Airbnb vs Rental
Investor · Houston, TX · Member since 2012 · 354 posts · 186 votes
Airbnb vs Rental
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
10yA huge negative a friend of mine who has several AirBnB rentals has run into is that lenders will not look at the income generated as rental income. No lease = no income in their minds. So they view each mortgage counting against his personal debt to income ratio, thus now he is having hard time getting his next mortgage.
District Invest Group546 Reviews
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- Commercial Real Estate Broker · Fort Collins, CO · Member since 2015 · 308 posts · 151 votes10y
I think it really depends on the property. In my opinion properties well suited for vacation rentals have:
- A great location for tourists
- Near outdoor / recreation destinations (beach's, ski resorts, etc.)
- Near nature (on a river, lake, ocean, etc.)
- Or perhaps a great location for business / corporate housing (Downtown, near major companies, etc.)
- Decent demand year-round (If it sits vacant 40 weeks out of the year you would be better off with a long-term tenant).
- Great amenities (WiFi, TV, Furnishings, Linens, Coffee, small appliances, etc.)
- Accept credit card payments
- Pool / Hot Tub is a nice bonus
- Outdoor space at the property (Deck, balcony, patio, BBQ area, etc.)
- Pet friendly (not required, but will get you more interest)
If your property seems to meet many of the above characteristics it is probably well-suited for a vacation rental.
Some major differences you will need to figure out (compared to long-term)
- Who will do routine housekeeping
- How will you get the guests moved in and out (lock box, in person, etc.)
- What laws govern your locations
- What tax implications (bed tax, reporting, etc.) will you have to figure out
- How much extra will you need to charge to make all the above worth it.
- A great location for tourists
- Real Estate Consultant · Los Angeles / México City · Member since 2015 · 34 posts · 30 votes10y
Hi Simon -
I think Sarnen made some great points, and I would like to add some knowledge I have picked up in my experience as an Airbnb community leader:
1.) Don't just think of it as a "vacation" rental:
One thing that people tend to overlook is the fact that even though a property may not have certain characteristics which would make it ideal for tourism, it can make up for them by being near certain workforce centers, especially medical and research facilities. I have worked with several hosts who have had great success in renting their units out through Airbnb to traveling nurses and doctors or researchers who are on contract. They will pay quite a bit more for the flexibility of a furnished unit for 30-90 days.
2.) You can be as hands-on or hands-off as you'd like:
When I personally host a property, I am a very hands-on host, and enjoy helping people have an awesome experience in their travels. That said, there are certain things I always do, which reduce my headaches and increase guest satisfaction, such as installing electronic locks (I use YGPAK locks which are inexpensive, durable, and easy to program and use... They're available on Amazon... there are other options which I could recommend if you'd like which are more convenient but add many $$ in cost). I also highly recommend installing a camera (I use Foscam PTZ's, which I can view via my iPhone)... place one outside your front door and you can have a set of ears and eyes at your property.
There are options for management such as "Pillow" which I have not personally utilized since they're somewhat of a competitor of ours, but they may be available in your area, and handle most of the overhead including cleaning of the unit.
3.) You'll experience less wear and tear:
This is in my own personal experience of hosting over 600 and counting guests... only once have I had to file a claim on a deposit because a guest got into one of my client's liquor cabinets... they were very apologetic, and I could have done a better job of setting ground rules for them. She paid 90.00 immediately with no fuss, it was in my account within an hour of filing the claim request.
If you set the stage and guest expectations well, I think you'll find that people take much better care of the property, as they view themselves as "guests" rather than tenants... they don't want their reputation on the site tarnished nor do they want to lose their deposit... beyond that there's a 1MM host guarantee on Airbnb and other sites such as Homeaway and VRBO offer other types of coverages.
Those are just a few things I wanted to throw out there for you... I am more than happy to give you some pointers on hosting if you decide to go that route... Best of luck to ya!
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes10y
Two great posts so far. I would only add that I think it depends how involved you want to be in the rental business. In my opinion, AirBnB and similar are much more involved and hands-on than a long-term tenant, as so many of the responsibilities that would normally fall to the tenant or be reported by the tenant will now be handled by you or your PM, if you outsource that part of it. With my rentals, I generally like to "Set it and forget it", meaning that I don't want to be there 3 times a month. I want to deliver a quality unit to a quality tenant under a quality lease, and see my bank account expand by $X every month on the first. I am instantaneous with tenant problems/requests, but I don't want to have many of them - otherwise, this becomes as much of a job as having another job.
Skyline Properties - Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes10y
A huge negative a friend of mine who has several AirBnB rentals has run into is that lenders will not look at the income generated as rental income. No lease = no income in their minds. So they view each mortgage counting against his personal debt to income ratio, thus now he is having hard time getting his next mortgage.
District Invest Group546 Reviews - Investor · Houston, TX · Member since 2012 · 354 posts · 186 votes10y
Great point and real life experience. I appreciate all the input.
Just an FYI. I live in the Nasa, Johnson Space Center area. It is right by Clear Lake (brackish lake that feeds into the GoM) and Pasadena, Texas is less than 15 minutes away (where all the refineries are).
I think it's the perfect spot for a condo that I can use as a corporate rental or vacation rental.
My biggest concern is working away. @Patrick Diamond. How can you be hands off on an Airbnb rental. Would I use a property management company?
- Real Estate Consultant · Los Angeles / México City · Member since 2015 · 34 posts · 30 votes10y
Hi again -
Firstly, let me touch on Russell's remarks... I am finding this (lending based on STR performance) to be a difficulty, though I think it will become less so in the future... it's still too new... That said, we have begun mirroring bed & breakfast models for financial record keeping, and I think that will help us refinance in about six months... time will tell how that goes.
Also, JD mentioned "set it and forget it"... I do believe it's possible to get to that point, but it takes extra work and putting in the time to develop systems that work for your property... If you focus more on corporate type housing, you'll have longer stays (1-3 months), and require less management... In that case, If you find a good housekeeper or maintenance person in the area whom you can trust, you won't really need a management company if you set everything up well, and it's important that before and after each stay an inspection form is completed, which helps you keep your property in tip top shape, and ensures guest satisfaction. It also acts as a worksheet for whomever is taking care of the property to find and fix simple small things before they become a big issue.
Further, on the lines of management:
I did a cursory check on the listings in the area... people are definitely utiziling the proximity to NASA to market their short term rentals... I doubt that it's reached the level yet where a company like Pillow would have services in the area, but you do have another option: asking an experienced Airbnb host in the area to manage the property for you. I have done this for several people, and it works relatively well. If you'd like, give me a shout and I can discuss is more with you and even potentially put you in touch with someone in the area who may be open to it. This would be more along the lines of "set it and forget it".
Bottom line is like anything else there are pro's and con's... I personally find the much greater income to be beneficial, and if you set it up right, it won't be too much of a headache.
- Investor · Houston, TX · Member since 2012 · 354 posts · 186 votes10y
Thanks @Patrick Diamond. Great information and post. I'll keep that in mind when I get my first rental bought.
- Real Estate Professional · Atlanta, GA · Member since 2015 · 279 posts · 109 votes10y
Originally posted by @Simon Shih:
Great point and real life experience. I appreciate all the input.
Just an FYI. I live in the Nasa, Johnson Space Center area. It is right by Clear Lake (brackish lake that feeds into the GoM) and Pasadena, Texas is less than 15 minutes away (where all the refineries are).
I think it's the perfect spot for a condo that I can use as a corporate rental or vacation rental.
My biggest concern is working away. @Patrick Diamond. How can you be hands off on an Airbnb rental. Would I use a property management company?
Hi Simon! It's actually fairly easy to be completely hands off on an Airbnb rental. A lot of property management companies are doing outright rentals where they essentially buy out your weeks, pay you a guaranteed amount (which I've seen is often more than what homeowners are making by self-managing), and take on the work and risk of managing.
- Investor · Houston, TX · Member since 2012 · 354 posts · 186 votes10y
@Monika Haebich. Really? That's very interesting. I'll have to ask around before I buy my first property. Thanks for the info,
- Falls Church, VA · Member since 2016 · 33 posts · 36 votes10y
I think your comparison thus far are agreeable. Long term investments are less work and Airbnb hosting/investing does involve more work. I've done a lot of reading about Airbnb and from what I've read, a lot of people report to have made more money through Airbnb compared to traditional leasing. Here are some other comparisons:
Cons of Airbnb compared to traditional:
- Possibility of having legal issues
- More competition with those who rent just a room out and thus, for a lower price
- Extra costs: sales tax, occupancy tax, supplies for rental, 3% host fee that is deducted from you booking
Pros of Airbnb compared to traditional:
- Social experience
- Learn more about the hospitality business
- Have the ability to play around with your prices
- Broomall, PA · Member since 2016 · 85 posts · 28 votes10y
@Patrick Diamond could you elaborate on what BnB financial record keeping is? Also what are YGPAK locks? I couldn't find them on Amazon. Do you have any advice for managing rentals less than 2 hours away?
- Real Estate Consultant · Los Angeles / México City · Member since 2015 · 34 posts · 30 votes10y
Hi there again, Jason -
BNB financial record keeping is a bit different in that it takes into account some different expenses then you would see doing a straight rental... "REVPar" is a good place to start... just give it a Google.
If you're interested I will send you a set of financials you can use as an example.
Here's an example of the locks:
http://www.amazon.com/Keyless-Electronic-Digital-P...
Myself and another Airbnb guru, @Al Williams, both recommend the same locks. It makes managing your property much easier.
That leads into your question about managing properties 2 hours away... the best way to get it across is to say:
1.) Systems
2.) Systems
3.) Systems
Sit down and type (or write) out a step by step guide to each stay, as if you were writing a guide for a new manager who would take care of the property and the guests... Make checklists. Be specific. Use them.
Each property is a bit different and takes some unique care, but many things are 100% the same across all platforms... Anything you can use a checklist on is going to be the same (Change sheets, change comforter and wash every 7th guest, etc.)Hope that helps... and feel free to reach out directly... also, @Al Williamson is developing a great guide for people like yourself who are managing remote rentals. I highly recommend saying hello to him!
All the best...
Patrick
- Rental Property Investor · Sacramento, CA · Member since 2011 · 2k+ posts · 1k+ votes10y
@Patrick Diamond thanks for the mention.
You've said it all with your Systems^3
Many Airbnb Landlords are fooling themselves. They aren't factoring in the time it takes to manage, clean, and book their units. People brag about their gross income but that's silly.
The only thing that matters is how your short-stay net compare your long-term net.
To make more money than traditional long-term landlord, you need to have really, really good systems in place.
That's the truth.
- Investor · Phoenix, AZ · Member since 2015 · 485 posts · 384 votes8y
Like @Al Williamson and @Patrick Diamond say, it's all about systems and processes. Look at it as a business. Anything in real estate so much depends on the location, the type assets, surrounding amenities and what you expect it to do for you.
I use Lockstate remote WiFi locks because they are currently the best and solve all the problems a modern smart-lock needs to accomplish: getting the right people through the door at the right times without me having to be there.
I run and experiment with various Airbnb solutions:
- Manage villas for clients in Tuscany
- Host a turn of the century restored 6 room apartment in a quaint German city near the beach.
- Manage varying types of other apartments, condos, and houses in various locations in the USA and Europe.
Keep in mind when dreaming of the "big bucks", it takes time to:
- Set up and maintain your Airbnb and various other accounts.
- Set up each new listing.
- Communicate with nice and not so nice guests.
- Factor in vacancies and damages.
- Outsource and manage cleaning and fixing team.
Your dwelling needs to make at least the same income compared to the long-term rental if you're only looking to grow equity. But I wouldn't recommend anyone get up for that strategy. In my opinion, you need to make a profit - at least times two of your median local rents. If that averages out over the year, you might be on to something by improving everything you do and how you do it.
You're kidding yourself if you're doing all that jazz by yourself. That's not called a business, that's a hobby or a job. Set up the teams and systems and you've got something you might want to scale. And last but not least, all this better be fun and fulfill you in some way because money isn't everything. Look for your sweet spot and build out your strengths.
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