Airbnb vs traditional rental?

Question

I own a townhouse in Fort Collins, CO which is currently my primary residence. I'm either going to:

1. Rent it out full time

- or -

2. List it full time on Airbnb

The cash flow for my unit as an airbnb is a lot higher than as a traditional long term rental (to the tune of $1000-1500 approximately per month). I know there is more upkeep with cleaning, turnover, vacancy, and more risk. I've also confirmed that my property is in the correct zone to qualify and i need a lodging license with the city. I have experience as an airbnb host for just one room in my townhouse, but not as an entire unit.

Im leaning towards airbnb - Im interested to hear what you guys would do? Pros and cons?

Thanks!

Patrick Soukup · Answer

@Luke Ron zoning zoning zoning. Fort Collins only allows STRs in certain zones. Commercial zones to be exact. I’d be willing to bet your Townhome is not in one. Worth researching

Ken Latchers · Answer

@Luke Ron

Just that it constantly amazes me how many people will throw hundreds of thousands of dollars at a property and learn about what is involved later.

STR has a lot of dimensions going on. People read a newspaper article and suddenly they are short term rental crazy want to scale up as soon as possible know 10% of what matters read some forums and are suddenly convinced they are in the right field to get rich.

at some point in the not-too-distant future, a reckoning is coming in the short term rental space that will be breathtaking. Perhaps an economic crisis, perhaps a collapse when a Breaking Point is reached with too many people piling into what they think are easy riches.

Huiping S. · Answer

Looks good for Airbnb. Why some famous RE investor said STR is the worst investment and one news of NRA recently said more than half STR owner felt regret to buy vocation rental properties.

Andrea Townsley · Answer

I have to agree. We were looking into it ourselves and the cash flow isn’t as great as people claim...unless they are expecting 100% occupancy, no cap ex, and no or very low mortgage payments. It’s certainly better than LTR for cash flow even with my conservative numbers, but not sure it’s worth the extra hassle and hands-on management.

Here in Florida, I discovered that anything under 6 months falls under the Division of Hotels and is regulated as such, and from what I can tell, STR owners are largely non-complaint with these regs, lodging taxes, even registering with the state as a landlord! (I personally think the state is going overboard but I also won’t operate outside the law, which adds to my headaches and my costs and makes it hard to compete).

So many municipalities are looking into ways to deter people from doing it. Our state passed a law that municipalities are not allowed to prohibit or put certain limits on STRs so cities are getting creative. HOAs and condos are also a crapshoot since they can change their bylaws at any time.

To me, in Florida, there are too many unknowns (and knowns typically ignored by others), coupled with my personal estimates being conservative as far as occupancy %, and we would need an 80% loan, so it’s not happening for us, and I fear you’re right about too many people jumping in to the point where we see a hard reset of some sort. I also think we will see a lot of failures and conversions to LTRs or even selloffs based on the factors listed above.

Luke Borley · Answer

@Lucas Carl yes exactly $1000 - $1500 extra. With that being said it seems like a no brainer to me

@John Underwood @Jon Crosby Good points! I don't mind being involved if the income is greater. Plus i enjoyed being a host previously so i already know what to expect to a certain degree.

@Ken Latchers I appreciate  the tips! I actually didn't think about the taxes aspect so thanks for pointing that out. Thats why i love bigger pockets!

@Paul Sandhu Your'e right, I have made my mind up! I like to get feedback from the more experienced because i am not a seasoned investor as of yet. There are many breweries in Fort Collins but New Belgium is a good choice! Cheers

Paul Sandhu · Answer

It seems like you already have made the decision, and you want the approval or go ahead from other people.  You seem smarter than 95% of the people on here that ask the same question.

I know nothing about Ft. Collins, except there is brewery there called New Belgium. I buy kegs from them for my 3 kegorators.  I keep one in my biggest house.  The other 2 are in my garage.

John Underwood · Answer

If your willing to put in more work then you can make more money with a VRBO /airbnb. Make sure you look at all the extra expenses of a VRBO vs a long term rental.

Jon Crosby · Answer

@Luke Ron  It really comes down to what kind of business you want to have as one is very passive and one is more active (VERY active if self-managing).   Don't let the higher revenue be a litmus test as it depends on your business model, thus your operating costs to which you might find the standard rental ends up cash flowing better due to the reduce operating costs.  So be sure you run the numbers on both sides, then ask yourself how much time and energy you want to invest and if you actually enjoy being an STR owner.  Your passion for the STR will directly tie back to the experience you provide your guests, which will dictate your reviews which will end up dictating your occupancy rate which will lead to your true revenue.

Best of luck!

Luke Carl · Answer

STR vs LTR

I assume you mean $1000-1500 EXTRA? for STR vs LTR?  If its furnished with appliances and furniture that are 5 star worthy you've got nothing to lose! If you decide it's too much work (which means your systems are weak) then just put a tenant in there and be done with it.

Being a town home you will have issues with your neighbors not wanting new people in and out all the time and the guests being too loud and puking. But deal with that as it comes.

I say go for it!

Good luck!

Airbnb vs traditional rental?

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