Airbnb how to start?

21 Replies

Hey guys I am looking to getting into Airbnb here in San Antonio and am wondering where to start? Should I be looking for 2,3 or 4 bedroom houses? What do you guys look for when searching for a STR or house to Airbnb? Is there any advice on houses or things to stay away from when just starting that you suggest? Any and all advice or wisdom is much appreciated!

@Michael Guzik I would start with understanding the regulation in your city.

What’s the regulation in San Antonio? 

@Michael Bowie As of now there is no regulation... The city was trying to create one about a year ago but it didn't go through. So right now as long as you pay your taxes and have the license you are free and clear.

@Michael Guzik That sounds great! Though, I would still try my best to figure out where you think they’re headed. That way you can buy where you at least expect to be safe whenever regs go through. 

For example, in my market it was Wild West as well. However, I kept hearing from the opposition of STRs that they didnt want them in residential zones. So, I started only looking for commercially zoned properties even though there was no regulation that required it. Guess what... regulations have now gone through that make it illegal for non-owner occupied in residential zones.

So, I get to continue to operate while other people are having to shut down. 

@Michael Guzik , here is 30,000 foot data for San Antonio from Everbooked (click here)...further down the page you can see Occupancy rates by room size and list price by size.  You should be able to do some really high level analysis with that to get started.   Just looking at rates though, it 'seems' like the sweet spot between ADR and Occupancy for that area is going to be the 4-5 bedroom range based on average sales price vs gross revenue.  

Feel free to check out my BP blog on some other insights with regards to STRs (click here) for some other insights and things to think about.  I'm certainly no expert on San Antonio, by any means, but the articles might get you thinking about some other things when planning your analysis. 

Also, heed @Michael Bowie words about regulations as they pop up out of nowhere sometimes and can have devastating impacts on your business model if you are not staying ahead of them. What I liked to do is create a Google Alert for keywords for my area (e.g. San Antonio Rental Permits) and then you will get all the articles that find those keywords and keep you in the know. 

Best of luck! 

@Jon Crosby Great suggestions as usual. I just did some random searches with everbooked. They have made some improvments since I last played with it. I checked my own properties on the "market reports" map and results were a bit higher in both gross revenue and occupancy( but in the ball park). I'm assuming that they take the airbnb data and guesstimate on the periods of my calendar that are either blocked or are homeaway bookings?

Hey @William Leahy !  Happy New Year!  Yes, as far as I know all these providers basically scrap the AirBNB data, then associate their own proprietary algorithms to it to get what they think is the most accurate analysis.  To my knowledge none of these providers have nor attempt to pull any HomeAway/VRBO data. This is a big struggle for me as most of my bookings come from VRBO and only about 5% from AirBNB.  

But like you said, they do give a nice ball park estimate to get your analysis underway. I like Everbooked because even though there is limited data on my property (due to it being mostly VRBO rentals), the estimates are pretty spot on to what my revenue and income is each year.  You can try your place on their comps lookup here (https://www.everbooked.com/comps#) if you like to see if it aligns better.  Although I'm guessing it's the same as the map shows.  

Nice to hear from you! 

I would start at a higher level.  Do a brief business case.  Something like the below.  If you're not clear why you're doing this, then you're not likely to start off as well as you would otherwise.  By the way, I wouldn't encourage anyone just to plan for one short-term rental.  Plan to do 5+ where the first one is a prototype for you to learn.

Fill out something like this:

Mission:  

Provide short-term rentals in the San Antonio market to cater to value-oriented travelers.  

Vision:

Provide various housing options ranging from single travelers to small groups less than 10.  Achieve some scale where this can provide $10k per month net income.

Strategy:

Start small with 2BR houses with rental income yield of $3k for purchase price of $200k.

Purchase, quality duplexes ...

Control costs and learn business by self-managing for a year.

Leverage W2 to ...

Leverage FHA to ...

etc.

Risks ....

- Regulatory

- Neighbors 

- Competitive

......

5 Year Financials:

Purchase $200k

Loan $180k

Rents:  $3000

Mortgage: 

Utilities:

Maintenance:

Cleaning:

Setup:

Improvements:

Net Income:

Appreciation:

Equity Build Up:

Try to buy bank foreclosure properties.  In this towns market, we can get them for about 1/4 to 1/3 of the appraised value set by the county appraiser.  In a nutshell, we pay about $6-$8.50 per square foot of house.

We buy furniture and appliances at estate auctions. They were good enough for someone to live with in their own house before passing away, so we figure they are good enough for a STR.

You can also buy new appliances for your current house and donate the old ones to your STR. If you have the receipt, you may claim it as a deduction but I don't know if that is on the level for taxes. The next time you buy a house, you can donate the appliances you just bought. But I don't know if you can use the original receipt as a deduction.

The above post is absolutely right about having at least 5 properties.  We have 22.  Other people have tried to do what we do but it can be hard to make a profit consistently with only 2 or 3 houses.  Especially when the person with 22 houses is taking the customers away from the people with only 2-3 houses by undercutting their price and providing a better living experience.  One thing I have is a bulk cable/internet account.  For a normal person to have those things it would be around $120/month.  I was paying $32/month for cable/internet for each address several years ago.  It's gone up a little since then.  When you have bulk, the field techs will give you extra remotes, splitters and coax right from their service trucks because they know you are a big fish.  The city utilities might also go out of their way to do things you might need too.  They have for me.

@Paul Sandhu is my hero.... but my cabins have nicer appliances and furniture than the house I live in. No one is reviewing the house I live in for the world to see.

I’d ask yourself why you want to do this. It’s way more work. And they could take it away from you at any moment. And even when things are good you have to deal with people leaving you 4 star reviews because they “made a mistake and hit the wrong button” which happened to me today and ruined my day for about an hour.

I use my vacation rentals to raise money to buy long term rentals so I don’t have to deal with the drama. BUT it’s pretty fun sometimes too.

My best suggestion.... don’t buy next to people that live in the house. Especially older people. It’s not fair to residents to have different randoms in and out very two days being drunk loud and clueless. Mine are in an all tourism are. My neighbors all come and go every two nights also. Harmony.

Good luck let us know how it goes!

Originally posted by @Lucas Carl :

My best suggestion.... don’t buy next to people that live in the house. Especially older people. It’s not fair to residents to have different randoms in and out very two days being drunk loud and clueless. Mine are in an all tourism are. My neighbors all come and go every two nights also. Harmony.  

Listen to that ^^^

One of my houses is next to a real old guy on oxygen 24/7.  He's a good guy but he complains a lot.  Sometimes he threatens me, sometimes he lets me know when something is broken or not right with my house or the tenants.  

You basically don't want a neighbor that will be calling your municipality about complaints regarding your house/tenants.  

Buy your houses neighbors a Christmas present each year.  Consider it insurance.  Consider it a business expense (goodwill) and deduct it.

There are plenty of rules of short term(under 30 day rentals) vs long term rentals (30+ days at a time) here in San Antonio. The biggest one is that you are basically a hotel. You pay the 18% tax just like hotels. 

@Lucas Carl Don't lie, you wouldn't know what to do with yourself if you didn't have guests to complain about.  LOL  

@Paul Sandhu has a great business model but, if you don't already know, his clientele are traveling blue-collar workers for the local factories who would otherwise stay in motels - so if you're targeting vacationers or white-collar businesspeople, you'll want to outfit your properties quite nicely.  (that said, I've spent more than a little time imagining how to replicate what Paul has done.  It's not my wheelhouse, even if I lived in the right kind of area, but he's found an awesome niche)

Listen to what @Rick Pozos and @Michael Bowie are saying about regulations and staying ahead of them - 18% hotel tax is no joke (how is that going to impact your profits?) and if they're taxing you like a hotel, what other hotel regulations might be imposed on you in the future?  Urban areas are more prone to imposing restrictive legislation on STRs than tourism-driven areas (where both my VRs are).

Finally, when considering what size of house to get, if you move forward - the numbers usually look pretty on the bigger houses, but consider the additional costs involved too: you have to furnish all those bedrooms, pay utilities on the larger house, incur more damages from larger groups, have a higher risk of unauthorized parties, etc.  And think about what your target audience is: families?  Groups traveling together?  How likely is it that such a demographic will provide year-round demand?  I avoid bigger properties for these reasons.

How to get started:

  1. Buy a house.
  2. Furnish it.
  3. List it on airbnb.

That's pretty much it. I personally look for walkable places. And because short term tenants don't care about things like school districts and what not, it's a good way to get a deal, and have the same superior cashflow.

Yes, SAT did pass regulation, but 80% of people aren't registered. And I've been doing it in Austin (heavily regulated) for a while and have had zero issues.

Just tossing in my personal experience with bigger properties... a lot of my guests are here for weddings, graduation, music festivals, conventions, film crews, etc... so I make the same profit of 5 studio sized units. Thus, I can personally grow faster with bigger properties, and that’s why I like to focus on them. 

However, @Julie McCoy makes a great point, and it really depends on the market. 

Consider the possibility that regulations may change. Have a plan in that event.

@Rick Baggenstoss Thanks for the break down I love it! Very simple and effective.

@Paul Sandhu I have toyed with that idea but the thing about foreclosure auctions is I thought you had to pay in cash? That is sadly something that I lack.

@Lucas Carl That is so true thank you for saying that. I never considered it but now that I think about it there are a lot of grumpy old people near me that would complain or call the cops all the time lol.

@Rick Pozos Yes you are right! However I've heard that it is pretty laxed and there is a lot of grey area and most people as @Drew Macomber stated don't really pay any attention or bother doing it.

@Julie McCoy Thank you for the advice I agree bigger houses aren't better which goes to show that bigger isn't always better sometimes it is better to much keep things simple.

@Michael Guzik To be clear, I've personally disregarded it in Austin, but... 1) Have no experience in San Antonio (not yet!), and 2) I'm still a little cautious - I don't put pictures of the outside, and I don't give my address out until booked. 

That being said, I think the regulations scare off most of the supply and can cause higher prices. So I view it as a risk worth taking. 

@Michael Guzik Yes, in order to buy bank foreclosures you need to pay in cash.  It's sort of Catch 22, you need to have money in order to make money.  I would not suggest this, but I know some people that have done this...they buy a house with a credit card.  It was someone that tried to compete against me.  They are doing a traditional monthly rental as a primary residence for the renters now with that house.

@Michael Guzik   I would consider what type of guest you want to host.  The guests that will throw parties likely will pay the most but you will have the most wear and tear and the home has to be setup to withstand the wear and tear.  We have had parties thrown at our AirBNBs to the point cops were called and doors kicked in, with alcohol all over the floor laminate is not a good option.  Trust me, we learned this the hard way.  I personally like smaller homes or condos in quiet neighborhoods close to downtown, universities, hospitals or convention centers.  You must have WIFI, and I would have cameras onsite to monitor the home.   Go onto AirBNB and see if you can find a need for listings that there currently is not or underserved.  For example, if you see a ton of 1 bedrooms downtown then you probably don't want to be one more listing in that area.  We have had vacation rentals by the beach, close to downtown, luxury homes, you name it.  I will say the large homes 4 bedrooms or more have the most management because they are often being booked for events, bachelor parties and hosting of large groups of guests.  Also the larger units will typically be slowest in the low travel months from Jan-April because families just don't travel as much where as 1 and 2 bedrooms will rent more frequently especially on weekdays because of work traffic.  One of our most successful rentals was located by one of the only neonatal care hospital units in the state, so we had a ton of renters that were there for long term stays to care for loved on or to support family in surgery.  I would also start staying in some AirBNB rentals yourself so you can see what you personally like as a guest.  I'd always suggest having an iron, hair dryer, coffee pot or Keurig, TV and internet to go with a changeable lockcode on site if you want to be high volume.  Lastly factor in wear and tear on your rentals.  The AirBNB host guarantee is a nightmare to work around if your place gets trashed and the security deposit takes 30 days to get unless the guest agrees with the charges which is not likely.

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