Somerville Airbnb investment

28 Replies

Here’s the deal: 


$1.1M multi family - 4 units. Each unit is 2 bed 1 bath. Somerville MA

Assumptions: we can rent each apartment for $220/night at 60% occupancy per month (about 23 days).

AFTER mortgage, taxes, insurance, cleaning fees, utilities and furnishing the 4 units, we believe our net operating income will be $75k the first year, and $150k each year after that (furnishing the 1st year) and assuming no structural issues or renos.

Some caveats; 1. the home is a historical site and might need some work. 2. We would be emptying all of our cash accounts for the down payment. 

Does anyone own any Airbnb properties in Somerville/Cambridge area and can give my assumptions a reality check? As a first time investor, I would be forever grateful! Thanks!

Hi @Alicia Palleschi , I think you might rather be using VRBO/HomeAway for the comps. AirBNB shows mostly rooms in homes at an average of 50 per night.

VRBO/HomeAway show a better nightly rate, but I think you are a bit optimistic at 220 per night. There are a pretty large number of rentals in that area. Most are 2/1 like yours at an average of about $160 per night. There are some outliers in the $250 range. Hard to tell but they look quite nice.

I did a quick look at about 6 places in the range from $120 to $255 per night, similar size etc. Assuming the blocked dates are bookings, you are looking at about 70% full for the cheapest place to about 40% for the most expensive.

I think your numbers are a bit on the positive side. There is not a lot of room for error. It could work, but it will be close.

Hey @Alicia Palleschi I'm actually just about to bring an Airbnb unit in Somerville online.  Just finishing our rebab and it actually passed the official Somerville Airbnb inspection... with a few things to fix of course ha. So, I hate to rain on this deal but Somerville just passed some really strict Airbnb regs and you won't be able to legally rent any of those units under it.  These are the regs that have always been on the books: https://www.somervillema.gov/sites/default/files/short-term-rental-guidelines.pdf

Basically it has to be owner occupied and you can rent a few bedrooms (3 rooms tops) in the unit that you live in and there are strict square footage requirements around that. Renting a full unit out as an Airbnb in Somerville is forbidden. Also, 3 Family homes and up have much stricter regs than 2 families for example.  From how the regs read you might have to install a sprinkler system in the entire building just if you want to rent a bedroom out in your unit if its a 3 family and up.  Even with our two family in order to rent a bedroom in our house they are making us install emergency exit signs and lighting!   Now, everyone breaks these rules anyways but then this just passed a few months ago:  https://www.somervillema.gov/sites/default/files/short-term-rental-airbnb-ordinance-passed.pdf

So everyone rents them illegally anyways because even though there was were always strict regs, there were never really any actual enforcement mechanisms.  WIth this though Somerville passed a $300 per incident fine, which they never had before.  It doesn't go into effect until Jan 2020 so they are giving operators notice but the way its phrased it seems like they will be pulling data from Airbnb -just like they do with NYC and San Fran -enforcing from the Airbnb platform rather than just relying on neighbors complaining.  I get that sense because one of the requirements they passed is that only one Airbnb host can manage one property in Somerville.  The cleaners that we are using own and manage a few units in Somerville and these new regs have them super spooked and scrambling to figure out if they can make them legal somehow... 

Anyways, my point is that you could find yourself setting this up illegally and rocking it for a little bit but then Somerville really coming down on you and that quickly not being an option anymore.  The only way that we are officially getting our Airbnb sanctioned is that even though its our entire 3rd floor its "part of our unit" and the square footage is under the percentage allowed.  

The one catch is if you read through all of the regs there is a Bed and Breakfast operator license you can apply for and if it is a historic building (I think you mentioned that it might be?) it might qualify as an historic B&B but that looks like quite the process to work through there to get that.  I wouldn't do this deal if it relies on short term rentals because Somerville will not allow it.  

But... also, 1.1m for a 4 family is a CRAZY low price right?  Sounds like its close to rent ready too?  Is this off market?  Is it a legal 4?  At that price I feel like you could condo out two of those, depending on the size, and almost cover the purchase price and then have 2 condos left to rent as almost paid off buy and holds? Just a thought. 

Hope this helps. Feel free to PM me as well as I'm actively working through the Somerville Airbnb inspection process and might have new info soon too. 

And you are basing this on current data. Airbnbs are growing rapidly. There are a lot of people like you. What will your assumptions do if there are twice the units and you have to cut your rates 40%. Or more. And your occupancy is half your assumption? 

Feel like the Airbnb space is being talked about more and more. I think there has been some great information shared above more specifically around the area. I agree that the numbers you have run seem to be a little ambitious, unfortunately. I am also trying to get the 60% occupancy to add up to 23 nights per month? If you were to use 30 days average per month, a 60% occupancy would be 18 nights. 

There are always more deals out there to get! Don't let this discourage you. Keep going!

As Adam pointed out, Somerville just passed some super strict AirBNB regs to the point I don’t think it would make sense in this situation if you play by the rules. However, 1.1 for a 4 unit is a good deal. Just know what comes with a historic property, I was looking at a historic 3 family in Somerville and several of the curved windows had estimates of 3-5k each to be replaced.

Thank you all for the quick responses!

Some updates. We went and looked at the property and it turns out there are multiple code violations (the basement unit is connected to the boiler room for one and there are some rear egress issues). Other than the code violations, the 3 other units needed updating. 1 unit was in good shape, the other 2 were complete dumps. They did a good job in the listing only showing the fixed up one. Since the open house was packed and Somerville market is super hot, I believe this will go above asking to a developer who might dump $$$ required into it to fix it up. Given the code violations and state of the other (legal) units, its not right for our first investment project and will have to pass.

Thanks for the insider scoop on current airbnb laws in Somerville @Adam Sankowski  

@Travis Zappia  you're right I think our assumptions were a little aggressive.

I went to the open house today. It was mostly investors walking through with their GC's. They are reviewing offers tomorrow at noon. I would be surprised if someone ever pulled permits for that basement unit. Also, I overheard a few agents talking with their clients about the one tenant still in place. One thing to keep in mind is that somerville's new condo conversion ordinance takes effect on 7/31 which will make it a bit tougher for condo conversions. 

@Alicia Palleschi ha yeah that sounds about what I would expect a 4 family for 1.1m to look like in Somerville at this time. I don't envy anyone trying to buy here right now.  Stay positive though, its just a crazy hot market right now.  I think that you're on to something with the Airbnb though.  With our renovation, and this only would work for owner occupied and it doesn't sound like that's what you're looking for... but anyways, what we've accidentally stumbled upon is a way to turn a 2 family into a 3 family by creating a legal airbnb unit in your unit. Feel free to DM for any future Somerville Airbnb questions cause I'm in the thick of it right now. 

@Justin Rank do you know anything about the updated building code and zoning changes that they were suppose to vote on this summer? 

@Adam Sankowski The zoning changes are supposed to be unveiled soon, and then they will have another public comment period before a vote. Word from the city council is that they think this version will finally pass. The one part I was keeping an eye on is that it looks like they will allow one and two family units to add an "ADU". The last version I saw was going to keep it deed restricted as affordable at the 110% ami level.

Hey @Justin Rank the ADU is wha to have my eye on as well. We have the lot size and all other requirements for it! And yes it will be deed restricted as affordable but we would move into it and the unit my 2 fam that it frees up would not be I believe though! Fingers crossed on the ADU. Know any good house builders? Ha

Just finishing our rebab and it actually passed the official Somerville Airbnb inspection... '

What is the Somerville Airbnb inspection? I read the new ordinance and didn't see any inspection or registration requirements for the City of Somerville. Is that only because you just did the rehab? Or do all Airbnb's in Somerville need to be inspected? If so, can you point me to something written about that. Thanks in advance!!

@Paula Miller  https://www.somervillema.gov/s...

And https://www.somervillema.gov/s...

These links explain man the rules: It has to be owner occupied, has to be a “room in your house” and has to be inspected by the city to get a “tourist home permit” which we just got. Somerville has been lax but they are cracking down on all non-owner occupied Airbnb’s this coming January. 

This is from the second link:

Step by Step ISD Permit Guide in Varying Examples:
I) Tourist Home Use for 1 or 2 Family Home with No More Than 10 Transient Renters at any One Time. Need to obtain a Certificate of Occupancy as a 1 or 2 family house (R‐3) with a tourist home accessory use.
1. Please go to the Inspectional Services page on the Cities website at www.somervillema.gov/ISD and click the citizenserve logo link. There click “Apply for a Permit” in the left upper corner. If you do not have an account, please complete the free registration.
2. Select “Application for Certificate of Occupancy”, and fill out the required information in the application page. Please note in your application that you are applying for an accessory tourist home use, for short term rental and how many rooms you are renting and the max number of people you will be renting to at any one time. If you have any specific questions about the application process please contact the front desk at (617)625‐6600 ext. 5600 and they can walk you through the process.
3. Pay the application fee
4. Load the following required documentation to your application:
o A detailed and legible floor plan which lists the total square footage of the floor area of the building. The floor plan shall also designate which rooms you will be renting out and those room dimensions, so as to verify the Gross Floor Area Requirement.
o Documentation which verifies you are the owner of the unit and it is your principal residence.
o If renting 3 rooms, a certified plot plan with parking layout which shows the property has sufficient parking. (Renting 3 rooms in a RA or RB zone as a tourist home will also require you to obtain a Special Permit from the Zoning Board).
 Contact the Planning Department about specifics and procedures at 617‐625‐ 6600 ext. 2500.

@Paula Miller so I just read the new ordinance too and it doesn’t mention an inspection but to operate currently you need one. I would be shocked if Somerville took away an inspection! My guess is that this new ordinance is mostly aimed and written so that there was an actual code enforcement mechanism as I don’t know if they had an official Airbnb fine before.

So if you weren’t following the rules before it was a less intense code violation. But I think they intend to actual track illegal users via data Airbnb will supply, much like San Fran etc. Anyways I bet the current inspection stays but maybe not? we’ll see but we are operating right now and the current rules in the second link require one.

I thought it would be a nightmare but actually it was pretty easy minus that they Made us install a second hand rail :)

Also FYI the bookings and money have been amazing. If you can swing an Airbnb in anyway in Somerville you have instantly doubled or tripled your rental income! 

I was thinking that instead of one of these affordable units that will cost 200k to put in and I can only collect 1,800 in rent it might be worth looking at this again. So if I read it correctly, I could have two bedrooms for rent and avoid the special permit process if I meet the gross floor area ratio etc? Have you had complaints about not having a stove? Do you offer parking? 

Here’s ours: https://abnb.me/VirwI017k0

We have no stove just put in a good oven and microwave, go high end... and we’ve had two overseas post docs that have stayed for 7 and 9 days. And a tech company booked out two weeks for business clients... had a traveling nurse. We put it on and in 2 days had a month solid booked out. Averaging 5k a month so far although I know the winter is slower but the summer seems like even higher priced than this. I think we are underpriced actually. PM with specific questions or throw them on here I just went through the entire official process and it really wasn’t bad...

I mean ours is higher end and has a roof deck But my point being if you can do it, and don’t mind a being a bit more hands (it’s not too bad, easy to systematize ) its so worth it! 

thats great information...you're really thorough,,,i thought you were working for the county for a second as a moderator...
.may I hire you to handle all the preliminary details and requirements for Savannah Ga airbnb.
i get impatient with all that stuff..

Originally posted by @Adam Sankowski :

Here’s ours: https://abnb.me/VirwI017k0

We have no stove just put in a good oven and microwave, go high end... and we’ve had two overseas post docs that have stayed for 7 and 9 days. And a tech company booked out two weeks for business clients... had a traveling nurse. We put it on and in 2 days had a month solid booked out. Averaging 5k a month so far although I know the winter is slower but the summer seems like even higher priced than this. I think we are underpriced actually. PM with specific questions or throw them on here I just went through the entire official process and it really wasn’t bad...

I mean ours is higher end and has a roof deck But my point being if you can do it, and don’t mind a being a bit more hands (it’s not too bad, easy to systematize ) its so worth it! 

@Justin Rank and yes we offer parking but you could probably swing it with using a street permit. You could come up with a street permit “lockbox” system or something... I know that there is an Airbnb around the corner from us, basement “garden level” unit with no parking and they are priced at $95 a night weeknights and weekends $225 and booked pretty far out. That’s still like 3-4K a month 

@Matt Berklacy ha thanks for the compliment. Nope not a moderator or city official I just get obsessed with this stuff when I’m gonna do it. The problem is that the rules are so location specific ... I really just got started here with a google search but you can also just go on the Airbnb site and look for a co-host. You can find pre qualified people through Airbnb itself who will PM or co host for you. They will know all the rules and figure them out. They do take like 20% but they do everything... from setup to scheduling cleanings etc and since Airbnb seems to bring in 100% plus increases in income paying 20% to a PM isn’t bad!

Killing it man! Thanks for the insight, I may have to pick your brain a little more if I can get the wifey on board : ). We're at least a year out as my tenants in my second floor are locked in until next September and that's the unit we would attach the airbnb to.

Wow this is super interesting! 

@Adam Sankowski I would love to learn more about your success with your new units in Somerville, my company has units in 11 states and I am always interested in new markets. 

@Ken Latchers if you're looking for Data, I subscribe to AirDNA to get my data for all my clients. It may be a valuable resource. 

@Justin Rank where can we find information about the regulations on AirBNBs in Somerville? 

nice yes...data access and co-hosts support is great...but it's the buying a product in the zipcode boundary, neighborhood specific maze, the ever-changing laws, getting the facts of nightly, weekly, monthly, room versus whole place, including if you lease arbitrage, own it, own as a primary, own as a second home, an investment, what you can and cant do is gonna take an attorney for Savannah if your going to buy or lease to do short-term rental, ...the plan of buying a non-traditional investment in any area with some history or hospitality draw, will take serious due diligence..even the municipalities, govt. workers give contradictory answers, because they dont know what can, cant be done, they just give surprises, and over enforce which can kill your investment.   We're a little early, shopping malls and hotels will be museums or co-working spaces in a decade...but for now, the municipalities are over protecting the hotel industry because they think that's the draw and money maker for the city.   

Originally posted by @Adam Sankowski :

@Matt Berklacy ha thanks for the compliment. Nope not a moderator or city official I just get obsessed with this stuff when I’m gonna do it. The problem is that the rules are so location specific ... I really just got started here with a google search but you can also just go on the Airbnb site and look for a co-host. You can find pre qualified people through Airbnb itself who will PM or co host for you. They will know all the rules and figure them out. They do take like 20% but they do everything... from setup to scheduling cleanings etc and since Airbnb seems to bring in 100% plus increases in income paying 20% to a PM isn’t bad!