I currently live in a really popular tourist area in Southern California (La Jolla) and know of many people that are having tons of success renting extra rooms, units, or their whole property through AirBnB.
My wife and I are relocating back home to Kansas City and I've wondered about the viability of operating an AirBnB business there. In the trendy areas of KC, the market looks to be pretty active (e.g. properties have lots of reviews and only a small % of folks even leave reviews in the first place so you can tell that their occupancy is solid).
Has anyone tried, or considered, the viability of buying a property solely for AirBnB rentals? Naturally you'd buy based on good fundamentals and the gamble is just on the startup costs of furnishings, vacancy, etc. I like this idea over a condo because the price per unit is lower and there's no 3rd party HOA or owners involved. Even if those folks bless the idea initially, they could easily change their minds down the road.
Some rough math on a property I think could work (a real property that is listed): $150k fourplex in a cool area of KC (attractive for business travelers, corporate rentals, education related travelers, etc). Supposedly the property is selling at a 10 cap and we'll assume that checks out. PITI with 25% down is $880/month. Utilities and other expenses are around $1500/month conservatively (this is accounting for turnover work/time and so on with a big markup to being conservative). Total rentable nights is 120/month (4 units times 30 nights). Let's say 50% occupancy (this would need to be researched with other hosts in the area, but appears reasonable) and an average of $79/night per unit. That's a gross of right about $4600/month after AirBnB's service fees.
Profit equates to about $2200/month, even after debt service.
I'm curious if anyone sees crazy assumptions in that? I think the real gamble is on the work and cash it takes to furnish the place. I know the ongoing management is pretty easy and flexible so very much worth the $2200/mo in profit (have seen this from friends' properties out here in CA).
@Brandon Laughridge , some of us had never ever heard of AirBnB. Had to google it. Nice concept.
I don't have experience with vacation rentals or multiunits so my opinion isn't worth much in this area. My thought is that if the 4 plex was cash flow positive as a normal 12 month lease, then you would be very safe to experiment with ABNB. You could start off with just 1 or 2 units as vacation rentals and ramp up if it went well or go back to leases if it wasn't.
I usually think of ABNB vacation rentals as something for major tourist destinations like Las Vegas, ski resorts, beach towns etc, but that doesn't mean it wont work elsewhere.
@Brant Richardson I agree I initially thought of it as a vacation only thing as well. The interesting thing is that it's really an arbitrage play that people are starting to use instead of hotels. Even in KC, a nice hotel in a good area is going to cost $150 or more a night and a blah room in the 'burbs would be pushing $100/night. I think AirBnB is truly starting to be used like a distributed hotel network. Unique experiences, better locations, cheaper prices = awesome.
@Michael Lemieux Glad you checked it out. I highly recommend trying it as a guest sometime when you travel. I've had nothing but great experiences.
I am only writing to offer my experience with airbnb. I am not making a suggestion or judgement on your question.
I listed a 2 bedroom apartment in Downtown Las Vegas for $250 a week. I had virtually nil interest or people who wanted to rent it for half the price.
I listed a bedroom for rent in Downtown Atlanta for $40 a night. I had 2 inquiries in 2 months.
Make sure airbnb rentals are already flourishing in the city. Many people have still never heard of it.
Also don't forget the huge amount of time it will eat up in your life.
I search AirBnB on Yahoo and no business address. No phone number looks shady to me.
@Nat Chan Good advice. Thanks for chiming in with your experience. I appreciate it.
@Joe Gore There are most definitely shady people that use AirBnB (though I believe it's likely a small minority) but the company itself is not shady at all. It's a huge success story with 100's (if not 1000's) of employees and billions in funding. It's rumored to be going public soon.
If they are legit, they would have a business address and phone number on their website.
I run a fairly successful vacation listing. A few things about AirBNB specifically
1. Decor is a HUGE part of AirBNB success. Tired/sparse decor will not cut it, even though technically you might have superior "amenities" than other listings. This is a premium hospitality business, even more so than VRBO or standard vacation rentals - so you'll have to wear a different hat to understand your market. If you don't think you can be realistic judge of how well you can deliver on this - please ask someone to help with this.
2. You can research comps on AirBNB directly. Don't just look at similar amenities and location, but also quality of decor. Search comparable listings at a given time frame and see what their overall availability is in their calendar, say for a rolling three month period. Listings that appear to be 100% booked for months on end are likely inactive, so don't factor that into your comps, or it will vastly scew your numbers. If you are talking about a four-plex, then you're going to be your own competition, so factor that into your occupancy rate too.
3. This is a hand-on active hospitality business - which can be fine. If you want good ratings/reviews, be prepared for being available at all times via text/ phone calls about bus lines, transportation logistics, where the best brunch places are etc. Your response time is reflected on your profile. Plus time/cost for maintenance of your listings - linens, full kitchen, toiletries, cleaning supplies, etc. Sure, you can eventually train someone to do this all - but you'll be needing to do this initially for sure to ensure good reviews.
I've just seen multiple people burned with underestimating how popular their listing will be on AirBNB and not understanding the market, and then confused on why they get no bookings month over month. But if done right, it can be a very great experience (as long as you are happy playing concierge!)
@Jenna Y. That is awesome feedback! Thanks for taking the time to write such a thorough response. It's greatly appreciated. It sounds to me like the consensus is that I should simply dip my toe in with a single unit and be prepared to "settle" with a normal rental property if the rental market or my sanity aren't quite what I projected.
@brandon laughridge: I rent thru Airbnb in SF Bay Area and am doing quite well. I am totally surprised that some people have not heard of Airbnb yet. It is a very successful start up even in China and Europe. We get guests from all over the world and I use them when I travel as well.
I think it is totally worth it to buy properties to use solely for this kind of rental, as long as you've done your research. We just started renting out on 30 days minimum only, but in the past we have great success doing short term.
And yes, that could involve lots of work, but if you are into this kind of thing, it's very rewarding as well. Due to our travel schedule, we just hired a property manager to take care of the rentals, but if I were to stay put, I really wouldn't find continue handling this myself.
@Joe Gore AirBNB currently has a valuation of over 10 billion dollars. Whether the valuation is over-inflated or not, their market penetration into the hospitality industry is now undisputed.
However, there are some issues around the legalities around residential properties operating as short-term hotels in certain metro areas (especially where hotels are seeing their bottom line being threatened). AirBNB is proactively trying to resolve these issues, but anyone thinking about purchasing properties solely to list on the site should be aware of the associated risks of operating in this market.
@Brandon Laughridge - NP! As mentioned above, please be aware of potential future issues, and plan accordingly for contingencies (sound like you already are though!).
@Brandon Laughridge I heard and used AirBNB, if your looking into downtown KC you should be ok going this route. Like you said if it doesn't work you can always turn it into a regular rental, it's is a highly desirable rental market.
Best of luck!
Hi Brandon, I have a vacation rental in Las Vegas solely listed on AirBnB. Compared to my long term rentals, it is definitely more work. Like the above posters mentioned, the decor must be nice, the place cleaned after every tenant, and you or somebody needs to be available for the guest to check in unless you use a lock box or electronic keypad which can only be done in safe areas. I am getting three times the rent if I had rented it out the unit on an annual basis, but I am on the hook for utilities, cleaning fees, supplies, Netflix and furniture. I would also recommend keeping the price low initially to build up positive reviews and then start to slowly increase the price and the security deposit.
I would not say its easy management. I hardly hear from my annual long term tenants. With AirBnB, there are requests, inquiries and questions almost everyday. If you have one renter leave and someone checking in the same day, you need your cleaner scheduled in and out in that window, same day guests (which there are a lot) will also make you have to clean your unit quickly, guest often arrive late and will make you wait to check in, people will give you bad reviews (sometimes for no reason), your cleaner may or may not tell you or notice damage in the unit, and a short term tenant can completely trash your place. AirBnB is great and lots of people are doing it, but it is not easy money.
@Joanna L. - I saw that you are renting your place on AirBnB for more than 30+ days. I also know that you hate San Francisco Rental Laws. You should read this if you haven't already.
@Johnson H. Yep, read that article. Good one to learn who not to rent to. That woman is a scammer. She's all over the internet (fundme, etc.) and got sued twice for not paying rent in the past. I'd like to think I screen my guests much better than that. A surpise tho since the homeowner is a lawyer.
But yeah, one more reason why I despise the SF Rental Laws :)
How does it make sense that tenants have more rights than the homeowner. If you rent a car for a month and refuse to return it when it's due, you'll be arrested for an auto theft.
My wife and I rent out our home in Arlington VA through Airbnb. With in the first day of listing we had inquires about our property. I have had a greater than 95% booking rate since listing our house in Feb. With that being said, I would love to buy more properties in Metro DC area and rent them out through Airbnb. But, viable Airbnb rentals would start at no less than $200k for a small 1 bedroom. Airbnb is all about the tourist market. What does KC have to offer that will keep people there year round? I would log on to Airbnb forums and talk to people who are renting our their place and see what their fill rates are. Also, Location of the property is everything. For me, I'm 1 mile from a metro that takes you into DC, this is crucial for tourist. Something else to consider is who is going to clean your house. If it's going to be you or your wife, are either of you going to be able to do it during the day or are you planning on doing it the evening that some one is checking out. If that's the case, you are loosing 1 night every time someone checks out just so you can clean the place. We found a cleaning service in the DC area that caters the Airbnb. The clean the house between 11AM and 3PM every time some one checks out, it's and expensive service ($80 per cleaning) but it allows me to have back to back bookings (our nightly rate is $135). Please let me know if you have any questions about my experience with Airbnb.
It's less popular in smaller cities, but still possible.
Make sure you're not violating zoning or local laws ("bed and breakfast rules," "hostel or boarder houses, etc."). Also see if your taxes are affected in your area (local sales tax plus income tax if it's a hotel, or just income tax if it's a rental). Also check with your insurance and make sure such a thing is covered.
A lot of people rent out rooms to visiting oil men or medical students. And, also, a lot of cities HATE Airbnb type sites that take business away from local hotels. So, make sure you're violating any HOA, city, or local ordinances in doing such rentals.
Wow, there are still folks who haven't heard about AirBnB?! I suppose it depends on where you live. There are a number of different sites doing something similar and have been for a while - VRBO, HomeAway, FlipKey - although, I think that AirBnB has the most user friendly platform for hosts and guests.
My husband and I own a home in Nashville that we also live in and, as soon as we put our home up, we began getting requests right away. So many in fact that we have to block the calendar off when we know we want to be home. We've recently started looking into building a second retable unit because of the requests. We're planning to move back to Austin (where we're from) and rent both units full time. Based on the interest and our nightly rates, I see absolutely no reason why we wouldn't be rented at least 3/4 of the month and bring in close to 4K. It is definitely a viable income source and one that we've started to look at as a long-term retirement plan. In fact, we always say to ourselves, "why don't more people who own properties do this?!". It is more work than a typical rental property, but the income can be so much more if you're in an area that can sustain it and that allows it.
I couldn't agree with Jenny Y more. Decor and visual appeal is HUGE so you have to take into consideration furnishing and decorating costs as well. AirBnB will send a local photographer out to your place for free to take lovely professional photos. It's worth a try if you're considering buying the property anyway. You can always go back to traditional long term renting.
@Brandon Laughridge Would KC be your first time listing a vacation rental property?
I was in a similar position, considering buying a property solely as a vacation rental. I decided to try renting my primary residence as a trial to see how I like it and what kind of interest I would receive. Since I live there and anything I bring in is extra it allows a pressure free testing environment. I've found a lot of the same things that others have posted about... keeping prices low initially, a couple positive reviews really help, getting verified, etc. Hope that helps, if you're interested in speaking more feel free to dm me.
Great info in this thread about Airbnb. It's great to hear about others' exprience. It's got me thinking...
I also wanted to share info from Paula Pant on her site regarding her Airbnb experiment. I was not really open to the idea until I read her article and it gave me some food for thought. http://affordanything.com/2014/05/27/the-airbnb-ex...
@Brandon Laughridge, good luck if you try this in Kansas City.
So I took closer look at the KC market on airbnb, and it doesn't look too bad for vacation rentals. The average vacancy rate in Kansas city is about 38%, and the average price per night is $126. @Brandon Laughridge, your right on the money with price, and the forecasted vacancy rate is more optimistic that your estimate. If the numbers work for you, then it sounds like a good idea.
We rented an AirBnB condo for our annual review and there seemed to be a decent amount of activity on it. It's certainly not going to be like the coasts, but it still works for vacation rentals I believe (from my very limited experience that is).
@Brandon Laughridge what did you end up doing? Are you buying a unit solely for vacation rental purposes out there in Kansas City?
Hi, can you please add a summary? How this airbnb played out? Any caveats?
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing