Looking at a total gut job on a home in Lawrence, KS where the University of Kansas sits. The numbers don't make sense as a monthly rental, but as an Airbnb they do. My thought is that's there's a very strong Greek system with numerous parent weekends, gameday weekends, graduations, speakers and other short-term prospects.
My questions to BP, does anyone have any experience with Airbnb in a small college town like Lawrence, KS where the town isn't a major metro area?
I'd be interested to hear vacancy rates on AirBnB's in different markets. If any investors who specialize in AirBnB check out this thread, I'd appreciate them commenting on what they typically in terms of occupancy for each city they invest in.
@Charles Kennedy That's the biggest missing piece for me.
Right now I'm running a 91 night range or 25% occupancy rate. I have no idea if that's close to reality or not.
Any help is appreciated!
@Michael Glaser it has be to very market dependent. I wouldn't have assumed that low of a rate (then again I don't know Kansas), but if the numbers work at that low of an occupancy, the rest is just icing on the cake!! Make the pictures, description, etc. look great to drive it up. I'd try to really encourage those first guests to write a review if they enjoyed themselves as my understanding is that reivews are crticial to Airbnb.
@Michael Glaser If you are in a college town that has football & basketball you can become an Airbnb hotspot. I run a few Airbnb's in Arlington, TX that has college basketball and the WNBA team plays on their campus. I don't really know the market of Lawrence, KS but you could easily learn it by scrolling through AirDNA. You can also search around for listings in your area to see if there are already people doing it. It sounds like you know your market pretty well.
@Michael Glaser I have zero AirBnB experience, but I do have lots in a college town. I would highly recommend you check the zoning laws on unrelated persons renting a unit in your market.
Many towns have a limit on how many people can rent a unit that are unrelated to try and eliminate large party houses down. This could be a huge issue if a nosy neighbor contacts the city when they see large groups in and around the property every weekend. Unfortunately, I've learned this the hard way.
If there are no restrictions, I do think the AirBnB is a great model for a college town rental. Especially if you can get a large enough property that can sleep 8, 10, 12, etc. You can make huge money on those 4 or 5 weekends that are really important every year.
I’ve helped managed my parents Airbnb.
If you plan Airbnb to be your main source of income for your investment property just make sure you know the laws very well. They vary by city. I’m personally not attracted to Airbnb as a long term solution, I find it to be more work than your standard rental.
The idea is to collect rent every month automatically with Airbnb I find it to be more leg work in preparing the property every time a new guest comes and goes.
@Myka Artis That's a great site for analysis. THANK YOU.
@Will Gaston I'm thinking there are 2 graduations a year; Winter & Spring. KU is a basketball school so there are roughly 7 Saturday games. Countless parents weekends. Move-in weekend. That's at least 10-15 weeks or weekends where you could inflate the cost to market. Thanks to Myka's data I would figure you could conservatively say that it would be rented 45% of the time vs AirDNA's figure of 62%.
I'm looking at a 4BR which would rent for $1600-$1700 brand new vs Airbnb for $2700. That's $200 per night at 45% occupancy. For conservative estimates, I knocked it down to $2,475 or $165/night. That's not counting the cleaning fees, service fees and city taxes that will be charged.
Purchase Price: $115,000
Closing Fees: $5,000
TOTAL PROJECT COST: $190,000
Cash on Cash is 18.75%
Bonus* I have a vacation house I can go and see my favorite basketball team!!!
If I did rent it out for $200 a night at 62% occupancy that's $3,700/month in rental money... that's highly unlikely, but that's also not factoring in that like houses are going for $226 per night and that's also not peak weekend for graduation, basketball, etc.
What am I missing here?
@Michael Glaser You're missing some small things. If you're doing an AirBnb you'll be paying for yard maintenance, all utilities, cable, high-speed internet, etc. And if you're renting out for those college football game weekends you'd better (just to be safe) bump up those repair percentages! One thing you will want to look at is the parking situation. If it's common to get 8 alumni to pile into a house and happily rent it for a higher price, they all need somewhere to put their cars. It's a different scenario if mom, dad, grandma, and grandpa are coming for graduation. They probably loaded up the Escalade and carpooled.
And your cash-on-cash calculation is way off. Why? Your total cash needed is not $42K (which is $37K + $5K closing cost). It's $42K + $20K in furniture, TVs, etc. So let's call it $60K. Those added items like cable, internet, all utilities, landscaping costs, etc. will be at least...what...$400 per month? So your cash-flow goes from $656 to $256 per month. $256 per month is around $3K per year which on $60K cash needed gives you a cash-on-cash return of 5%.
Who knows, maybe my numbers are wrong or you've accounted for some of these things in your costs already.
@Michael Glaser Assuming no zoning/city issues, I would try and maximize the amount of people that can stay there. Can you fit 4 Queen Beds and 2 pull out couches that could sleep an additional 4 people? The reason I'm asking is because a lot of college town weekend rentals (especially for football/basketball) are from young alumni that are coming back in town for the game.
That means they're usually splitting the price among the amount of people that are staying there. If 12 people can easily fit then I don't see why you couldn't charge $400-$500/night depending on the location. My wife and her friends do one of these trips to their school every year and they always end up paying $100/night per couple.
It's the somewhat similar to the concept as my student rentals. Max out the number of people you can get comfortably sleep there, make the property nice and unique, and get as much money as you can for those 8-10 weekends/year that really matter.
First, I would check to make sure that you don't need a short term rental permit in your area. That varies from city to city. Then, spend some time on AirDNA and see what's happening with airbnb rentals in your area. I agree with @Andrew Johnson , there will be a few more expenses than what you have listed in your spreadsheet. Furniture, TV's and kitchen supplies are going to be a big one. You will also need to budget for towels and bedsheets, as you will need at least 2 turns (stays) worth of those things, possibly 3. And you don't want to skimp on the furniture if you want good reviews! You are going to need to get nice, matching furniture and put some effort into the decor. You will live and die by your reviews, and you don't want to give the guests ANYTHING to complain about (i.e. the mattress was uncomfortable, the furniture was wobbly, it felt like a college student's house etc).
I usually buy short terms in vacation-rental heavy areas. However, a big college being nearby is definitely a plus. I would be hesitant to buy something that's NOT in a vacation heavy area that would not be profitable as an LTR, in the event that the STR did not prove to be as profitable as I had hoped. Just research, research, research!
I live in Lawrence, and work in the hotel industry, and the Airbnb demand is pretty strong. This is a weekend and leisure driven town. Pretty perfect for Airbnb homes. However, the city is in the process of drafting regulations and I am not sure how friendly they will be. # of occupants was one item brought up in the information meeting held last week. Long term rentals are limited to 1 unrelated person per bedroom. Also, some folks feel that they should have to be owner occupied to be a STR. Likewise, you also have 4 new hotels in the process of being built in Lawrence, so that will affect weekend rates I think next fall. Lawrence has been able to get high rates both in hotels and Airbnb's. That will probably soften for a couple of years with more availability. Hope this helps.
I'm a big fan of Airbnb. I even train landlords how you set up short-term rentals.
However, I'd like you to run your numbers on renting your 4 bd by the room. Furnished room of course. All-inclusive rent.
Price each rooms at the going rate of a typical unfurnished studio.
I'd bet four all-inclusive rooms will beat your Airbnb projections on a NET INCOME basis ... especially when you factor in your time to manage your short-term rental (which is something many landlords aren't brave enough to do. Most like to think about gross income only and ignore the true costs).
Hope that helps. Best to you!