AIRBNB HOSTS: ROI I can expect from Short Term Vacation Rentals?

Question

Hi there! I'm thinking to foray into the world of short term vacation rentals.

From your experience, what kind of ROI can I expect from Short Term Vacation Rentals? I've heard Airbnb hosts can collect anywhere from 2-5x long term rent in an area, and can see up to 25% return on investment.

Would ROI be significantly less if I managed it remotely and hired a cleaner and handyman?

John Underwood · Answer

Your ROI would be significantly less if you don't self manage.

Jeremy Horton · Answer

You all are seeing 25% CoC ROI in this market?

If I found a deal like that I would not pass it up. Most stuff I'm coming across is in the 7-8% range - with typical financing - or even less. Most of them I can hardly get to break even.

Something I'm doing wrong?!

Joshua Messinger · Answer

Hey @David Babayev!

Those numbers are pretty speculative but you can get there with the right management, location, and optimization on your listing. If you decide to self-manage you can see a higher CoC return but that's only if you take on the cleaning/handyman work. Otherwise, you will see around 10% of your gross revenue diminished from cleaning fees. But, keep in mind if you go this route you can charge a higher cleaning fee and recoup some extra cash on top of each reservation.

If you have any more questions please don't hesitate to reach out!

All the best,

Josh

Christian Ehlers · Answer

@David Babayev That's a wide range of numbers but accurate in my experience. Years ago I heard a lot more about 40-60% returns on Airbnb by just buying a nice place and putting it up for rent short term, now many vacation destinations that are STR friendly have seen a ton of people join the game, partially because this is often the only way to make a property cashflow right now from day one. For your first investment, simple purchase, furnish and rent 25% is not a bad benchmark to shoot for. When you get into BRRRRbnb and other strategies your cash on cash returns can get much better.

I'd take a 25% return plus loan pay down, appreciation, and tax benefits all day long for your first STR.

Account Closed · Answer

You're correct. We aim for 15% CoC minimum but have seen upwards of 50+%.

You'll for sure want to hire out for these things, plus guest communications/property coordinator, to free you up to go get the next deal and stay high leverage. It allows you to keep more than simply hiring a property management company, but it's slightly more effort to get started. Once it's cooking though, it's great.

Bruce Woodruff · Answer

Either paying too much or not charging enough....?

Michael Weigum · Answer

Hi @David Babayev

As others have said, it depends. How you buy the property, the seasonality of the market, and your management all factor in to returns. That being said, I have seen between 25% and 45% in Myrtle Beach. Self managing gets you the higher ROI for sure.

Bruce Woodruff · Answer

It depends on how you bought the house (how much cash v % loan) but you should get at least 2X.

And of course you will get a lot less by not managing yourself.....I'd say 35% less....?

AIRBNB HOSTS: ROI I can expect from Short Term Vacation Rentals?

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