Arizona, BRRRR Airbnb. Thoughts & Criticism?

9 Replies

Hi BP, 

My buddy has 2 properties in Tempe, AZ. He is killing it with Airbnb. I am looking to get involved in this market as well. However, he has run out of purchasing power because he is buying turnkey properties. 

We are thinking to introduce a sidekick to BRRRR:

 BRARR (Buy, Rehab, Airbnb, Refinance, Repeat)

That way we can benefit from refinancing to increase volume and the STR income. If someone has done this already I would love to hear your story. I still need to speak to a lender to see if STR would qualify for a refinance.

My concerns is that I have a feeling Airbnb will be restricted in some way in the near future, but I also want to take advantage of this STR income while we can. If Airbnb becomes restricted I feel we can still flip the house for a profit in a worst case scenario situation.

What are your thoughts and criticism on this idea? 

AirBnB is pretty much irrelevant to your questions. Figure out if the numbers work and dive in. 

As for regulations.... google it. Does it look legal? Does it look like it’s getting less legal? Call the court house and find out. 

Financing won’t matter depending on how you’re trying to finance it. If you’re doing an investment loan the bank wont care if it’s short term long term or even owner occupied at that point. 

The thing is posts like this happen CONSTANTLY. The number of people that pull it off is very few. Don’t be one of the many! 

I see you are buying turnkey. If you are paying retail you will not be able to get much or any cash out by refinancing.

Now if you bought at a nice discount this may work for you.

@Lucas Carl  Thank you for your input. I am running numbers on worst case scenario. 

Well in 2017 the state of Arizona made it so that City regulations cannot restrict Airbnb. Then again that was 2 years ago. I will continue to do my due diligence. 

@John Underwood Let me clarify. My buddy is buying turnkey at the moment, but we want to purchase distressed properties, furnish, Airbnb, and then refinance in order to take 75% of the ARV into another property.

The 2017 law prohibited cities from *preventing* AirBnB altogether, but they are allowed to place restrictions. Number of guests, noise, etc. have been big issues. They are working their way through the courts, and yes, some areas are restricting AirBnBs more than they used to. I highly doubt that AirBnB will ever be regulated ENTIRELY out of business, but I do imagine landlords will have more restrictions to contend with in the future.

However: owning in Tempe, you would have a fantastic safety net. If AirBnB turns out to not go your way, there is a constant demand for student rentals. If you don't want to rent to students, professors and parents are also looking for places to stay in Tempe. And if you want to get out altogether, your resale value should be protected by the consistent rental market in the area. So all in all, I think Tempe is one of the safest places you could try this out. Happy to answer any specific questions! 

As @Pamela Sandberg points out, you should buy property that provides a contingency in case something changes. In my market, my favorite property is 1-4 units in the downtown area that is zoned commercial. I can use it for vacation rental, long-term rental, or a business. These houses are 1-2 blocks off main street and will be worth big money if/when the City expands. Could be in ten years, could be 20. Either way, I want to be ready!

AirBNB is a great business in Arizona. Tempe and Scottsdale would be great places to buy a property if you are trying to do this, and even if eventually Airbnb isn't working out for you, you could easily turn it into a long term rental. Tempe has a ton of demand for housing for students and families in general. The overall rental market in AZ right now is pretty crazy so you could go both ways. 

@Nathan G. That's exactly what we were factoring in if the Airbnb regulations change. Always gotta have an exit strategy if the original plan doesn't work.

@Ivan Enriquez That's the plan! My buddy has properties in both cities. Thank you for your feedback.