Real Estate Coach · Asheville, NC · Member since 2016 · 176 posts · 172 votes
I'm looking into the short term rental market in Durham, NC and am wondering if anyone is doing the same thing? I grew up 30 mins from downtown Durham. I have family in the area still and would like to balance having a place of our own to stay while putting my money into an asset with possible monthly cash flow.
It's hard to research vacancy rates on airbnb because you can't really be sure if someone's listed house is actually rented or if they are blocking out dates for their own use.
My focus is Chapel Hill (launching units 4 and 5 right now). For the Triangle market, hotels have seen 5-8% YoY growth over last six years. AirBnb/STR has had roughly 2-3x growth over last three years. Hotels capture about 90% of the market.
My read of these stats is that we're opening up new markets. But, we'll see what happens during next recession.
For supply/demand, we're also one of the top ten places in the country for flips, and most folks don't buy and hold. So, they haven't incorporated BRRRR+AirBnb yet. Rather, they take the quick money.
I'm working with the Town of Chapel Hill to write the proposed STR regulations, and we've set up a group of owners/hosts to lobby. You can join us here.
Our position is that STR's are a vital part of the new economy and will help promote future growth.
Hi @Derek Robinson - that is definitely not my area of expertise, but as a consumer of airbnb type properties in the Durham area, I think the market is under-served. Durham is also a fantastic, growing market across the board. In terms of hotels, "The Durham" is pretty recent, JB Duke on Duke's campus is new and there is an Unscripted hotel opening next month. I know there are more hotels in the works.
All this to say that the hotels seem to think that demand for short term stays are up, but the supply of the airbnb-style options as opposed to hotel rooms is lagging. Again, I am certainly no expert in this area, but my gut says this could be a great opportunity over the next few years as Durham grows.
While I don't have personal experience investing in short term rentals in Durham, I agree with @Dave Olverson that it could be a great opportunity. They're actively building in the downtown area, with One City Center being marketed for $700K+ (these are condos at the corner of Corcoran and Main St.)
Durham has really put itself on the map for it's startup culture and diversity. American Underground (coworking space) has a huge presence (they've expanded several times), as well as the Tobacco Campus (more coworking/office spaces). As far as tourism, you've got DPAC and the Durham Bulls and nearby Duke. 9th Street has been booming too.
I think if you are able to find a place that is convenient to downtown you'd have a slam dunk. Of course with short term rentals there are more maintenance/turnover costs, plus of course always the risk that somebody could trash it.
Also @Derek Robinson - if you ever want to talk about the different neighborhoods of Durham and how they are changing and morphing, I am always excited to chat about it. I've done a bunch of research on Durham, own one triplex here so far, and I'd love to swap ideas about DURM!
I live 150 ft from Duke East Campus and have a garage apartment behind my house as one of my rentals. (I wish I had 10.) I have considered converting the apartment into a short-term rental. There is definitely a market. Almost zero from tourism but considerable opportunity working with visiting professors, alumni, parents, and tech contractors. The important thing to remember that I have not heard discussed often is that short-term renting is a hospitality model. It's a totally different level of customer service than most of us in the long-term tenant/landlord world are used to dealing with. If you have restaurant, hotel, or retail experience, you will be in better shape. I know if I step into this world I may need to be concierge, front desk, housekeeping, and maintenance all in one day. Having a lot of restaurant experience, that model (and the potentially higher margins) appeals to me.
@Derek Robinson did you end up doing this? I Googled "Durham airbnb" this morning and happened upon this post. I really think it would be a great area to get short term rental and I'm wondering what your experience has been. I don't even own real estate currently, but I'm interested in continuing to rent for now, and considering buying a small place walkable to downtown Durham to host (only really just considering it for now, with no definitive plans though!)
@Erin Mullaney, sorry for the delay, I didn't see the notification from 10 days ago. I didn't pull the trigger on Durham. I ended up getting a house in Boone for short term rental, then one in Myrtle Beach. I still thing Durham has a lot of potential for airbnb, but my plans have changed a little. If you want any info or help getting started in short term rentals, feel free to ask. I've learned a lot in the past two years and am happy to share!
Thanks, @Derek Robinson! I'm considering either downtown Durham or Chapel Hill in the neighborhood around TJ's and Whole Foods. We are planning to move out of our apartment in November and over to CH because we love that area and probably are going to rent and continue to save but maybe some day we could own a place and AirBnB part of it. I'm watching closely to make sure this side of the Triangle doesn't act as harshly towards AirBnB hosts, like Raleigh has lately!
Are you glad you got into short term rentals? I am thinking it'd be a good way to FIRE sooner or at least to get some lower impact revenue streams going.
@Erin Mullaney, so glad you mentioned FIRE! I just stumbled into it 6 months ago. I'm already there, but wish I knew of the community while I was striving for financial independence.
Yes, I'm glad I got into short term rentals. I only have the two now, but am looking for more. I started because I was looking for an asset to put money into that we could also enjoy as a family. That is why we have one in Boone and one in Myrtle. I'm currently looking for a lake house. Boone isn't a high demand destination, but I broke even in my first year and should turn a 6k to 7k profit in the second year. I'll turn at least a 5k profit on my Myrtle property in the first year. I have property management that handles both so I'm pretty hands off after I get them set up.
@Derek Robinson, yes I became obsessed with FIRE when my brother in law introduced me to ChooseFI last year. So I've been listening to every podcast related (there are so many good ones!)
I would love to have more passive income. Right now, I work for myself as a web developer, but would love to "retire" to short term rentals or something passive like that some day.
@Mike F. I will definitely check out that group! Thank you. We don't currently own any property but I'd love to start with something small (maybe even a rental) and rent it on AirBnB to get a taste for it. Chapel Hill would be lovely, as I'm completely in love with that area. Right now, we live in South Durham, but we plan to move back to CH at the end of the lease because I miss the walkability. It feels like a great area for short term rentals what with the big university, and the tourists coming down just to check out the cute town.
Additionally, just scanning airbnb, there is not a ton of competition still. It's actually pretty confusing. Maybe investors here don't consider short term rentals? Maybe the overall low supply of housing means people don't really have to get creative in terms of strategies?
Wow, this is awesome! I had a feeling this was the case here. Now if I could just get STARTED. I'd really like to do rental arbitrage here, in Durham and Chapel Hill!
Can you chime in? I know you're in Chapel Hill, not Durham, but you've got some great experience with what's going on at the city governance level. Especially considering Raleigh's recent restrictions on STRs...
My focus is Chapel Hill (launching units 4 and 5 right now). For the Triangle market, hotels have seen 5-8% YoY growth over last six years. AirBnb/STR has had roughly 2-3x growth over last three years. Hotels capture about 90% of the market.
My read of these stats is that we're opening up new markets. But, we'll see what happens during next recession.
For supply/demand, we're also one of the top ten places in the country for flips, and most folks don't buy and hold. So, they haven't incorporated BRRRR+AirBnb yet. Rather, they take the quick money.
I'm working with the Town of Chapel Hill to write the proposed STR regulations, and we've set up a group of owners/hosts to lobby. You can join us here.
Our position is that STR's are a vital part of the new economy and will help promote future growth.
Hi all, I'm jumping in here as I'm in south Durham as well and looking for our first property. Like @Erin Mullaney I love the area and know that no matter what happens with the economy, the universities and the technology here are still a huge draw for people.
@Mike F. I'm really interested in hearing more about your BRRR+Airbnb mode; do you have an article or more information on how that would play out?
All--when looking for STR-specific properties, what should one look for in the property itself? How would the analysis differ from a buy and hold if at all? IE: would you need to adjust for a higher vacancy percentage in the monthly costs?
I shared my story at Zeona's blog. You can find it here.
For market analysis, it'd be easy to say start with knowing my target customer. But, I actually stumbled into that after market testing different size houses in Chapel Hill and studying my data.
Currently, I have three that I own, arbitrage two, and manage another one for a friend. I'm working on a portfolio loan now. Once complete, I've pulled my money out of the business and basically have infinite returns. With tax advantages from the first rehab, I actually got my initial investment back in twelve months.
For calculations, I'd recommend the following,
- Become very, very familiar with new tax code. Bonus Depreciation is a dream! See if your neighborhood falls into an Opportunity Zone and understand implications.
- For initial BRRR purchase, use conservative buy and hold estimates. Base it off rent market value. Don't count on the AirBnb income.
-For the AirBnb portion, plan for $2k / room to furnish / start-up cost and see if you can pay yourself back in six months. Then, try to find a property where you can net $1000 month (do not count cleaning costs in this figure).
-For stress testing, I'm a bit conservative and want 65-70% LTV and 6-12 months reserves.
-Use AirBnb profits to pay off your mortgage.
-For South Durham market, you have to style out your home- hip, modern, etc... From what I've seen, I think many folks are overspending and then having a race to the bottom with customer pricing.
I am absolutely intrigued with the idea of a short term rental in the Chapel Hill/Durham area. I would really love to know on average, how many nights per month you were able to rent?
My daughter and son-in-law have just moved here for work. I would love to have a place to stay when I come to visit that also makes money when I am not here. I figured that they could help me manage it. I live at Lake Tahoe, and we are really struggling with the laws surrounding short term rentals. We do not have a hospital, University, or any of the other secure types of visitors. However, we have a truly unique place, and visitors still came from 2008-2011.
Anyway, I'd love to hear even more about how to select the perfect STR in the area, and how the regulations are shaping up.
Hey Derek, I would love to contact you for short term rental opportunities in durham, NC. currently I am managing more than 50 airbnb properties in Bay Area and I am looking to do same thing in Durham. anyway I can email/text you?
You may want to research STR in Raleigh/Durham because I've heard many people say that they are working to pass legislation which would only you to STR if it's your primary residence and allow a certain number within the city. I haven't researched the topic myself but you may want to research if you plan on using this strategy.