Is Airbnb Sustainable Through Fall/Winter in a Beach Town?

Question

Hello!

I'm about to leave Virginia and move up north, and am really struggling on what to do with my current property.  I own a 4 bed/2.5 bath single family house in Chesapeake, VA that has a good sized fenced-in yard that backs up to a park in a great neighborhood.  We are about 25 minutes to Virginia Beach Oceanfront and 25 minutes to Naval Station Norfolk.

The options as I see them are:

-List my house for rent for 12 months and probably not get what I need to cash flow positive (I need $2350/month - *not including a property manager* and most realtors think I can get $2200/month from a long term tenant in this market).

-Put my house on Airbnb as a short term rental and "hope" that it rents out for enough weekends in September-March to get me through to the summer months (I could set high discounts to encourage long-term weekly and monthly rentals).

-Do a combination of the two - list my house on Zillow for under $2000 to quickly secure a tenant for a 6 month rental starting in September and then once April arrives, put the house on Airbnb.  I believe that the income from summer months would more than make up for the loss I would be taking in the fall/winter.

I've researched some on airdna.co, but don't really know if the numbers will be as accurate as they say.  My house is smack dab in the middle of suburbia and most of the vacationers come here for the beach.  Although we have several military bases and corporations in the Hampton Roads area and there are always people coming and going, but I'm afraid that my place is "too much house" for the average group traveling here for the weekend.  I've reached out to several Airbnb hosts in the area to see if they have gotten much business during the cold months, but most are brand new to Airbnb this year and haven't experienced hosting their house during this time of the year.  Also, in my experience people book last minute on Airbnb so I've really only gotten interest for Labor Day weekend in September, but nothing else as of yet.

I'm just really not sure what the sustainability of Airbnb will be through the "dead" fall and winter months here.  If anyone has any thoughts on a good solution that would be much appreciated! @Zeona McIntyre maybe you would have some insights on this that you wouldn't mind sharing...

Thank you!

Jon Crosby · Answer

Hi @Rob Roy, thanks for your question and I'm sure you are feeling like you are stuck between a rock and a hard place at the moment with these decisions.  Bear in mind, I know nothing about your market from an STR or even long term rental perspective but my knee jerk reaction to your question is to just sell and move on.  Assuming you can get break even or a little positive equity on what sounds like a heavily leveraged property, chances are you are not going to cash flow enough to make it worth it.

If you need 2350/month for just your mortgage, then you need to realize STR"s run at a 60-80% operating expense ratio including management (which is only 20% of that).  It also doesn't sound like you have a 'home run', so to speak, from your location to the prime rate beach areas as well.  Once again, I could be wrong on this but from what I'm reading and the use of words like 'hope' in your investment models is not a good sign. I can't even recommend a lease option to you either since it sounds like you are pretty well leveraged on the property.

Sorry I can't be positive on this, but once again, I'm wrong all the time so just be sure you do your due diligence on whatever you decide and keep in mind that a market correction is coming soon and you want to be sure you have enough margin to weather the storms to come.

Good luck to you!

Cheers!

~Jon

Rob Roy · Answer

@Jon Crosby @Lisa Doud  Thank you both!  I've gone back and forth with this decision for a while now and have had other tell me to sell months ago - but it's hard when you put $0 down on a $300K+ house (VA loan) and have the potential to out it outright in 30 years.  But I am going to sell, even if I only walk away with $10,000 in my pocket after all the realtor fees and closing costs.  At least I can redeploy that money into a better market with the sole intention of generating cashflow, rather than trying to squeeze cashflow from a property that was bought solely as a primary residence.

Lisa Doud · Answer

Be careful, I went to a class in April presented by the Hampton Roads Realtors Association, and We had Chip Dicks an Attorney from Richmond ( he helps write new legislation for the general assembly) come and speak to us on the changes in the laws, and one of the things that they hammered on was the Airbnb.  The new legislation requires residential unit that is rented less than 6 months at at time must register with each city/county in the applicable jurisdiction, and apply for a licenses to do Short term rentals.  So The state of Virginia and the localities are not being able to collect taxes on your money though airbnb and want their cut.  You will need to google the new legislation, but I believe there is some crazy things in there to prevent people from doing airbnb.  But don't get caught I believe there are some large monetary penalties.  Since I do not do Airbnb, just standard rental property, I really didn't pay as much attention as I should have.

https://lis.virginia.gov/cgi-bin/legp604.exe?171+f...

You should read it before you decide.

Valerie Rogers · Answer

Hi Lisa,

Thanks for sharing the link to the VA State legislation. I've read it, and I am curious about this statement:

"Residential dwelling unit" means a residence where one or more persons may maintain a household, including a manufactured home."

During the meeting that you attended did the attorney explain that this legislation ONLY applies to a residential dwelling in which there is a primary resident living in the dwelling but just renting a room or space in the same? This is what I consider an "airbnb" since that website was originally founded for such a rental situation.

What I am wondering is if this legislation is not applicable to an entire home that is offered as a short-term rental (without someone also living in the home.) Did the attorney make a distinction between the two, do you recall?

Is Airbnb Sustainable Through Fall/Winter in a Beach Town?

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