AIRBNB/VR investing - advice for newbie

AIRBNB/VR investing - advice for newbie

Jersey city, New Jersey (NJ) · Member since 2018 · 65 posts · 8 votes

Greetings everyone! I discovered this forum by accident and glad to find lot of information and helpful community. I'm looking to invest in short term rental/Airbnb business as a long term potential making a living sort of thing. At present im self employed in an IT business where I make decent income, but its all dependent on contracts. There are several months gaps at times between the contracts and then i start getting worried about my future. I'm not looking at airbnb as a quick fix alternative where right away I will start making 6 figure income, but im looking at it as something which can one day make me less dependent upon income from my present occupation only and perhaps become a primary source of income. I have 100k+ worth of cash and good credit to get decent mortgage. I have always loved hospitality business and I think I have the qualities to be successful in this kind of business. In the last several months, I have been reading a lot about airbnb and other vacation rental business models and how more and more small time investors are getting into it as a viable career. I came across sites such as mashvisor and airdna which seem to be provide solid information for novice investors like myself. My first preference is southern california-including areas such as palm springs which seem to have good airbnb potential. Im also open to invest outside California, but then I have to manage semi remotely as I still need to keep primary residence in LA area. I have been reading about some places such as detroit, Tennessee, palm beach, denver etc which seem to be pretty high in the list of places to invest for short term rentals. 

Im also open to collaborate with some like-minded investors if its mutually benefecial. I'm looking for some advice on how to go about my search and any suggestions in the southern california area? I currently dont own any property and this will be my first property- possibly a multi unit property which I can run professionally as an airbnb host.

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Investor · Shelton, CT · Member since 2016 · 218 posts · 225 votes
8y
Dev Paul based on what multiple people have said on your post, you need to take a serious look in the mirror and ask yourself why it’s even rational to consider investing in “If it moves we tax it and if we don’t tax it yet we probably eventually will” People’s Republic of California! California has a horrible fiscal situation and anything may become a target. Your profile says you’re from Jersey City, NJ. See, you escaped from one high tax unaffordable hell hole. I live in the People’s Republic of Connecticut and easily self manage a vacation rental in Gatlinburg, TN. Reward yourself and make a great decision for your future and don’t just get lazy thinking on convenience now when that may have consequences for the future. One day in the future when Jerry Brown or some future out of their mind tax and spend politician puts a confiscatory limitation on what you can do with your private property and do you think you’ll be able to sell that easily or will it be worth as much?!?! As @Lucas Carl stated, this is not a business you sit back and log in to see how your mutual funds are doing. It takes some upfront work to assemble a team on the ground. After that it’s very very rewarding. Do you research and make sure to actually APPLY your stated future goals. Good luck!
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  • Rental Property Investor · Everywhere, USA · Member since 2012 · 689 posts · 525 votes
    8y

    @Dev Paul welcome to BP!

    Check out AirDNA, I love the site as you can get market reports on public data scraped from Airbnb's site. It can give you an idea of nightly rates, what size units are in the highest demand, what type of amenities the top listings have, what occupancy is, and more. I like basing my real estate investment decisions on data, and Airdna can give you a good set of data points to work from.

    Then on BP, check out the articles and videos done by @James Carlson. They do a good job highlighting info about short term rentals.

    https://www.biggerpockets.com/renewsblog/pros-cons-airbnb/

  • Bill S.Pro Member
    Moderator
    Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
    8y

    @Dev Paul so the rules regarding Airbnb are constantly changing in some areas. You should check those out before deciding to invest in those areas. In your shoes, I would focus on areas that are Airbnb friendly and also focus on properties that cashflow as long term rentals. In the Denver area the trend is for the larger municipalities ie Denver and Aurora to limit STR to primary residences or stays or 30 days or longer. Do your homework before you invest.

  • Luke CarlPro Member
    Rental Property Investor · Tennessee Florida · Member since 2016 · 4k+ posts · 5k+ votes
    8y
    Airdna is a joke just do your own market research by obsessing on AirBnB and remember this is not passive. If you want to make money you must self manage and your phone will light up at 2am. It’s a good gig and can be fun but it can also be very frustrating. There is a difference between an “AirBnB” and a “Vacation Rental” Here if you need me. - Remotely own and operates 5 properties in the Gatlinburg Pigeon Forge Wears Valley area.
  • Cleveland, TN · Member since 2016 · 26 posts · 4 votes
    8y

    Hi Dev,

    I just moved from Southern CA to TN two years ago. I am a broker, investor and general contractor. I purchased a vacation rental business called Tennessee Lakefront Cottages and focus strictly on leasing other people's lakefront homes for them. Most of my home owners are out of state owners who purchased either their future retirement homes or simply liked the tax advantages of owning a vacation home in a state that is fiscally healthy. 

    With that said, I left CA as it is not a business friendly environment. The governments both local and on the state level make it very difficult for small business to keep any profit. So the question becomes, are you more interested in cash flow to supplement you income or are you more interested in real estate appreciation for a larger sale value? To over simplify, historically  any coastal states will have a greater appreciation in value then in land states, however middle states have a greater possibility of cash flow, in part due to their lower entry price. After you spend your down payment, do you want to be burdened with a larger mortgage which may need your current income to make the payment during  down times in exchange for a larger sale number? Or take a smaller mortgage that will be more likely to be covered with the rental income in it's entirety but not have a huge exit number?

    Another consideration, again, making a generalization,  folks who live coastal tend to have higher living expenses and less discretionary spending money while folks who live in more affordable areas tend to have more left over at the end of the month. Who are you realistically going to market your hospitality toward? Locals? International travelers? Seasonal Guests? Once you answer those questions it will help you narrow down your choices.

    Best Regards,

     Jennifer Niez

  • Jersey city, New Jersey (NJ) · Member since 2018 · 65 posts · 8 votes
    8y

    Thanks everyone for your responses. I believe understanding your exact needs are imp, as Jennifer pointed out. What is your opinion on getting property in palm springs, california for investment purpose? Im currently not in that area, but want to move closer to LA for personal and professional reasons. In a way, trying to kill two birds with one shot. If I can buy a property in and around LA area (or even 2-3 hrs driving distance) and then both live there (im single, so very basic needs) and use 75% of the property for short term rental/airbnb etc, that would be ideal. My budget is more like 250-350k, with around 50-75k down. I read that airbnb is in grey area in california with legalities changing every day, so that's my concern. I believe with my budget LA is out of reach, but palm spring or such areas might be doable. Any thoughts?

  • Rental Property Investor · La Quinta, CA · Member since 2018 · 263 posts · 95 votes
    8y
    Hi, I’m closing on my first property in La Quinta in a week. I live in the Pasadena area and the drive out there is about 2 hours no traffic. The vacation rental market in the Coachella Valley is pretty good but make sure to read up on local laws and ordinances in regards to STR’s. Palm Springs has a lot of restrictions and prices out there are a lot higher. If you look down to La Quinta or Indio, there are more favorably priced homes around and do well as vacation rentals. A pool is a must-have and the closer you are to amenities or festivals, the better you’ll be. I met one of my first contacts out here through BP and he mentored me a little through the process. Feel free to reach out.
  • Jersey city, New Jersey (NJ) · Member since 2018 · 65 posts · 8 votes
    8y
    Thanks so much for your note. Yes, sure, I would like to know more. 
    Originally posted by @Mark Futalan:

    Hi, I'm closing on my first property in La Quinta in a week. I live in the Pasadena area and the drive out there is about 2 hours no traffic. The vacation rental market in the Coachella Valley is pretty good but make sure to read up on local laws and ordinances in regards to STR's. Palm Springs has a lot of restrictions and prices out there are a lot higher. If you look down to La Quinta or Indio, there are more favorably priced homes around and do well as vacation rentals. A pool is a must-have and the closer you are to amenities or festivals, the better you'll be. I met one of my first contacts out here through BP and he mentored me a little through the process. Feel free to reach out.

  • Rental Property Investor · La Quinta, CA · Member since 2018 · 263 posts · 95 votes
    8y
    Dev, Yes there are a lot of regulations in Palm Springs and neighboring Palm Desert. As I mentioned, La Quinta and some parts of Indio are favorable for rentals. For your price point, there are properties you can find. Keep in mind the bigger space you have, the more you can charge on rents. PM me if your interested. I can connect you with a local agent that helped me.
  • Investor · Fox Point, WI · Member since 2016 · 4 posts · 4 votes
    8y

    I have a short term (28 day+) rental condo in Palm Springs. The city vacation rental ordinances can impact you a lot depending on the type of property you have and the manner in which you want to rent it. There is also a vote on the ballot for June that could have a big impact on fee land (no lease) R1 properties. Spend some time reading on the Desert Sun site until you have a good grip on what has happened and what may happen.

    With your budget, you may have trouble finding a SFH in Palm Springs. There are lots of nice resort-style condo communities that welcome renters in that range, though.

  • Jersey city, New Jersey (NJ) · Member since 2018 · 65 posts · 8 votes
    8y
    Thanks Allison. What do you mean by condos for rent in that range? Do you mean one only gets to rent the condos after paying 250-300k?
    Originally posted by @Allison V.:

    I have a short term (28 day+) rental condo in Palm Springs. The city vacation rental ordinances can impact you a lot depending on the type of property you have and the manner in which you want to rent it. There is also a vote on the ballot for June that could have a big impact on fee land (no lease) R1 properties. Spend some time reading on the Desert Sun site until you have a good grip on what has happened and what may happen.

    With your budget, you may have trouble finding a SFH in Palm Springs. There are lots of nice resort-style condo communities that welcome renters in that range, though.

  • Investor · Shelton, CT · Member since 2016 · 218 posts · 225 votes
    8y
    Dev Paul based on what multiple people have said on your post, you need to take a serious look in the mirror and ask yourself why it’s even rational to consider investing in “If it moves we tax it and if we don’t tax it yet we probably eventually will” People’s Republic of California! California has a horrible fiscal situation and anything may become a target. Your profile says you’re from Jersey City, NJ. See, you escaped from one high tax unaffordable hell hole. I live in the People’s Republic of Connecticut and easily self manage a vacation rental in Gatlinburg, TN. Reward yourself and make a great decision for your future and don’t just get lazy thinking on convenience now when that may have consequences for the future. One day in the future when Jerry Brown or some future out of their mind tax and spend politician puts a confiscatory limitation on what you can do with your private property and do you think you’ll be able to sell that easily or will it be worth as much?!?! As @Lucas Carl stated, this is not a business you sit back and log in to see how your mutual funds are doing. It takes some upfront work to assemble a team on the ground. After that it’s very very rewarding. Do you research and make sure to actually APPLY your stated future goals. Good luck!
  • Valley Cottage, NY · Member since 2017 · 84 posts · 28 votes
    8y
    Hey I’m in Philly and we use an AirBnb model on most of our properties. Would love to collaborate with a like minded individual. Let’s connect.
  • Jersey city, New Jersey (NJ) · Member since 2018 · 65 posts · 8 votes
    8y
    Hi Jeff, you made a very interesting point. I agree that success and inconvenience go hand by hand in life. Agreed that california may not be the best place for this kind of business with stringent laws and all, but what's the guarantee that similar stringent laws may not come up in future in currently liberal places? Im certainly open to start this business in more favorable places such as TN and manage them full time (even remotely) if that's what its required. I just want to achieve financial independence from this business in the long term.  Location doesnt matter that much.

    Originally posted by @Jeff Piscioniere:

    Dev Paul based on what multiple people have said on your post, you need to take a serious look in the mirror and ask yourself why it’s even rational to consider investing in “If it moves we tax it and if we don’t tax it yet we probably eventually will” People’s Republic of California! California has a horrible fiscal situation and anything may become a target. Your profile says you’re from Jersey City, NJ. See, you escaped from one high tax unaffordable hell hole. I live in the People’s Republic of Connecticut and easily self manage a vacation rental in Gatlinburg, TN. Reward yourself and make a great decision for your future and don’t just get lazy thinking on convenience now when that may have consequences for the future. One day in the future when Jerry Brown or some future out of their mind tax and spend politician puts a confiscatory limitation on what you can do with your private property and do you think you’ll be able to sell that easily or will it be worth as much?!?! As @Lucas Carl stated, this is not a business you sit back and log in to see how your mutual funds are doing. It takes some upfront work to assemble a team on the ground. After that it’s very very rewarding. Do you research and make sure to actually APPLY your stated future goals. Good luck!

  • Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    8y
    Originally posted by @Dev Paul:

    @Dev Paul

    Have you ever heard the phrase about the 3 rules of real estate?  Location, location, location.

    I'm in a refinery town, and my business plan would not work in any other town in a 90 mile radius.  I'll spare you the details, but the houses generate enough rent in the first 12 months or less to cover the purchase price.  The quickest payback on a house was 7 months.  Go to the next town over, and the one after that, and after that; this model wouldn't work.

  • Jersey city, New Jersey (NJ) · Member since 2018 · 65 posts · 8 votes
    8y

    No sir, I didnt mean that. What I meant was that i want to invest in the best location or city possible. It doesnt matter if that city or town is closer to my convenience or in another part of the country.

  • Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
    8y
    Originally posted by @Dev Paul:

    No sir, I didnt mean that. What I meant was that i want to invest in the best location or city possible. It doesnt matter if that city or town is closer to my convenience or in another part of the country.

     Humbolt Tennessee.  Tyson Foods is going to start building a $230,000,000 chicken facility there.  My town was in the running for it until November.  Whenever there is a big project in my market, I generally make one tenth of one percent of the project cost.  You can too.

  • Jersey city, New Jersey (NJ) · Member since 2018 · 65 posts · 8 votes
    8y

    Thanks for the tip. I checked and yes it seems they are going to start the operations in late 2019. I believe the key is to identify such markets where there is potential but the market is not fully saturated yet. Appreciate your wisdom. If you have to start today and have the budget and goals like mine, which place would you start with? 

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