Hi Y'all, I am trying to analyze a deal for a 1bed 1bath apartment at a very popular vacation spot. My mindset in RE investing is more of a buy and hold and preferably stick with long term leases. But for the current property I'm looking at it would seem to make more sense to AirBnb it out. I have no experience evaluating a deal that would be a short term rental and could use some help.
I understand how to evaluate the comps and price the per night rate, but the other fees are what I find hard to understand. So is the cleaning fee determined by the host and does it vary depending on the duration of stay?
And for the service fee, that's determined by the website and does not cut into the daily rate you receive from the visitor?
Also, what is a conservative vacancy rate that most AirBnb hosts use when evaluating returns?
Any and all advice is appreciated and thank you in advance!
Well almost every property makes more sense as an Airbnb unless you are in a smaller market, but it's much more of an active investment than a long term rental.
Full disclosure: I don't have an Airbnb rental, but can still try to help
90% sure cleaning rate is set by host, and shouldn't very much based on length of stay. You should be having a cleaning person come in after every guest to have the place looking good. Get in contact with a company to see what they would charge, but this is a fully reimbursable expense, so you shouldn't have to worry about this.
Service fee doesn't cut into your amount. If you look to book a rental yourself this is an added fee to a guest.
Vacancy will largely depend on your location. I'd specify where you are this vacation spot is so that if any investors are in that area they can tell you what they are averaging. I'd guess maybe 70% occupancy if it's a strong market? Have no basis for this assumption to be honest. Just remember though that if you're lower than market in terms of pricing you'll have higher occupancy and as you build reviews you should have better occupancy.
There's a site called AirDNA that will show you number of active rentals, average nightly rate, occupancy rate by zip code. I don't know if it takes into account "additional pricing" as AirBNB puts it, which would include the cleaning fee set by the host.
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