Strategies to rent lux properties and AirBNB w/ owner's approval

[Richard McCaffrey]

Hi,

Was hoping a seasoned AirBNB professional could point me in the right direction.

I am exploring the idea of leasing luxury property in the Lake Tahoe, CA area for the winter season in the 5-20k/mo range and renting out for $500ish/night during the week and $2-5knight on the weekends. I am lucky to have some excellent contacts there so I believe I can potentially pull this off.  I personally know that the demand is far exceeds the supply for these properties. 

I am new to this, so I wanted to ask:

How do you go about securing the lease with an addendum that I can sublease the property as a vacation rental and get the owner to go along with it?

Do you purchase additional insurance beyond what AirBNB provides?

How would you go about teaming up with an interior designer/stager providing a first class experience while keeping costs down?

What is the worst case occupancy rate you factor into your margins given that the property is in an A+ location and is staged beautifully?

What is the standard rate for an AirBNB property manager as I would be a silent investor?

[Nathan Gesner]

I think you're about to make a big mistake or, more likely, you're just bouncing ideas in your head and will never actually act on them.

Do you have any idea what it would cost to furnish a luxury home like this? I can tell you don't, because you don't even know an interior designer and you're naive enough to think you can hire a "first class" designer that "keeps costs down".

Do you have the funds available to cover the expenses (rent, utilities, insurance, marketing, property management, etc.) until it starts to produce a return? I suspect you'll be losing money for the first 3-6 months while establishing the business.

It's not really worth trying to answer your questions because you're not taking the idea seriously yourself.

[Michael Baum]

Hi @Richard McCaffrey. Do you have a property in mind? The biggest issue with Tahoe is all the restrictions. Violations can have you lose your license to rent. Many places are not able to be rented at all.

You MUST have a full short term rental coverage. I use Proper for our home coverage. It is quite a bit more expensive than regular LTR or home owners, but worth it. Others use CBIZ or Foremost.

Also, the idea of luxe type rental usually includes services which change your taxable state. IE: Using a Schedule C vs a Schedule E for your filings.

There is no way to do a high end design without paying for it. There is one option I am familiar with. 1ChicRetreat.com does design work and will travel. I have no experience with them, but have been reading their blog. Check it out and they have several places shown of what they did and how it was before. Lots of ideas there.

You might also want to consult some of the high end property management companies in the local area. Some of their rentals are amazing and the nightly is very high, way above $500 a night. They have great hi-res photos to give you an idea of the competition.

Just because you have a great place in a fantastic location doesn't assure occupancy, plus the first year will be light. No reviews and a new property mean a risk to travelers. Why choose your untested, untried place when they can rent something with 40 5 star reviews? Especially at the high rates you are talking about. It all depends on the guest. Some will spend a ton for a great multi generation family vacation when they are of modest means. While others have a lot of disposable income and the risk is more acceptable.

Finally, I think it will be difficult to get an owner of a property worth a couple of million dollars to do arbitrage. That is unless you are loaded to the gills with cash and can pay the lease regardless of occupancy. If you are relying solely/majority of occupancy to pay the lease, then I expect it will be a hard sell. My opinion on that.

Personally, I think the risk is too high for an arbitrage situation. You could lose a lot if you have one minor issue or your occupancy is below your set threshold. If you owned the place, the risk is still high but the rewards might be worth it.

[Paul Sandhu]

If you are serious about this, try doing a basic STR first then move to something more advanced once you have the experience. You learn to crawl before you learn to walk, you learn to walk before you learn to ride a bicycle. You learn to ride a bicycle before you learn to drive a car. You are trying to drive a tour bus, but you haven't established that you can ride a bicycle.

[Richard McCaffrey]

Thank you for your honest responses. I think I will hold off on this until I am more experienced!

[Richard McCaffrey]

Originally posted by @Nathan Gesner:

I think you're about to make a big mistake or, more likely, you're just bouncing ideas in your head and will never actually act on them.

Do you have any idea what it would cost to furnish a luxury home like this? I can tell you don't, because you don't even know an interior designer and you're naive enough to think you can hire a "first class" designer that "keeps costs down".

Do you have the funds available to cover the expenses (rent, utilities, insurance, marketing, property management, etc.) until it starts to produce a return? I suspect you'll be losing money for the first 3-6 months while establishing the business.

It's not really worth trying to answer your questions because you're not taking the idea seriously yourself.

I’m guessing staging would be at least 5k/mo. Prob closer to 6.5k