AirBnb probable rental rates

16 Replies

So, I saw a video about renting rooms, apts, etc to rerent on AirBnb.  I understand how it works, but I am having a problem knowing how much to rent a property for.  I have to make sure that a property will rent for more than I pay for it to make a profit.  How can I determine the probable room rent before signing a lease?  I intend to focus on garage apartments or separate rooms in private properties.

Yes, this is not something that any landlord will agree with, not any landlord who cares about their property anyway! If you don't understand how much to charge for a room, then you really don't understand how Airbnb works. Just because you watch a video or take a seminar does not enable you to be able to do the work. I suggest you do a LOT more homework!

@Michael Davis

Seems to be quite the hostile group! Rental arbitrage is a widely accepted practice done by landlords, property owners, and investors all over the country. This practice is not for all property owners, but when done correctly can net both owner and operator a healthy return. A quick rule of thumb to figure out if the rent to earnings ratio is 1/3. Keep in mind that along with rent you also need to cover furnishings, utilities, cleaning staff, maintenance and supplies.

We all have our own threshold on what’s “worth it” but I hope this puts things in perspective. If you are looking for owners and investors let me know and I can point you in the right direction.

So what about the people I have read about making 6 figures per year doing exactly this same thing?  Advice was asked for, not nastiness and undue criticism against someone wanting to learn.

They put it on the web!  It must be true!

They’re liars. There are many, many liars in real estate.

How old are you?  Can you imagine living in a home that you own and having random people appearing in your private home?  Are you really planning on driving all over town to do maid service any time a place is rented?  In most places, you will have to do that to turn a profit. 

If it’s attached to your home, you will do AirBnb if you want it done. You’ll need to find full apartments and larger for anyone to bite. In most cases, AirBnb runs 10%-25% above market rent. So then you’ve got your little slice to share with the owner (because they might want more), to do furniture, to pay utilities, cleaning crew if you don’t do it, etc, etc. There are very few properties this works for in very few markets. And they aren’t someone’s spare bedroom. 

Worse news:  studios and 1 bdrm are most popular on AirBnb, so you can’t solve your fixed costs by getting bigger units.

look on airdna for rental data, just be aware the explosion of hosts has created a glut, and low prices in some cities, so it is a very competitive environment.  The angry replies might be from hosts who have seen bookings fall lately 

There are many people across the country making solid income by the use of Rental Arbitrage.  Contrary to most people's perception, AirBnB rentals are better cared for than long-term rentals.  The reasons being: 1) rental is professionally cleaned after each use of usually 2-5 days; 2) both Host and Guest are given Yelp-type ratings that everyone sees.  If you're a bad guest no one will want to rent to you; 3) as the Lessee, you can provide extra Renter's Insurance to give the Owner added peace of mind.

This trick is convincing the Landlord of all this.  As time goes on, more and more Landlords/Owners are getting hip to this model and will be more likely to give you a Lease, especially if you have some Real Estate experience and present yourself in a professional manner.  You will also likely have to offer the Owner above-market rate as added incentive.

Also, sites like AirDNA can give you an idea which markets are good for the model.  Moderately populated college towns are usually a good fit.

I’ve researched AirBnb markets out of my own curiosity. Many people in my neighborhood have illegally converted their basements into second units and rent them out by the month at $900-1500/month, but my husband would lose his play space, so we even don’t do that. I’ve rented plenty from AirBnb, but that’s my only interaction. 

I’m not angry.  I think you’re hilarious.

I’m sure Brad knows and can tell you that many college towns have already passed laws restricting AirBnb, just like they control the percentage of rentals in many neighborhoods and set the max unrelated adults conservatively. Expect the rest to follow.

Brad also knows that he’s describing a very different situation than your imagined set up, where you are posting single rooms for AirBnb occupancy inside occupied houses. 

Not really understanding the vehemence against rental arbitrage here on this thread. It’s happening everywhere; it’s a great business model as long as Landlord/Lessee are on the same page and there is proper insurance in place. The main competition I get in my area is from those doing this exact thing. I own the property that we list on Airbnb, but looking to find a good rental arbitrage situation as well.

Michael, I’m not sure how realistic it would be to find private rooms to rent and then sublet, that’s a curious business model that I hadn’t heard of. I’m only aware of subletting with stand alone units.

Also true that everybody and their brother is jumping into STR, creating a glut and forcing us to price our units unrealistically low. Even with lower rates, we are making a good return, but wonder where this will all go in years ahead with oversaturation and regulations.

@Genny Li being a "newbie", as you describe yourself, it might be a good idea to contribute in a more positive way. Not only are you coming off as negative and angry, what you are posting is completely false.... What the OP is proposing is becoming more and more common and there are multiple discussions on it within the BP forums. Renting property and then "subleasing" on Airbnb is a strategy that people are using, as others here have described. A little research and some humility will go a long way here to help you through your journey into real estate investing.

Renting and then subleasing UNITS is pretty common. Renting and subleasing some dude’s bedroom?  Not exactly common.  

I’d like him to bring it up with all the folks with rooms for rent locally.  See what they say. 

Seriously, though, AirBnb opportunities are being heavily controlled in most college towns. I have a disabled brother and we’re making plans for his future security, and an AirBnb manager is actually high on the list, but there are many restrictions because of the location that makes it more difficult.

If you look back at my original post, it mentions "garage apartments" before individual rooms are listed.  Does that make a difference in anyone's thinking?  I would prefer separate units from a house, but I know some people rent out rooms, so I didn't want to leave out that possibility.

@Kim Becker

I’ve seen models doing rental arbitrage where each individual room was rented. Maybe my original statement wasn’t clear, I was not suggesting a room in a private house but a full apartment renting each room out is doable. I personally feel that full units are more profitable, but to each their own.

Whoops should have specified which Michael! Michael Melendez, I’m definitely on the same page with your post. I was addressing Michael Davis, who mentioned rental arbitrage with a private room in someone else’s house. Which I think would be extremely awkward and a huge can of worms. Maybe it’s out there, but I hadn’t heard of it.

Michael Davis-
Your best bet for rental arbitrage is stand alone units- as in full apartments, house, condo. NOT on the same property as the landlord. After having done Airbnb for a full year, I could imagine a host of potentially terrible situations if the landlord/guest were on the same property. Just my humble opinion, I’m not nearly as experienced as many on this forum.