I wanted to get a second opinion on this topic. I recently graduated from college, and am currently living in NYC. I started with about 90K in student debt and now have under 40K left to pay. I am saving each month (to build up money to start investing in real estate) as well as paying off my student debt and paying extra when able. I currently work a full-time (approximately 50 hour per week) professional job, and I rent a two-bedroom apartment. I live in one room (the smaller of the two) and my roommate (who lives in the larger room) is moving out due to getting married. I am considering listing his room on Airbnb. I am considering this for three reasons.
1.) To hopefully make extra cash to either pay off my student debt or save for my real estate fund;
2.) To gain some experience dealing with tenants (i.e. Airbnb guests) in hopes that these skills will be useful once I start investing in rental properties.
3.) I am excited to get into real estate and this is something I can do with little additional investment.
My total apartment rent is $2,400 per month. I pay $1,175 and the room that I would be listing on Airbnb is currently rented for $1,225. The room has a queen bed, large closet (by NYC standards), two windows, and I will install a lock on the door. The apartment is located on the Upper East Side (96th St. Between Park and Lex) of NYC, and based on my research apartments similar to mine in this area go for about $100 a night on average. Given that I will be brand new to this, I anticipate having to rent the room at $75/night on average until I am able to build up solid reviews and raise the nightly rate closer to market. If the room is rented 67% of the time (20 days out of 30) at $75 per night I can make $1,500 a month (gross) which is enough to cover my rent, the start-up cost needed, and my time investment with the goal that I could make more as I gain experience.
I have the following issues with this strategy:
1.) I work a full-time job with inconsistent hours and am required to travel on short notice. If I have back-to-back bookings the guest would likely want to check in before I get off work (around 7:30 PM on average). This creates two issues. The first, is that they would arrive at the apartment and the bed would be unmade with dirty sheets on the bed. (I am trying to find a cleaner, but I can't find one at reasonable rates i.e. cheaper than $60 / day). The second problem is dealing with the keys at check-in and check-out. (I believe I have found a solution to this by using Keycafe which would handle this for me).
2.) The risk that the apartment will not list due to no reviews and no existing history, or that I build up reviews and then start to get negative reviews.
3.) In addition to covering the rent I estimate that I will have to spend close to $500 - $1,000 to get the apartment in shape to list (i.e. new couch, towels, sheets, etc). I have no problem spending this as long as it rents, but I don't want to sink money into this and have it fail when I could have been using that money to save to invest in rentals.
I wanted to get some feedback and get an objective 2nd opinion on this and see if anyone else is currently doing this in NYC or in a similar market and what their experiences are (both positive and negative).
I appreciate any comments or feedback.
Thanks in advance,
Don't forget about your license fee, if any, and the AirBnb inspection cost.
Brian Page has a whole course on AirBNB. It will teach you everything, I mean everything you need to consider and do to get you up and running at a professional level quickly. I would at least listen in on his webinar and that will give you a lot of information to propel you forward. www.bnbformula.com
1) Charge the cleaning fee to the guest. It's either that or never have back-to-back guests.
3) There's no guaranteed money anywhere. Do you have rent-to-own furniture places in NYC? More expensive if held for a long time, but it helps keep your start-up costs low. With only one room to rent, you can't need more than 4 new towel sets, 4 place settings, etc. That should be a minimal cost on Amazon.
I have units in your market that do fairly well. While I only do full home rentals I feel like I can shed some light in this aggressive market you are about to step into free of charge. I think hosts like you are what the market was built on and giving you the tools are resources to do it successfully would be my pleasure. Feel free to call or text me to set something up so you can pay off those loans!
@Brady Boyer Congratulations on getting your college degree and welcome to Bigger Pockets!
I've been a LANDLORD for 22 years (16 rental units) and HOST with Airbnb for 1 year (one rental unit). We own all of our units and manage them ourselves.
Here are my thoughts....
1. This is a question for the "Short-Term and Vacation Rentals" forum, not the "Landlord" forum.
2. Before you consider taking this leap, you need to review your rental agreement and get approval from your Landlord to rent out a place that doesn't belong to you.
3. You need to understand the laws that apply to your jurisdiction, so you won't do something that is illegal.
4. You need to make sure you have proper insurance.
5. You need to study what it takes to be a HOST. Which differs considerably from being a LANDLORD. When you become a HOST, you are in the hospitality business. It takes a different mentality and a different skill set than being a LANDLORD or REAL ESTATE INVESTOR or REALTOR.
6. Find a local Airbnb Superhost that is willing to mentor you. If you have the right to rent space in your apartment, but don't have the time to do what it takes, you could consider enlisting the services of a CO-HOST. Basically that would mean outsourcing the hosting work.
7. Spend some time watching YouTube videos which outline how to be a successful host.
8. Join Airbnb and travel as a guest, staying in Airbnb apartments/condos/houses/etc. hosted by Superhosts.
9. Read everything you can, including the tutorials, offered by Airbnb on their website.
10. Review Airbnb listings located in the vicinity of your apartment. Study them and read the reviews. Read the both the good listings and the bad listings.
If you primarily want to do this for the income, considering your lifestyle, it probably would be best for you to find another long-term roommate.
There are better ways to develop real estate investing knowledge and skills than by hosting guests in your home. Hosting does not teach landlording skills, but it may help improve your interpersonal skills and customer service skills. Those can be applied to any work situation, as well as personal relationships.
I find both landlording and hosting very rewarding. If it seems like a good fit for you, then keep up your interest. If not, then invest your time, money and energy elsewhere.
I've been doing Airbnb for 3 years now and am a Superhost. #1, unless they changed something, there is no Airbnb inspection. Your ratings will determine whether your property is suitable for Airbnb. #2, unless you have a private, en-suite bath, your listing will be more difficult to rent. #3, dealing with Airbnb guests is NOTHING like dealing with rental tenants. They are a world apart. With Airbnb your money is guaranteed and paid the day after check in. With Airbnb, 98% of the time they leave after their paid stay. With Airbnb, in your case, you are present on the property. #4, on the Airbbn app you can block one night before/after to do your cleaning and leave a key in a lockbox for guests that arrive while you're at work. #5, When starting, make sure your photos and description are top notch. Someone bill book, Promise! #6, Any expense you incur preparing your room for guests is also tax deductible, whether it succeeds or fails. Don't spend a ton of money, but DO get top quality sheets and towels. #7, there is no license fee to rent out an owner-occupied room. The issues come in when people rent entire units. #8, you can charge a cleaning fee, but I would never rent from someone who charges a cleaning fee. If I don't pay does that mean you aren't going to clean? Not having a cleaning fee will boost your bookings. #9, DO NOT, I repeat, DO NOT buy sheets and towels online. Go to a store and feel them yourself. DO NOT use sheets less then 600 thread count. #10, Agreed that this will not help your landlording skills, but is a great way to have a "roommate" for a short period of time at a much higher return than a lease share.
@Austin Peck Thanks for the tips. I haven't found anything about this in the NYC area during my research, but I will look at this closer.
@Lawrence Turner Thanks for the advice. I watched his webinar. Have you done his class?
@Dan Schwartz I considered charging the cost of cleaning (around $60) as a cleaning fee but based on what I have seen in my area the average fee is between $25-$30. I don't want to drive people away by such a large cleaning fee. I think if I go through with this I will charge the average and eat the remaining cost (i.e. 50%) which would be recouped as part of the nightly rate. I also considered making the minimum stay longer which would result in less cleaning needed but then due to the decreased flexibility may also impact the occupancy.
$1500 and lots of work
$1225 with less work
I'd prolly try to rent the room on a monthly basis and see if I could get a little more for it.
If you have a friends place you could crash at you could rent the whole apt for way more.
Check your lease, maybe you can change the lock set to a keypad. (I did that on my new rental units and it was pretty straight forward and I am NOT handy).
There was a good BP podcast with a lady crushing air bnb. I don't know the episode number off hand but if you haven't heard it I would search for it.
Yea, I heard that podcast. That is kind of what opened my eyes to this and then my roommate talked about moving out and it all just kind of happened at the same time. But yes that was good podcast.
@Marcia Maynard Thanks for the tips. Greatly appreciated.
What market are you in? The average listing that I have seen in my area (NYC) is for a one bed private room shared bathroom (and even some non-private rooms). Just curious why you think it will be hard to list if the private room doesn't have a bathroom?
Also just curious what is your occupancy rate?
I didn't say hard, I said it's easier with an en suite bath, unless no other units in your area have an en suite. People like their privacy. Would you want to share a bathroom with someone you don't know? I wouldn't.
In the summer my occupancy rate is about 20 days out of the month, but I have a 2 day minimum so that deters quite a few people. From November through February, I may have 2-3 bookings that whole time.
So @Marcia Maynard brought up a good point, which you didn't make mention of. Does your current lease allow you to sublet rooms? I'm surprised no one else thought to ask you this question. If you are leasing an apartment, will they allow you to change locks? I ask because most landlords would not allow you to do either. I guess if you could explain to your landlord your situation and they approved it, then everything would be fine. As long as they get the rent on time and the apartment isn't getting damaged. I think the whole non-subletting policy in a lease agreement became standard, prior to airbnb becoming so popular. If you are renting, and decide to host at your apartment. What happens if someone falls and gets hurt? Your landlord would become liable (to someone that's not even on the lease). Essentially someone would be staying at the apartment who wasn't approved or screened by the landlord. Question for current landlords? Would you be willing to allow a tenant to sublet rooms in a rental?
Love the idea and enthusiasm, Brady. Coming from someone who travels often and stays at a lot of AirBNBs domestically and internationally, I have to agree that the shared bathroom will hurt your marketability. My girlfriend and I would personally never stay in a place where we don't have a private bathroom to ourselves. I'm curious as to how you arrived at an anticipated 67% occupancy rate?
Understood on the en suite bath. Why do you not drop the price in the winter to encourage more guest to stay?
Because I don't need the money, and at some price point it's not worth the effort of hosting. People don't really come to Chicago in the winter.
Yes, my lease does have a no sublease clause. However, this technically is not a sublease as there is no agreement between my landlord and the guest. Now I also get that this is a gray area. I also know of other apartments in my building that are listed on Airbnb and the landlord/management company are not very hands on, and I struggle to even get them to fix things. As long as the rent is paid that is all they care about.
In regards to the door knob issue once again this is technically and upgrade to the apartment so I don't think the landlord would care, but I will also keep the original knobs and can replace them prior to move out.
I just estimated that 67% for illustrative purposes.
Brady you may want to consult with an attorney on that. As far as I understand it, a sublease means a lease between you as the tenant and the subtenant (which in your case is the AirBNB guest).
Understood. I'm curious to know what the difference in occupancy rates between rooms like yours and private rentals. NYC may very well be one of the best markets for AirBNB
Understood on the sublease point. I am not sure the difference in occupancy rates because most rooms I have seen are similar to mine. I can say the rooms where you get an entire apartment are much more expensive in terms of daily rate.
@Brady Boyer We have in the past split the cleaning fee for our rental, so for our 4 bedroom home if the the cleaning is $175 a turn, then we cover 75 and the renter covers 100, which this covers our cost of normal cleaning, taking out trash, washing all sheets and towels, etc. I would say $60 a cleaning isn't too unreasonable, but you might be able to work out a cheaper rate if they understand that you are doing this long term not just a one or two time thing as well.
Also for the key, talk to your landlord and see if you can go to a keypad for the lock, we have ours on a keypad and ever month or two we change the combination. (Also will free up a little space on your keyring)
For the vacancy rate, I would spend a little time and click through some comparable listings that have been on the sites a little longer (room size, amenities, pricing, etc.) and take a look at their calendar for how booked up it is. Might not give the best representation if their is seasonality in the market but will give you an idea.