I'm looking to buy a property in Baltimore use as a short-term rental full time via Airbnb. While working through the slower parts of the purchase process (financing through a small credit union), the thought occurs to me - Why not see if I could rent a home or two and do the same thing?
I've read some posts here about owners angered by their tenants doing Airbnb on the sly. I understand. That's not what I'm after. I want to do this totally on the up-and-up with PMs and/or LLs being totally aware of my intentions.
I take for granted that landlords/PMs are going to be predisposed to reject use as a STR - especially full time.
What are some good ideas about how to approach landlords or their reps and assuage their worries?
My instincts say I should be very forthcoming - not even asking for a viewing of a listing until I've come clean about my Airbnb plans.
I'll also assure - and even encourage the LL to put into the lease - that I will have a STR-tailored commercial insurance policy that will supersede homeowners insurance. (Propoer Ins, underwritten by Lloyds seems like the gold standard here.)
I would also be willing to put down 2 months rent as a deposit (max allowed in MD, I believe, and double the standard).
I can also pay more, say 10% or even 15-20%, more than current list. In most cases, that is still will below the initial listing amount from when the properties went on the market in May, June or July.
I'm also only planning to approach on properties that have been vacant for 5+ months. The Baltimore market is slower than a lot of others and a lot of big apartments are coming on line. There appears to be diminishing demand for the 4 bedroom townhomes that I'd prefer.
Many thanks in advance for any thoughts, ideas or practices that have worked in the past.
The main thing is what value can you provide the landlord that they can't already get?
Giving more money and more security deposit is great. That can already be a win in many landlord's mind.
But, you need to understand from their POV this is probably a risky proposition. Why should they rent to you to do your experiment? Will you shield them from your headaches when you start up your STR? What about when long term tenants about the landlord complains, what will you do? Can you reassure your guests will be high quality?
Number one sell in my experience is if you are able to provide hassle free rent every month on the dot, that's the best.
@Andrew Wong , thanks for your thoughts! I like the idea of explaining how I plan to screen visitors and protect the property from bad guests - however rare they may be.
First, I'll be furnishing the place to the tune of, say, at least $20k in furniture. I will install remote security, including front and back entry cameras. I'll also have individual entry codes for each guest (you have to love technology these days). We can also craft language for the lease that makes me specifically responsible for any damage related to guests (in addition to my own personal use). I'm hoping the double deposit also helps.
These homes are listed for, give or take, $2,000 / month and have been sitting empty for at least four months. In most cases, the listings have dropped 20% from their original listing rate. No one is making money on them now.
My first impression is that 20k is a lot of money to dump in without proving your business model works out.
My anecdote with remote locks is that they ultimately weren't worth the price and was more headache than they were worth. Running out of batteries means that I have to take a trip out to the unit, and I hate taking trips out to my units. I try to be as hands off as possible.
Another thing due to me leasing the unit was that the owner wanted to renovate the doors, and they got doors where my remote deadbolt couldn't fit in. That was money, and again time to uninstall the lock, and now I need to figure out how to re-purpose it.
Yeah - part of me doubts furniture, etc, will not cost 20k for a 4 bed, 2.5 bath home. But I've been using it for conservative estimates. I appreciate your note on the remote locks. Some of these lessons I'll learn the hard way.
I do plan to be around a lot, as I want to do the initial few months of turnovers myself. That's the best way to learn as much as possible, I figure. I have the time and the flexibility.
@Andy O'Neal The best way to approach a landlord about using Airbnb on their property is to show them that you have experience doing it. I just got my first approval from a landlord that pretty much wants me to run one of his units as an Airbnb and then start working on the rest. The only reason he said yes is because I will be giving him more money than what he is renting for now and I gave him my short term rental portfolio. Once he saw those two things he was more than willing to work with me because he knows I know what I'm doing. If you have a short term rental portfolio you should easily be able to persuade a landlord into letting you Airbnb their spot. You might have to give them a cut of the proceeds but that doesn't matter as long as you are making your sweet spot on the profit.
Totally agree with @Myka Artis , and would add that doing preliminary research on insurance and providing him with examples of where it has worked out/benefitted landlords would help. Basically, I think if you can prove to them they won't get sued and they'll make more money, you have a much better chance of them coming around.
@Myka Artis : Thank you for this insight! And good luck with your portfolio!!
@Erin Spradlin : Thank you as well! I love the business you and your husband are building.
So far, it sounds like if I can effectively communicate the pitch "you'll make more money, I'll cover any and all risks, and - perhaps first - I know what I'm doing," then I'm on the best possible track. I am open to offering a cut of the profits - but I'm not sure if that's going to be too complicated starting out. I'll also put my resume on the table so the PM/LL knows I've handled decently complex work and should be up to this task. Anything to help me seem less random and crazy.
I do not yet have personal experience as a host (my apartment is not an option -- entry is super-complicated and tied to a 'precious' FOB device), but I've watched closely as my girlfriend has successfully Airbnb'd her townhome in DC and she has already suggested that I list her as a partner. Note: I have a great gf. :)
The sequencing is sort of backwards, but I also plan - regardless of the rental route - to purchase in the same neighborhood and Airbnb the home (eventually 'homes') that I own. If I were already doing so, that would be the first line of my pitch: "Hey, I own 123 X Street and do this there. It works. I'm not getting sued. I want to do it with a place you rent out. Let's both make money."
Thanks again for all of the input. These posts are clarifying and encouraging. I'll post any and all updates here. I'm getting more clarity on insurance tomorrow & putting together a couple of slides on comparable Airbnb properties in the neighborhood... ducks in a row and all.
Hey Andy, out of curiosity, what areas are you looking at in Baltimore? I live here and my wife and I have casually talked about acquiring STR in touristy areas in BMore.
Hey @Tobias Graham , I'm admittedly super-new to the Charm City scene. My initial target area is Ridgely's Delight. That's where I'll most likely purchase. Further down the line, I'll be keeping my eye on quieter parts of Pigtown as well as Federal Hill. With Pigtwon, I'm primarily talking about The North side of Washington and no further west than Cross Street (really though, Pobbleton). As for a straight rental to Airbnb, there are some in those parts of Pigtown that passed the walk-by test yesterday.
I'm not opposed to other areas - I just don't know them as well, or at all. I've walked RD and Pigtown a 6-10 times over the last month. I had a networking lunch in Remington the other day... love how that area is developing, but the Airbnb numbers don't compare to the areas on either side of the stadiums.
(For those who don't know, Ridgely's Delight is a very small neighborhood that abuts the baseball stadium on one side, University of Maryland's med/professional school and hospital on another... and Pigtown on a third side. It's a five minute walk to that stadium and a ten minute walk to the Ravens (NFL) stadium and the Baltimore Convention Center / downtown. Put shortly, it's a quiet residential neighborhood of homes built in 1900 that is a stone's throw from 80% of the things that would draw someone to Baltimore.)
I've enjoyed reading all of your responses.
I'm interested in this particular thread because of the "property management" portion. It seems that Andy should concentrate on properties that are not already managed by Property Management companies. Is this correct?
Pigtown has impressed me over the last few months. I've seen prices increase a good amount in that area. Great location for AIRBNB.
I agree with Remington, it's a super cool area, but I think it's better for long term rentals as opposed to STR.
@Tobias Graham - On Remington, I have the same sense. Regardless of city, I'd prefer some walkability to attractions beyond cool restaurants for STR. As for Pigtown, I'd definitely stay between MLK and Cross Street. My spidey senses are too active once you get West of Cross. If that Suspended Brewery place ever actually opens, the neighborhood will get another little bumb.
@Yolanda Columbus - Thanks for the interest! If I fail in my initial efforts to approach PMs and LLs on my short list of target properties (these are very small neighborhoods), then I've decided to go with some combination of advertising and direct mail. I'll post my results here.
I think talking anyone who is thinking classic LTR into leasing for to a full-time STR'er is going to be uphill sledding. Adding a PM middleman further steepens the hill. But the returns seem to justify the effort. The Airbnb Arbitrage won't exist forever - and I don't think it should be the basis for justifying a higher-than-LTR purchase price - but it exists in a lot of places now.
@Yolanda Columbus Yes it seems to be easier to approach a landlord than a property management company from my experience. Usually a property manager is going to have to go through the landlord anyway to get approval. Might as well cut out the middle man. I seen a post on the forums not too long ago when a landlord found out that the property management company was allowing tenants to Airbnb their property and the land lord wasn't too happy about it.
BTW, Andy if you are looking for an easy way to give the landlord a cut of the profits, there is a way to just assign money straight from Airbnb to multiple accounts ( @James Carlson and I used to do this in the beginning when we had multiple accounts.)
I would think about paying a higher rent rather than a percentage of the airbnbs. Pitch it as a higher stable rent and so if you have a bad month for STRs it is ok, because the LL would still get X amount every month. Not have to worry about how well you are doing every month.
FYI this is possible and people have done it before, though as you mentioned, many people do it without telling the landlord. It is also how most shared workspaces (like Wework) work, they lease out office space and re-rent it to companies. At first big landlords were hesitant, but this is why a lot of them (co-working spaces) cropped up in 2001 and 2009 etc, because the spaces were empty anyway. If the landlord is sitting vacant, they are usually much happier to be creative.
@Erin Spradlin , that's super helpful. I could see lot's of reasons to want to split. I would think that feature is useful for a lot of types of partnerships... not to mention roommates/co-owners who were probably the original targets for it.
@Andy O'Neal Awesome post. You've obviously put a lot of thought into this. I won't retread what people above have said. I would just add a thought about your approach to the landlord.
I'd consider not just cold-calling people and jumping into your pitch. I'd ask for a meeting with the landlord and say you have a proposal that you want to run by them. Treat it like a business pitch. Have the numbers ready. Have your arguments ready. (Extra money for them is obviously enticing.) Oftentimes, the biggest objection is a perceived increased risk of partiers who will either trash your place or disturb the neighbors. But in my and @Erin Spradlin 's experience with Airbnb here in Denver, almost everyone is respectful of your place. And if they're not, they're gone in a few days, whereas you could be stuck with a terrible LTR tenant for a year.
Oh, and I'll second the idea that Airbnb makes it super easy and automatic to distribute money to different people.
I am working today on how best to approach landlords and property managers. I want to have a reasonable, conservative set of info on my insurance plans, legal basis for outsized deposits, my partner's experience as a host, as well as how properties in these neighborhoods perform. And I still plan on getting a bunch of refusals.
@Jarrod Kohl , I appreciate the vote for higher fixed rent versus rent + a cut on top. That's my plan. It makes it easier really for all involved. The initial basket of properties I'm looking at have, on average, been sitting vacant since May and have fallen 20% from original list price. I am running numbers on renting them at their original list - though that won't be my first offer.
Definitely seems possible but if the landlord is smart he will allow you to prove concept, thank you for your services when your lease is up, and then set up his Airbnb. You don't want to be in a position where you can easily get cut out when you have time and money in the deal.
@Sebastian E. , this is why it pays to own... to have that option. I'm still planning to purchase homes for this use and only came back to this idea because, well, purchasing takes time and I'd prefer to have a portfolio of homes in the market quicker than I could purchase. With luck I'll have a door or two or three in six to nine months.
However, if I can talk a couple of LLs into letting me pay to rent their long-vacant properties, I'll get to my happy number quicker. If they say 'no', well, I'll have spent a little time chasing a lead that didn't work out. But I view that as additional time doing market due diligence.