Airbnb Yay or Meh 2019

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BP Investors what has been your experience with Airbnb/VRBO vacation and short term rentals? What cities and property types do you have? Did you convert your long terms rentals into short term or did you convert some back?

1/3 of my portfolio consists of vacation rentals. Mine are in the Gatlinburg/Smoky Mountain area of Tennessee. I will only consider true vacation rental markets such as Gatlinburg (although there are various others that produce great cash flow as well) for STR's/Airbnb property because the economies of those markets have been dependent on tourism and short term rentals since well before I was born. In other words, those markets are far less likely to impose unfavorable regulations on short term rentals, as they figured out how to capitalize on them decades ago.

My goal isn't to build an entire portfolio of STR's. I use the heavy cash flow from my STR's to roll into other types of investments. It's been a really great strategy so far.

We have two in Orlando and it's going great. We have a little more responsibilities than a long term rental but much for cash flow.  I would say it's about twice as much work and twice as much profit, so still worth it in my opinion. 

VRBO/HomeAway has been great for us in 2019. Only 2 AirBNB guests. One was just OK and the other broke a window among other things.
We are done for the summer. Hoping for some guests this fall and we have one family coming for Thanksgiving.

We are in North Idaho on Lake Coeur d'Alene.

@Jason Taliaferro

I think short term rentals will always be around, it’s a great business strategy anywhere people need a place to stay. As far as AirBNB and VBRO, I think we’re still riding the wave...until they get outlawed.

I own 3 Airbnb's in New Orleans. I acquired a business license and LLC and run mine as a boutique hotel on paper. But it's just like any other Airbnb except mine can't be taken away due to grandfathering laws. I'm about 15min away from the French Quarter so I stay moderately busy. I do 5500 a month in revenue in the slow months and about 7500 during the busy months with Mardi Gras being a real money maker !! My overhead is usually right at 3250$. (Mortgage, insurance ,flood insurance , utility/gas/internet bills, landscaping, cleaning, supplies, HOTEL TAXES and lastly the random repair and avg of that price)

I have headache days but the vast vast majority of guests are wildly polite and low maintenance. If I rented out all three I would make about 500$ profit a month renting vs 2650$(avg) profit for STR. The choice is obvious

@Jason Taliaferro yes pretty passive if you have a maid, pool company, and lawn maintenance. We rent out half of our duplex so I manage that property and doesn't take much time bc I live there. The other property has a small guest house that I pay the tenant 20% to manage the larger short term rental. That one is almost completely hands off. If you can replicate that deal with a ADU I'd 100% recommend going that route for sure. Make sense?

We do airbnb in our personal residence renting out 3 spaces. It pays the utilities. It's a lot of work but we "cash flow" at about the same amount as one of our rental sfr.

I have had a number of long term rentals, and did fix and flips.  My Realtor friend put his new renovation on Airbnb and said it did really well.  When I found an owner financed property in the municipality that allows STRs, I decided to give it a try.  I’ve been doing pretty well with it, thus far.  80/20 rule on guests and behavior.  

I set Airbnb low and VRBO high at first, trying to get reviews.  Once I had 5, I switched.  I prefer my VRBO guests, because it pays me better, they are older (grandparents, adult children and grandkids) and take better care of the property.  I’m only three months in, so things are likely to change with the school year. 

@Jason Taliaferro

Great question. As you’ve already seen in previous posts, but possibly not in so many words: it depends...

Everything makes sense with the right numbers.

If you are buying a lake house from profits from other rentals at 20-30% down, and it's a super desirable whole home STR, then it will be a no brainer.

We have 6 listings total across a few arenas and here’s what I can you:

Example:

Our Los Angeles master bedroom only (no access to the rest of the home—but with a private restroom and kitchenette inside) 10 min from universal city stays occupied. Close to 100% occupancy rate. It’s a money maker.

Another example:

A 4/2 home that is right next to the hospital district in Fort Worth. We use that property to visit family frequently but keep all 4 bedrooms in rotation including whole home. Even considering our visits, and the lawn maintenance and cleaning and security system etc... we still cash flow a few percent. It’s nice to have a place we use make us money while away.

LOCATION is always key. We mostly have doctors and nurses in rotation for weeks at a time at the Fort Worth home.

It is DEFINITELY more work with STR's but the hidden beauty behind those that nobody has seemed to touch on is that....

People staying in STR's don't have a problem telling you if there is a problem. I.E. leaky faucet? You'll know right away with STR's. They don't mind telling you. Long lease rentals? You might not know until 12 months to.... years?...

Anyway, even for the effort, we enjoy our STR's

Until there are too many to handle...

Hope that helps :)

@Jason Taliaferro @Chris Tryling My derivative of “short term rental” is the rent by room strategy to working professionals like Chris does with the doctors and nurses. A well located house with furnished bedrooms can rent for 50-100% more. One 5/3 house in Fairfax Virginia worth $400k rents for $2500 long term (market=about equal to the mortgage) OR $4000 (5 bedrooms x $800 plus utilities ). Sometimes I’ve used Airbnb to pick up occupants for short (10-30 days) during room vacancies but my preferred tenants come from FB marketplace, Craigslist or Zillow and sign a year lease with a security deposit and explicit house rules. If not followed, I have the money from security deposit to fall back on. I feel like Airbnb is 10x the drama for the same price and net less. (My house would never rent for $135-150 or more per day ($30x5) with limited vacancy.) With 12 month room rentals I don’t pay for regular cleaning, common area supplies like TP, and don’t have to risk a 1 Star review if I ask for $$ for stained towels or sheets, or another roommate is loud or dirty. When roommate stains the carpet or gouges the wall, it’s cash out of the security deposit. There’s also less turnover of people. With the ST guests I lose something like the room’s ceiling fan remote and have NO idea who did it because cleaner doesn’t notice right away. It’s more stable for the neighborhood and less likely to get neighbor complaints.

My town is not a tourist destination.  But there is a large refinery here.  My renters do specialty short term construction/maintenance jobs in the refinery.  My STRs are an alternative to staying in a motel, it costs less plus people can cook and do laundry.  Bank foreclosures have become fairly common after Amazon closed and moved their distribution facility here.  That was 1800 jobs.  Most of those people left town and let their bank have the house back. 

A 3BR with CH/A in a nice neighborhood goes for $9500.  It might need up to $1000 in repairs, and about $1500 to furnish.  It'll bring in $600/week.

My official day job is working in a medical clinic. I give the refinery contractors a pre-access drug screen to get in the plant. I can have my cake, and eat it too. During the day I'm at an STR doing minor repairs and maintenance. When someone needs the pee test, I'm there is a few minutes.

@Jason Taliaferro to underline what @Austin Hair said, all you need to self-manage an STR remotely from anywhere in the country is a cleaner, a handy-person, and a smart phone. Managing STR's, while it does require a little work, is literally the equivalent of answering text messages a few times a day. Maybe throw a phone call in there every now and then.

@Austin Hair Google "worst place to live in Kansas" and Coffeyville was #1 in 2018 and 2017. This year we are #3. That's the catch. The catch is made up of high unemployment, drugs, crime, and generally a miserable town. In 2017 our per capita homicide rate was right behind Baltimore and Chicago. I don't even bother reporting stolen grills or mowers. Once I went in to a vacant STR and encountered an intruder on drugs. Another time I had a tenant die on me. Another tenant didn't show up for work the first day, his boss and I found him unconscious and unresponsive (overdosed). Another time some tenants asked me if I wanted to stick around for the 6:30 show. The tenants were 11 pipefitters. It was a lady they paid to umm, put on a show for 11 guys. I ran into the same lady in another house with 6 electricians.

I have a mixture of LTR and STR. There are some fabulous tax deductions available for STR that don't exist for LTR. They are a little more work but I offer a substantial deduction for 30 days plus and keep my minimum stay at 7 days. Most of my guest are local businesses who need short term housing for employees and contractors, but I will fill in the gap with my AirBnB account. It allows me to block off days. The fees on both ends are pretty high but they helped me get "established" and after 5 years only 10% of my guests come from there and the rest are word of mouth.