Testing the Waters on an Idea MN Air BNB

[Daniel Kurkowski]

Hi everyone, a few of you may have seen my enthusiasm in the past about utilizing Air BNB's platform to bring entrepreneurs together with investors to expand both of their businesses and while I have done some limited testing in my own market with favorable results, wanted to get other's opinions and share this idea.

In the Twin Cities market in Minnesota we are fighting hard to find 6% cap rates in multi family homes (oftentimes even harder in single families) which has turned off many investors who have been sitting on their cash for the last year.  At the same time, the Air BNB market is gaining some momentum, but the biggest limiting factor for expansion for most Air BNB operators is the initial capital investment to acquire a new property.

My solution is to pair the two by vetting and working with experienced Air BNB operators who want to expand, but don't want to be relegated to negotiating over and over again with landlords who can't rent their house to an ordinary tenant or don't have the cash/inclination to stick 20% down payments into these properties.  This is an inefficient use of time and does not allow the operator to expand their business into the desirable areas they should be targeting (which consequently is where most investors want to own RE).

If an investor can acquire any property an operator would like to use and get some standard return on a long term lease (8 cap is the target for 5 years), the investor is able to benefit by getting a slightly above market rent amount without having to pay for management.  The operator is also happy because they get a new property that they choose with the ability to profit anything above the rent amount they are paying per month, which will allow them to scale much much faster.

As I said, I have interested and willing parties on both end already, but wanted to open the idea up to scrutiny and feedback and hopefully allow people in other markets to take advantage of this model to scale their business.

[Todd Dexheimer]

Your idea sucks!

JK, but in seriousness, I think the biggest challenge is to convince someone that owns a property to master lease it to you, unless you are giving them substantially more in rent. The rental market in the twin cities is at 3% vacancy and in most areas less than that, so renting a house is easy. Why give you the keys, unless you will pay me $1800/mo vs $1400? 

As always though, thinking outside the box comes with challenges. Try your concept. If it works, there could be a lot of good money made. I would try to work deals as contract for deeds if you can, that way you are building equity as well.