AirBnB Cabin investment
Is there anyone here that is willing to have a conversation regarding a potential Airbnb cabin in Maine. I would like to run the numbers by someone that has experience.
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Quote from @Will Cruz:
Is there anyone here that is willing to have a conversation regarding a potential Airbnb cabin in Maine. I would like to run the numbers by someone that has experience.
Post them here. A lot of experienced people here will jump in to help.....
I’d be happy to
Thank you all.
So I am currently under contract with a Lake front cabin in Maine at 465k which I feel its overpriced. Hoping the appraisal comes in lower. The comps in that area are around 300-380k in that area being lake front. It is currently being Airbnb about $220-300 dollars a night. May 2022 it is 70 percent booked, Jun-Aug 90-95% booked and September - end of year is being blocked off incase of a sale. There are 44 reviews which are great despite its current condition.
The cabin needs some updating and I think we can make it be worth 300 a night from May-October. In the near future we would like to extend it to a 3Bed / 2bath rather than a 2bed/1bath. SQ footage will go from 910 to about 1300sq ft. The nightly rent should increase to about 375-475 a night.
My questions are:
Do you all think based on the numbers, is this a good investment. Interest rates are running high now a days?
Newport Maine to be exact.
Quote from @Will Cruz:
Newport Maine to be exact.
Did you Pricelabs the current revenue and market dashboard? What are your goals/criteria for an STR?
Jeff,
Sorry I have not. I am looking into it online now, but I can't seem to make it work.
This is my best back of the envelope, spitball estimate. If you can book 255 nights per year, or a 70% occupancy at $250 per night, you're looking at gross rental income of $63,875 before expenses. Based on a 20% down payment at a 5-6% interest rate (making some guesses here), your monthly payment would be in the $2500-2800 range on a 30 year note depending on exact taxes, HOA, and insurance costs. If you account 5% for maintenance costs, 3% for platform booking fees, 2000-3000 per year in utilities (will be more if on a heating oil furnace), I calculate an operating profit of $15-20k before taxes. Standard depreciation (465,000/27.5) is $16,909, so that would likely be tax free income.
There are a lot of assumptions in this calculation. If occupancy goes down to 50%, you're looking at approximately $7,000-8,000 in operating profit based on my assumptions and calculations. What if your actual 12 month average nightly rate is $200? Again, these can go either way...it could be $300/night - I don't know the area or the property. You have to be confident in your ability to add value as an operator or have upside in the land. If you could add an airstream, yurt, or other structure to generate revenue, that can change the income potential as well. Every property is different, but at $465,000, I'd want more than 2 bedrooms. You are on the water though and that counts for something. My goal in purchasing short term rentals is to maximize the number of bedrooms for my budget and 2 bedrooms is light for $465k.
Those are my thoughts, which may be worth what you paid for them. Please send me a direct message if you feel that I could helpful. I'd be happy to email you the spreadsheet that I use when analyzing purchases. We own a short term rental in Ellsworth, so I know that little corner of Maine well but not much about Newport. What I can tell you is that the startup expenses to get a property ready are usually a bit more than you estimate. Make sure that you account for that in your calculations. My initial take, since you asked for it (kind of), is that it better be a great property on an awesome lake and you better be confident in your ability to self manage for you to get a solid return on a $465k, 2 bedroom house that needs updating.
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What's it like in the winter?
You just want to figure no higher than 30% in the other 6 months. You may be able to get snow mobilers as there is a trail right there but that will be contingent on snow. We are ahead of the game when we rent to nurses or construction people for 3 - 6 months in the winter.
@Will Cruz 70% occupancy in New England is extremely optimistic. Across the borders in other parts of New England 50-60% for vacation rentals is doing very well. As others have called out in the STR forums, northern climates have built in shoulder seasons. In my experience, April, May, June, September, November, and most of December are dead months. That's 6/12 months you can expect minimal income, meaning you have 6 other months to cover the full 12. While that's generally not an issue for a well-run STR, it does change the math to a 50% baseline vacancy rate, which you can then layer applicable ADRs, CapEx, and fixed vs variable costs atop.
Additionally, since the property's already being used for STR, ask for P&Ls, same as you would for traditional LTR investments. Sellers should have those or you can walk them through how to export them in AirBnB/VRBO/etc. Blocked dates on a calendar are no indicator of occupancy, they could just as easily be manually blocked by sellers for any reason.
As you have undoubtedly seen from the forums, many investors have flocked to more southern regions with greater year-round demand. Areas that, with a larger lakefront property like this, can do quite well given sky-high rental rates. I'd just caution that you calculate conservatively on ADR and liberally on vacancy rate. That's particularly true with the bitterly cold winters that Maine is known for and that Ed, rightly, calls out with the reference to frozen lakes and snow mobilers.
Hope this helps and let us know how things turn out in the end!
@Travis Timmons this is a very well thought out response! I’m looking into investing in and around the Ellsworth area myself and would love to hear more about your experience in the area. This would be my first location so I’m probably not calculating the numbers properly and definitely am unaware of all the costs for up keeping a property in this region. I’m more familiar with DFW homes. I sent an invite to connect, would love to chat sometime.
Where in Maine is the deal? Curious as I see a lot of Maine deals. Definitely some goldmines in Maine. Just have to watch out for properties being appraised as rural from a lending perspective.
