How much money can I make off Airbnbin Chicago?

Question

Hello,

I am 26 and am thinking of buying my first rental condo in Chicago to put directly on Airbnb/VRBO. I have owned a 3 bed home in the suburbs for 3 years and think it's time to own in one of the best cities in the world. It would allow me to use the condo when I please and have the mortgage paid for + profit. I can increase the rate dramatically during concerts/events. Here is my plan:

Purchase a 1 bed, 1 bath condo with HOA under $300/mnth. No rental cap or rental restrictions. 1 parking spot included.

Looking around River west, west loop, lincoln park, gold coast, possibly logan square/wicker park.

If anyone has any experience with Chicago and Airbnb please let me know.

James Carlson · Answer

@Matt Jordan, I'll just echo @Stu Waters' comments about studios. I've furnished and hosted at 10 different properties, from studios to 2-bedrooms. The 2-bedrooms pulled in a little more money, but the distinction between studios and 1-bedrooms was almost non-existent. (In fact, my best return was on a 450 square foot studio with a nice balcony and, if I do say so myself, nice furnishings.

If you're in a cool town (I'm in Denver, you're in Chicago), then people are largely coming for the city, so having an actual bedroom doesn't seem to matter. This doesn't mean you skimp on well-thought-out design. In fact, you have to be a little more creative to create a distinctive home in such a small space.

Matt Jordan · Answer

Thank you for all of the advice and tips! @Stu Waters I would love to pick your brain more about your experience with Aribnb rentals and am very curious to see what happens on 12/17 with the city. @James Carlson If I could save 15-25% on a studio vs a 1 bed then I think it's worth it as long as the location is prime and there is something unique about the unit. I am also in love with Denver and would purchase my 3rd property their hopefully soon. I noticed Airbnb is very big in Denver and the fees/taxes seem to be much less than Chicago. I'm assuming the property taxes are also much lower as well. I also know Denver is perfect year round because of the ski season and not to mention marijuana at all times of the year. What numbers do you usually crunch before making an offer on a place? How often are your Airbnb's rented out? @Catherine Brennan  Thank you I hope Airbnb is around for many years to come and not banned like NY!

Stu Waters · Answer

@Matt Jordan Hey! I have a good bit of history with Chicago Airbnbs. I'd be happy to share some tips about the scene.

Chicago is an above-average Airbnb city. I say that with a few criteria in mind-

1. Seasonality: Chicago Airbnb, like Chicago real estate, is seasonal. We typically see a drop in revenue of about 35-45% depending on the size and location of the unit between November and April. Note that there are way to minimize this; if you are curious I'm happy to lay out tips, maybe in another post.

2. Legality: Chicago, like most big cities in the US, is going through legal growing pains with regards to Airbnb and the home-sharing economy. Each city is trying to find ways to deal with this new, shared housing economy. The laws here are best described as unsettled (in my VERY un-legal opinion!!). I have been to City Hall to discuss legal channels and despite multiple attempts, I was told to come back on Dec 17th 2016 when the city would have instructions on how to proceed.  That being said, Chicago is #5 or #6 in the chart of Airbnb listings for the US. The fact is Airbnb is in Chicago, and how this will play out has yet to be seen - but considering its size, it is a monster that won’t go down easily.

3. ROI: The return on properties that are intended for Airbnb for Chicago are looking very good. This is driven by very good monthly revenue, especially in the summer months where demand will drive prices up, which more than compensates for the lower season months.

This may sound like more bad than good; it’s not. I'm seeing success in the market for people who are interested in taking advantage of this new economy. Trust your gut like with any deal but be very choosy about neighborhoods.  Walkability goes a long way to the rents you can get because cool neighborhoods are where people visiting from out of town and using Airbnb want to be. Remember, people use Airbnb for not only a cheaper visit, but also a more authentic one. Neighborhoods like Bucktown and the Loop will hardly have vacancies.

One extra tip- If you’re looking to make a deal on a small space, you might be able to save some money by grabbing a studio. On the revenue side there is very little difference between a 0 and a 1 bedroom - but on the purchasing side, you can get studios for much cheaper!

Best of luck! I could talk for days about this so don't hesitate to reach out.

Sam Amir · Answer

Haha I read this article last night: http://chicago.curbed.com/2016/11/2/13496906/chica...

Now of course, the Cubs going to the world series doesn't happen every year, but I think it could be profitable. Chicago is a very touristy and the places you listed would be perfect for Airbnb. One thing I would be aware of is that the laws could change, like they have in NY (http://www.theverge.com/2016/6/19/11973078/nys-sen...) so make sure that you have a back-up plan.

You can try to contact the people advertising their apartments on Airbnb and ask them a few questions, I'm sure you'd find someone that wouldn't mind helping you out. Good luck Matt!

Blake Brose · Answer

Outlawing of nightly rentals is increasing all over the place. Some areas like Park City, UT even have a bounty for those who report somone running a nightly rental home.

The key is finding properties that are actually zoned for nightly rental. These are far and few between. That is one of the focuses my group has as well.

If you are looking to run a nightly rental property, I would highly recommend going after a larger property than a 1 bed/1 bath. The larger the property, especially as you get into the 6,7,8 bed/bath properties have a far better ROI, because they are in short supply.

James Carlson · Answer

@Matt Jordan . Yes, Denver is pretty damn awesome. I think people assume it's either a cow town or a snow-filled mess for six months of the year. Neither are true. While it's no cosmopolitan metropolis, it's filled with cool pockets of restaurants and bars and parks and shops. And the weather is amazing. Sunny almost all year. When it does snow, it's here and gone within a few days. And yes, we have some sane laws regarding pot. Whether you imbibe or not, it's pretty cool to walk into a shop and see for legal sale a product that will get you arrested in a less progressive state.

You're spot on about finding a studio with a little something different. A tiny basement studio with no light and old fixtures ... probably not going to do it. My wife and I own a 350sf studio in a cool location, on the top floor (read, "Penthouse Studio" in the rental listing), with nice updates. We rent it nicely furnished to traveling nurses for 3-6 month stays. It's not Airbnb money, but it's about 50% more than we'd get if it was unfurnished and long-term.

Beware of buying here, though, soley for Airbnb short-term rentals. The new Airbnb laws going into effect Jan. 1 outlaw STRs in a place that isn't your primary residence.

As for calculations ... I've only bought my one investment so far, so you might seek the wisdom of more sage investors. That said, we bought using the BP calculators and used long-term rental prices as our input. That way, if something happens and we can't do these medium-term furnished rentals, we still have a cushion to fall back on.

Matt Jordan · Answer

@Matt Boyle I would potentially live there the times it is not rented out and hopefully up to 2 - 4x in peak months in summer. I have considered a 4 unit but would rather have the flexibility of the short term renter vs a large commitment that could be very time-consuming and risky.

Matt Boyle · Answer

@Matt Jordan Hey there! I grew up in Geneva. Did you go to East or North? I know a few North people.

Anyway, back to the post. If you're willing to deal with an Airbnb why not purchase a rental property with more stability? Ive never dealt with owning an airbnb but it just seems like more work to keep vacancy up. You could get an FHA loan, buy a 4-unit building, rent out 3-units and live there rent free for the same down payment you would put on a condo. The catch is you would have to live there for a year. In my opinion a small price to pay for ownership. Just something to think about.

Catherine Brennan · Answer

@Matt Jordan I'm a full-time Realtor working in the neighborhoods you listed.  There are many larger condo buildings working to change their Bylaws to prevent "hoteling" in their buildings if they haven't established their position already.  Make sure to ask and read through all condo docs and 2 years of meeting minutes so you're aware of current and forthcoming policy.  Good Luck !

How much money can I make off Airbnbin Chicago?

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