Hey All! I'm new to Bigger Pockets. I have been successful using Airbnb, HomeAway, and TripAdvisor to rent the one-bedroom apartment I have in my two-family home in Brooklyn, NY. I'm a 5-star hosts on all of those platforms and I'm making nearly 3x what I would make in rent after expenses. I'm now starting to look around for opportunities to acquire more properties in popular tourist areas. Philadelphia caught my eye because properties are still relatively affordable, at least by Brooklyn standards. I'm taking a look at 3 or 4 bedroom properties where I can rent out individual rooms and potentially use one room as an Airbnb private room rental.
Has anyone had success doing room rentals in the Philly market?
If my research is correct, I can purchase a remodeled 3 or 4 bedroom SFH for anywhere between $100k to $150k depending on the neighborhood - my max budget is $150k. On the high end, it looks like the mortgage would be $800 per month. It looks like single room rentals usually go between $500 and $800 per month from my research. It looks like two room rentals can cover the mortgage plus expenses (utilities, insurance, taxes, internet, cleaning/maintenance, etc) leaving the two extra rooms for a profit. I looked quickly through Airbnb and it looks like room rentals are going from $25 to $75 per night during peak season.
I'm guessing that cash flow could look something like
Room Rental ($500 per month * 3 rooms ) + Airbnb Room Rental ($50 per day * 20 days [subtracting days for flip days]) - Expenses ($1k) = $1500 + $1000 - $1000 = $1500
Net Annual Cashflow
Room Rental ($500 per month * 3 rooms *12 months) + Airbnb Room Rental ($50 per day * 180 days per year[6 month per year]) - (8.5% hotel tax + 1 sales tax) - $125 annual regisitration fee for home sharing + Using the Airbnb room as regular room rental for remainder of the year ($500 per month * 6 months) - Expenses ($1k * 12 months) = $18000 + $9000 - $855 - $125 + $3000 - $12k = $17020
- Furnishing common areas and Airbnb room plus purchasing pots, pans, utensils, garbage cans, etc - $5000
- Acquiring property with traditional financing - $30k or so
- I will kick the tires with lease optioning as a potential way of bringing down financing costs
Breaking Even on Start-Up Costs
$5000 to $35k initial start-up costs
Assuming $500 per month lease option = ($5000 + 500)/1500 per month profit = 3.66 rounding up to 4 months to break even
Traditional financing = $35k/1500 = 23.33 months rounding up to 24 months or two years to break even
- Philly has a law that you can only rent on Airbnb for 6 months per year
- I went with the higher purchase amount $150k but with the lower room rental range and middle Airbnb daily rate
- I'm assuming that the property will have 4 bedrooms
If my assumptions and numbers work than Philly definitely looks interesting as a vacation rental market. I would love your thoughts and insights.