AIRbnb For Multifamily
Investor · Atlanta, GA · Member since 2016 · 241 posts · 86 votes
I recently had a chat with the Director Of Multi-Family Prooject with Airbnb and they are reaching out to Multi-Family Investors to offer a program to help implement short-term rentals for their properties. I have talked to single family home investors who do Airbnb instead of traditional tenant models and they say that they make more money with Airbnb.
Has anyone tried this with their multi-family properties? If so how did it work out?
Hey Kyle! I can share a lot of information where Multifamily stands with short-term rentals and Airbnb! One way Multifamily is profiting is by renting vacant units, however many cities are capping the amount of nights per year rentals can be used for short-term guests. Then on top of that cities aren't allowing rentals to be listed short-term if it's not the hosts full time home. There are regulations most definitely making it hard to rent vacant units! Los Angeles is putting laws in place right now and many companies/individuals are going to have to shut down STR operations. Now Multifamily operators are leveraging short-term rentals in a completely new way that works with regulation and HUGE value add for them. Top Multifamily operators like LivCor, Blanton Turner, Lincoln and are a few getting a lot of value out of this new short-term rental model - they do this by allowing residents to rent to short-term guests. This short-term rental capability is a huge value-added amenity. Multifamily buildings see more tours when residents are given the option to rent short-term. 78 percent of millennials want the ability to rent their unit on Airbnb, and offering this amenity is a great way to attract renters. In 2017 Pillow teamed up with Airbnb (exclusively) to give Multifamily operators a platform to offer this new short-term rental amenity to residents. If anyone is considering considering this as an option, the only option out there is Pillow.com. Basically the platform is powering this new amenity by allowing building managers to handle rentals in their property with control, transparency and profit sharing. They can set rules for renters to make sure everything is in in compliance with local short-term rental laws. Best of all Multifamily Operators can set are minimum nights a year, minimum security deposit, maximum guests, blackout dates and have a bunch of. The operators also get full details all the rental activity on your property - past, present and future with complete information about guests. The adoption has exceeded expectations, many of the TOP portfolios are on-boarding more and more buildings once they've put one building through a trial period. If anyone has questions about short-term rentals in Multifamily feel free to DM me - a ton of excitement from the industry and huge opportunities by adding short-term rentals as an amenity.
@Todd Conway Are you essentially just charging a higher rent in exchange for offering it as an amenity? Or are you just using it as a selling point to cut down vacancies?
@Brian Garrett Very good question. Definitely both, however most large buildings we work with use it it to close more leases (great for lease up marketing). This might answer your question "It's a value-added amenity that attracts renters, provides a huge competitive advantage and encourages renters to sign more expensive leases, as they know they can recoup some of this money through short-term rentals." Brian thanks for your interest in my response.
We have some C-class 6-plex buildings in a pod in Fargo ND. Definitely not a vacation destination (aside from checking out the wood chipper at the visitors center). These buildings are composed of two large 2BR units on one side and four studio units on the other side. As you can imagine, studio units in a C building are difficult to fill with desirable residents. I wanted to briefly touch on a few things that I didn't see specifically addressed so far in the discussion:
1. Quality of residents: As addressed above, we make more money using a short-term model (primarily through Air BnB). It is definitely more labor intensive. You lose the power of the lease and are effectively subject to a yelp review from strangers with wildly differing perspectives on amenities, level of finishes, etc. That said, in our situation with a building that is turning in an area that is turning with a small one bedroom or efficiency unit, you can attract a resident of much higher quality in a short-term rental. Our holy grail is the contract nurse as mentioned in other posts. There are few options for them in our area and their agency may offer them an extended stay hotel for 2K/month. We can come in at $800/month and offer them an excellent value, full kitchen and secure building. They are thrilled and after all expenses (we built our own short-term management) we still come out significantly ahead on the cash-flow side with a great resident.
2. Hybrid: You don't have to be one or the other. We maintain our 2BR units as traditional rentals. They are actually happy with the short-term situation because of the quality of the residents in the studios. They also have taken advantage of our constant need for good cleaners of both the units and the common areas and several of our residents who stay home with kids during the day pick up a few hours cleaning.
3. Numbers: I know for most of us this goes without saying, but the numbers have to be right. We make a lot more with short-term rentals than we would with traditional rentals. However, the property has to meet all your criteria and cash flow with a traditional rental model. Municipalities are changing regulations all the time. Something could happen with our short-term manager (they are hard to find/train). A whole bevy of issues could arise that would impact our ability to offer short-term rentals. Our buildings cash flow well using traditional market rent numbers or we wouldn't have bought them.
4. Banks: Banks in my area aren't sure what to do with Air BnB income yet. With regard to multifamily value, you're definitely not going to get them to count it dollar for dollar toward your NOI as it is variable from month to month and they see that as a vulnerability. We are buy-and-hold investors, but if you're planning to force appreciation and refi or force appreciation and sell to 1031 into something else, just know that your projections may not pan out with banks or appraisers.
Awesome summary
I am under contract to purchase my second multifamily vacation rental in Colorado. We just sold a traditional rental 4-plex in Denver where we are not allowed to do short term rentals to finance this second vacation rental. So far 4 months in on our 1st property we are beyond impressed with the numbers and it seems much more efficient to buy multifamily than single family or condos in the area.
For example:
Under contract on a triplex for $700,000. Property needs updating and we will probably put about $150,000 into it.
Single families in the area sell for 500,000+. The least expensive condos that need work and have poor management sell in the $300,000 range plus $400 per month in HOA fees. For me, I'll take the multifamily, turn it into a nice place to stay, get the same rents as I would from a condo and keep the $1200/ mo in HOA fees in my pocket.
Jake Cohen
Anyone in Seattle, WA can help shred a light on the city's recent short-term rental policy: each STR operator is allowed to run up to 2 dwellings as long as one of them is a primary residence (in other words, owner-occupied): https://www.seattle.gov/Documents/Departments/Coun...
How about one non-primary residence or an investment SFR and a multifamily, which most of the time, does not require owner occupancy?
Also, what are the up and down sides of running a multifamily as a "transient lodging" vs. a "rooming/boarding house on a short term basis"?
For those who are Airbnbing your multifamily, what license(s) did you file with your city?
Thank you!
@Julia Bykhovskaia @George Mevawala how are you two automating the turnover process? Based on her experience's in the article it seems like it would be really difficult to scale this unless you had your own cleaning service in house.
Hi! I'm too lazy to read all of the thread but a couple of thoughts: short term rentals won't work just in ANY multifamily building. It has to be a high traffic location, usually urban and you want to be close to transportation if it's a tourist destination. If not - parking. I'm looking for MF properties to buy in NC/Atlanta and none of the properties I'm touring (Class C, sometimes B) will ever be a good STR location. Turnover process - 1) You need to find reliable cleaners. Those who seek will find! I interviewed (email + in person) about 20 to find 2 teams I currently use 2) They will have a check list of what to look out for 3) you share calendar with them so they know when is the next clean. Hosts who are scaling typically use something called PMS which stands for Property Management Software and allows automation, including calendar sharing and sending out text messages to cleaners automatically every time there's a new booking.
@Kyle Ransom We just purchased a property in Big Spring Texas. Going to use the back club house area as a air bnb. Will keep everyone posted on how that turns out.
Thank you @Account Closed :)
Update on my property above. We now are up and running with 3 additional units and I just took on a property management client. All are renting very well in Steamboat Springs,CO. Now have a total of 9 listings on Airbnb and will add the additional 6 to VRBO once we have 3 reviews on Airbnb for each unit.
I have been experimenting a lot with PMS systems.
Started with Guesty which was pretty good but very expensive once you have multiple properties. They charge 3% of each booking. Sounds reasonable until it starts costing 5-10,000 per year.
Tried Orbirental and like the base of the software but support was lacking.
Using Smartbnb now and love the messaging and metrics functionality but limited in a booking/ calendar management capacity.
Possibly will add a system like 24beds to supplement with SmartBNB. Tons of products to sift through. I’ll try to keep updating with what I find.
Another tip: use a pricing program like price labs.co This enables me to put pricing on autopilot and let the algorithm adjust rates for holidays, special events etc. You make up the price you pay very quickly with better pricing to be more competitive in slow times and maximize your dollars during busy times.
Hope that helps someone getting started.
@Jake Cohen if you're still looking into software I might be able to help. I ran 20+ rentals with software (Tokeet) only to determine that the main reason you pay for a PMS is to "market" your rental on more than just Airbnb and VRBO. I never got enough value out of BDC, TripAdvisor, rental website, etc to justify the headache of dealing with crappy software that didn't meet 100% of my needs. Airbnb and VRBO have nice calendar integrations that work well, and now that Smartbnb integrates with VRBO you're covered on both fronts. I guess my point is you might be able to operate your rentals just fine without a true PMS/Channel Manager.
@Tyler Work Thanks for the advice. I have come to the same conclusion for the most part. The main thing I feel I am missing now is a true calendar and pricing integration.
Are you still investing in short term rentals?
Thanks again for the advice.
@Jake Cohen I was doing the same thing (using beyond for VRBO) with Homeaway and it wasn't ideal but it worked. Pricelabs actually integrates with Tokeet which pushes rates out to all platforms (except of course Homeaway). I never got enough traffic on homeaway for it to really matter and I actually only host on Airbnb now after 2 years. Up in the mountains you probably see a better ROI for hosting on multiple platforms so I could see it being worth it. I would be curious what you end up going with.
My girlfriend and I each own a rental in Denver and we're looking for our third as we speak with an ADU. Super tough to find but we see one or two pop up a month. Eventual goal is to buy properties in the mountains but I know Denver's market so we figured we'd start here first.