I just moved back to Nebraska so that I can help my dad on our farm and was hoping to find a small multifamily to invest in but have had no luck. In efforts to stop living with my parents forever and driving an hour to work in Omaha, I was thinking of getting an apartment in downtown that I could live in during the week and then rent out on AirBnB/VRBO/etc. on the weekends. Does this seem like a bad idea? I have found a condo that the condo association is investor friendly and allows to sublease both long term and short term (condo president himself used to do STRs until he had children). I know that I will have to get different insurance, hire a cleaner, and lock up my valuables or keep some items at my parents. Is there anything else that I am not considering that would make this a bad idea? I can only see this as a positive for me being that it gets me (30 year old man...) out of my parents basement, closer to work, and helps pay for itself?
@Lance Peterson I don't know your market or comfort level of having strangers in your home, but I think you would be counting on many things going right to meet your need.
1. You need to have consistent rentals in order to make it worth your while (and are you hampered by a mortgage payment/HOA fees if you cannot?)
2. Where would you go if you rent it out? Back to your parents place? What is your time and effort in packing, traveling to and from if you have STR?
3. What happens if someone trashes your place? Unlikely with a short term rental but always a possibility.
Personally the volatility of the STR market to me seems like an inconsistent revenue stream. Could you get a 2-bedroom condo and house hack it with a roommate? Your long-term risk is greater, but you are also present 100% of the time, you can screen a roommate for a long term fit, and you have a better chance of collecting an active revenue stream. All of your other needs (e.g. proximity to work, moving out) are met with this option as well.
@Lance Peterson Will you be spending weekends at your parents' to help them out anyway? If you're going to be making the trip regardless, your strategy is plausible - I doubt you'd actually profit off of it, but it could/would offset some of your costs. But definitely consider the "hassle" factor - you'll need to make sure your personal things are locked away or stored elsewhere, and make sure the apt is guest-ready with fresh sheets etc. prior to your leaving (or paying a cleaner to do it) and then also having it cleaned when the guest leaves and you move back in.
Look on AirBNB at places similar to what you're looking for, see how much they're getting each night and how booked up their calendar is. How much can you reasonably expect to make from this venture? Does it outweigh all the hassle?
I definitely applaud you thinking out of the box, and it could definitely work, just make sure your expectations are realistic and it's a better option than, as @Joe P. suggested, just getting a roommate.
That seems like an expensive fix to a common problem. You want a deal but your frustrated because you can't find one. Don't settle for something you don't want. It sounds like you want a small multi so go find one. Work with agents call owners and ask if they are willing to sell. An hour commute is not a big deal on the coasts so put it in context. Listen to BP Podcasts on the road. I will let you in on a little secret. A lot of farms have multiple dwellings on them. People don't look at them as "Multis" but they could. Plus you may be able to qualify for FDA or some state rural development loans to get yourself in business. Just an idea.
Thank you all for your responses. I will take your comments into consideration so that I do not make this decision based off of emotion and hate for a long commute everyday.
@Joe P. I have housed hacked before and had several "short term ish" military roommates before AirBnB or other vacation rental websites were popular. So besides leaving valuables at my parents house I would be comfortable with having strangers in my home. And so far my math is working out that mortgage, HOA, taxes, insurance, and possible maintenance comes out to about $750 which I can definitely handle if I do not make anything on this STR. If the place were to rent out every weekend I would be at my parents place anyways. I have thought about doing a house hack as well, but the one bedroom condos I'm looking at are around $80,000 and the 2 bedrooms are around $250,000, so I would hate to eat up all of my capital available and miss out on a possible multifamily that I could try to purchase this summer (I'll keep looking for a deal even if I do this condo!). I have also thought about a single family home, but of my previous deals the only one that did not cash flow is my only single family, and finding one in Omaha in a decent area is difficult. I guess I was thinking that perhaps I could live in this condo for a year or so during the week and STR on the weekends, and then switch to either full time STR or a long term lease for $850-$900.
@Julie McCoy I would be at my parents farm on the weekends anyways, but this would shave an hour of my drive each way to work and about 100 miles total off my vehicle each day. I understand that most months I would not make a lot of money, if I could come close to breaking even I would be happy (I think $100 a weekend during an off month is a reasonable expectation for downtown Omaha) and then during Berkshire Hathaway shareholder meeting in May I think I could easily make over $1,000 and then over $2,000 during June and the College World Series (my condo would be a long walk or short cab ride to both events).
@Jimmy Dudley I know this is not a cheap option, hence why I reached out to you guys as the experts! I have been looking for three months now and made several offers but it seems that all of the multifamily homes are either in real bad parts of town, or the owner won't budge from a very high listing price. I will definitely keep looking though, even if I do decide to put some of my capital into a condo. That's a great idea to look around for farms with multiple dwellings, even if it was something like an old farm house with a smaller farmhand quarters I could make that work. But this would likely not solve my commute problem, and farms and acreages are way overpriced around here (growing up on a farm I can speak to this!). I think I would be able to deal with an hour commute better if I was on the coast, but being that I am driving over 50 miles each way in a truck I am getting tired of this drive (commuter car that I had was just totaled). And I have already listened to all of the BP podcasts, so that only solves about an hour a week of my commute.
@Lance Peterson , I agree with others that it might be the best money maker, but I think it is a fine idea! I started doing this in my duplex when I traveled, and on major holidays to help offset the cost of my mortgage. I didn't have any problem creating some secure areas in my small space and it helped me downsize a ton and made me keep my place cleaner in general by necessity.
And there is something to be said for the quality of life you will gain by having your own place, at least for the majority of the week, and having to commute much less! Just avoid that drive would make it worth it for me at the price point you mentioned.
Are you dead set on a condo? There are lots of SFH in the area that you can find for under $100,000, even close to downtown. If I were you, I would find a 2-3 bedroom house in my budget that is closer to work, and then put the single rooms up on Airbnb during the week while I am there (more income than roommates, and you can also block dates when you don't feel like having guests or if you have family coming into town), and then put the whole house up on Airbnb for the weekends. Just make sure in your listing specifically states that there are personal items in some parts of the house. You could even require a minimum stay for the weekend, so you wouldn't have to worry about cleaning or turnover when you are not there.
But that is just what I would do! :)
@Lance Peterson - that's great that the condo and HOA are pro STR. Is it written into the docs though? Those things can change quickly. Also, does the city have any laws yet about STR? If not, they will come soon enough. That said, I'm a huge advocate of STRs and the money they can bring in versus what a long or even medium term rental can, but it is more work and it can go away. I think if you can run the numbers and know you'll be lucrative if and when the time comes to flip to a medium or long-term rental than doing STRs for as long as you can makes a ton of sense.
Based on what you've said, I would think the $80k condo is a fantastic idea for you, and STR on the weekends. You backed it up with visiting your folks on weekends anyway, hate the commute, living on your own, are comfortable with vetted guests in your home. The last one is usually the deal-breaker to some people who just don't want to do that. In addition, you can cover the costs anyway, it has peak periods of really high income, and you understand it can go away at any time.
Go for it before the May dates are booked up.
Thank you all for more great information and opinions on this topic. And for the record, I did move out back when I was 18, I only moved back in with my parents while I was looking for a real estate deal that I could possibly use as I mentioned above or for a house hack.
@April Vogt when you mention creating some secure areas, did you lock a closet or seal off a room or anything that the guests could not access?
@Jenessa NeSmith I sent you a colleague request. I am not dead set on a condo, I was just thinking that the location would help with the STR listings being that the condo I was looking at was downtown. But, this condo I was looking at just went under contract yesterday just as I was going to make an offer.
@Erin Spradlin the pro STR feelings were not in any docs, just the feelings of the condo president, but that condo I was interested in went under contract just when I made an offer so I hesitated too long on that one. What is a medium term rental if you don't mind my asking?
@Nancy Bachety thank you for the encouragement!
@Lance Peterson Thanks for the colleague request! I think some of the other advice above is good advice, especially when it comes to getting it in writing that short term rentals are ok. I know of people who have had success with condos, but it just makes me nervous that a HOA could come in and pull the rug out anytime. With a SFH that has multiple bedrooms, if for whatever reason Airbnb doesn't work out you have more exit strategies. You can still find places in Omaha that will at least meet the 1% rule, or even more if you are willing to consider doing some remodeling on the property. There are a lot of great realtors out there that could help you find place, let me know if you want some recommendations!
Another thing I was thinking...would you be opposed to renting a house or 2 bedroom condo with a roommate or Airbnb? Then you wouldn't have the expenditure of major repairs or the commitment if things don't work out. Again, just a thought!
@Lance Peterson Yes, I just made one closet a keyed entry and then left most of my valuable stuff in there. I was also lucky enough to have a small storage shed on the property, so that helped as well. I put some stuff on the highest shelf in my largest closet and kind of blocked it off. If someone really wanted to get up there and mess around they could have, but I wasn't too worried about it. While I like most of my things and they have value for me, I tend to buy mostly on craigslist or thrift so they are not too expensive to begin with.
Also, if you might consider a backup offer on that condo if you do really like it and feel it is the right fit, you never know what might happen!
@Lance Peterson - Hey Lance, no problem. A medium-term rental is a furnished rental of 30+ days. That's not a formal definition, but it is what I meant by that. The advantage to the medium-term rental is that you are probably not going to encounter laws/HOA rules that limit them (HOA can be tricky, so double check), they are less work than an STR, the money is still better than a traditional rental and the demand is relatively high if you are close to a college or a hospital or something with appeal that needs employees.
Regarding the feel you got from talking to the HOA contact, I would check the docs and read minutes before making any decision. HOAs can be fickle and you never know when something can change and you have to transition out of an STR investment (this happened to us), so just keep an eye on it. Good luck!
Go Big Red.
As a Nebraska boy myself I wish you lots of luck! If it works you’ll end up buying a second condo. Then the whole building!
Would you be happy living there and paying for it if STR wont work and you live there full time?
Would you be happy (cashflowing positive) if the hassle is too much and you decide to stay with your parents full time and rent it out full time?
If the answer to both is yes, then your worst case scenario is positive and you should go for it.