Buying a House Owner Finance & Airbnb'ing the Property

11 Replies

Has anybody ever bought a property owner financed and then Airbnb'd the house? Not only would you pay for the mortgage but in a good Airbnb market, you could have some serious cash flow. Although owner finance properties do have higher interest rates, i understand the availability of money is sometimes more important than the cost. I'm thinking owner finance over a bank loan because I can buy multiple houses and it not show up on my credit unless I incur a foreclosure allowing me to leverage more of my money. I'm thinking about potentially doing this but want to get some feedback ... Thanks!

How long would it take you to pay off the house? Can't you just pay cash, or put it on a credit card? In my market, it takes up to 6 months of rent to recoup the purchase price of a STR. It might take 7-12 months to receive 6 months of rent. Once or twice a year, there is a special event where we can take 2 weeks of rent and pay cash for another house. That's when we are wishing we bought another house. Then 3 or 4 times a year we have lots of vacancies and lots of bills, and we are glad we didn't buy another house.

I'd stick to just one house and try to get it paid off a.s.a.p.  Then consider buying a second.  Once the second is paid off, buy a third.

@Clayton Oakley Wish we could by a house with 6 months rent in all our markets too! Great strategy but remember your motive should be because you want to run an Airbnb not because it’s a good strategy.

@Paul Sandhu I always marvel at our numbers and wisdom. And successes!

Updated 4 months ago

That should have read “ at YOUR ....successes” to @paul

@Clayton Oakley why would they finance to you when they could just cash out or AirBnB themselves. It’s not very likely you’ll make this happen.

Interesting strategy, remember to consider management fees. The turn around work for Airbnb can be pretty intense.

@Paul Sandhu Yeah that makes sense, I'm just trying to leverage as much as I possibly can. An owner finance seller would charge me 10-12% and a credit card company would charge me 15%-22%. But even if I'm breaking even its still a good deal in my opinion because my rental is paying for my mortgage... Question Paul, what do you mean by it takes up to 6 months of rent to recoup the purchase price of a STR?

@Lucas Carl  Idk, i guess the owner is interested in selling their property owner finance to get long term returns on their money without having the duties of a landlord. I feel like this is the main reason driving owner finance sellers. If they want a long term investment, they aren't interested in cashing out and if they don't want to be a landlord, they aren't interested in Airbnb'ing or Renting their properties. I'm assuming they would rather finance to me because (charging 10% interest) i'm going to pay them 10% on their money for 15-30 years which is a great return for them, and they have no landlord duties. They're making 10% on their money and it's backed up by real collateral. That sounds like a pretty good deal to me... Meanwhile i'm paying off a mortgage and + cash flowing, sounds like a win-win!

@Clayton Oakley I buy a bank foreclosure houses for around $10K.  Spend about $2k to furnish it and fix any problems.  It'll bring in between $400 and $600 per week.  6 months of rent at that rate will pay for the house.  It's in a decent neighborhood and has central heat and air.  

It will take 6 to 12 months to get $12k of rent.

My market is not normal.  Google "worst place to live in Kansas"

There is a weapon within arms reach 24/7.

Yes we've done this a few times @Clayton Oakley we tend to buy the property on a 30 Year Amortization with a 7-10 year balloon which gives us more than enough time to refinance once the property is up and running with provable rent history.

Personal preference of the seller varies wildly, some want full asking but don't care about as high of an interest rate, some want higher interest and are willing to discount the list price.  

We've never had a problem getting them up and running.

i have been digging a little into airbnb stats, and apparently the party is over for many hosts. Early adopters did well but now th airbnb message boards are full of hosts complaining of lower bookings, and giving preference to newbies in searches. go to air dna to see what your market is doing, before making assumptions. My concern is that with over 4 million hosts, we are going to get a lot of properties back as long term rentals once hosts realize their airbnb gig is paying less and more trouble than long term rentals. I looked for a place in new symrna beach fl. and sooooooo many listings with nice houses minutes to the beach, $49 a night! Essentially a race to the bottom in prices for hosts now  

@Will G. you live in Maryville and you’re looking in Florida? Gatlinburg/Pigeon Forge produce some of the biggest returns in the country and it’s in your back yard. I have 5 there. I’m 37 and retired. Let me know if you want to chat.

@Will G. I can't  speak for all markets in Florida, but here in Destin/Ft Walton Beach, Airbnb was never the biggest player in vacation rentals. Most hosts use Airbnb to "fill in vacancy areas" rather than primary booking for vacation rentals. If there is sufficient demand for the area and the unit is desirable, there are plenty of bookings in my area, even though there are thousands of properties listed. Some  type of properties do better on Airbnb for sure. One of my units is a studio rental. That is definitely more of Airbnb material. I don't know that I would draw any conclusions about Airbnb popularity just yet, lol.

It’s really all about the numbers as always. I have owner financed several properties throughout the years because I hate banks.

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