Airbnb Opportunity in San Diego (Feedback Needed)
Realtor · Denver, CO · Member since 2016 · 162 posts · 37 votes
The opportunity:
7 bed house in North Park, San Diego. 1 shared bathroom per 2 bedrooms. Large communal kitchen, living room, outdoor lounge area. I want to create a coliving community.
The questions:
1). What could I charge per room per night bearing in mind each bedroom shares a bathroom with another bedroom?
2). There is an opportunity to turn 1 bedroom with its own bathroom into a communal area/extra bathroom for the community. You lose a bedroom but you gain a bathroom in case one of the bathrooms is occupied within the shared arrangement. Keep it as a bedroom or turn it into a lounge?
3). Who would you market this to?
4). What channels would you use to market this?
@David LowePM me if you want more details, but I'll try to lay out as much as I can. I have a home that's similar. Used to be owned by a non-profit and they housed 2 people per bedroom so the rooms are relatively large: all 200+ sf and two large closets per bedroom. There are 2 rooms x 1 bathroom upstairs and same layout downstairs. There also is 1 room up and 1 room down with it's own bath (so total 6 bedrooms and 4 bathrooms). 4 of the rooms have their own exterior entrance. The laundry room also has a bathroom so there is another spare bathroom (bathroom #5). Total rent coming in is $5100/month. I rent long term and market on CL almost exclusively. (I also post on a facebook rooms for rent page, but haven't had luck there. I paid for a subscription to market to SDSU students, but that also was a bust as most everyone was looking for a place months out). I'll probably try Zillow, too, for my next vacancy. Given the proximity to SDSU I thought I would get college students, but in actuality all the units are working young-ish adults. I've only ever had one SDSU student, who was a graduate. A couple tenants go to school and work, but neither actually attend SDSU. They are non-traditional students in speciality programs. Leases are month-to-month, with the ask to stay for at least 6-12. In a snapshot I have 2 tenants that are almost 3 years. 2 that are at about 1.5 years, 1 that's almost at a year and 1 that's been there a few months. The trickiest part is that a bad egg ruins it for everyone so I try my best to screen. I have STVRs, too, in my portfolio, but those are A LOT of work and you would need to plan some major investment to furnish each room and keeping things stocked. Being on the hook for 7k/month-- seems very high IMO. To compare - $800 rent breaks out to about $26/night. What is the room rate for that type of property in that location? I can tell you that I have a stand alone 1/1 beach cottage with it's own kitchen, bath, patio space, etc a stone's throw from the beach and there are nights when I'm dropping it to $69 to get it rented. And I'm paying SDGE, cable, internet, linens, toilet paper, etc, etc. Be careful. Is it possible to test the waters on STVR first before furnishing the rooms?
@Colin L. just because I emailed you over the weekend :) This property isn't one that I am making plans for, but maybe one day we'll do an ADU. It definitely has the room in the backyard.
1. Probably the same as an extended stay motel
2. What's the question?
3. Students, traveling workers, people getting divorced, witness protection programs, etc.
4. CL, local FB, and have a banner hanging on the outside of the building.
@David Lowe Uncle Paul is right while maintaining his sense of humor.
San Diego and Short Term do not mix. Do some googling you’ll likely find it’s not even close to legal. I could be wrong. I’ve been wrong before.
@Paul Sandhu Thanks for answers.
1. OK
2. I've updated and added the question.
3. OK
4. I haven't seen this done for Airbnbs but maybe that's because they are the ones operating illegally.
@David Lowe
Coliving and short term do not work. You can’t create community with one week stays.
@Jermaine Chad Ingram Excellent point. Could you answer the questions assuming a 1 week minimum stay? And have you experienced any coliving spaces? Sounds like you value community which is awesome.
Hi @David Lowe, here is a link you should read - https://www.sandiego.gov/treas...
There are a TON of articles and opinions about STR in and around San Diego. Several people running for mayor have made outlawing STR's a campaign promise.
I am guessing that you will end up with a LTR place in short order. Of course you could make the stays a min of 30 days to get around that. Then you could do the community cohabitation thing to some degree.
There doesn't seem to be anything of importance there like a college to major business that could use stays of 30-180 days. Seems like it would be a less than stellar opportunity for STR to Medium term rentals.
2. "IF" you can do this, I would keep the bedroom as a rentable portion of the property. A common area can't generate individual rent.
3. You can also rent to displaced people. Last year there was fire in a families house in my town. It was totalled. Their insurance company put them up in a motel for 48 hours. Then they put them up in one of my furnished places for 3 months.
@Michael Baum Thanks for the link. Have you done any ventures in SD? Yes, a 30 day min would definitely help build the coliving community versus STR higher revenue.
@Paul Sandhu Fair point. I was just concerned if a bathroom was being shared between 2 bedrooms and it was occupied, the other bedroom would need an emergency bathroom. Nice idea re: displaced people.
If you are not intending to house hack, the STR option is high risk. If San Diego does not pass anti STR regulations, you still have to worry about the state. I am more worried about the state regulations than city regulations as San Diego is fairly moderate and probably conservative compare to the state in its entirety. I would not recommend anyone proceed planning for STR option in Ca if it does not also work as an LTR.
7 BRs with a bathroom to two BRs leaves a BR unaccounted for. This may because this is the BR that you were considering converting to a bathroom.
About 1.5 years ago I came slightly close (not very close) to partnering with another local BP user on a commercial/residential RE. Our plan was to convert the upper stairs of the commercial area to residential (the lot was already zoned for both and had both - It was 3 separate buildings one of which was shed size (I would guess at 10'x10') but rented for $400/month commercial (tenant in place) with no plumbing). one was a previous duplex but was rented to a single tenant I believe at $2K, and the one we planned to repurpose). We had planned the new residential to have little 1 BR self contained units with a common area that included common bathroom area (each unit also would have a small bathroom), common lounging area, possibly common kitchenette area. Our preliminary financials penciled out favorably (It looked to potentially provide a good return) but neither of us had experience in this area (this scared me more than him) and neither of us had much time to dedicate to the project (this is ultimately why the effort was not pursued further). We were hoping to fit 4 of these little units and the common area in ~1900' (I forget the exact size). Some questions included who would be responsible for cleaning/maintaining the common areas seeing that our plan was LTR. It seems slightly similar to what you are considering except we were looking at it as LTR, similar to self contained dorms.
Someone else purchased the RE but I cannot determine if they have done anything to value add. The issue with the RE as being sold is the main building was ~3900' 2 story commercial single tenant (beautiful historical building and property). An accounting firm had rented the building for a long time (at $4800/month) but was no longer a tenant and it was vacant. We believed finding a commercial tenant for that unit (3900') as it existed was going to be difficult therefore the idea to make the upstairs communal residential living (maybe $1.2k to $1.4K rent per unit (building and lot were beautiful)). Our repurpose projected $4800 to $5600 for the upstairs. I think we projected $2.6K to $2.8K for the downstairs commercial space. We were considering making the former duplex back to a duplex (two tenants) which would have provided increased rent on that building. We were quite content to get $400 for the shed (no changes planned as I was surprised someone was paying $400 for it - Smaller than a single car garage but beautiful).
Good luck
Thanks @David Lowe! No I haven't. My personal opinion is that California is not the best place to setup a STR. Both state a local governments seem to be anti vacation rentals for the most part. Especially in major metro areas like San Diego.
I haven't been to SD for at least 15 years but I remember it was a pretty nice town, but with all the rumblings about housing shortages and issue with the homeless in the general area, "AirBNB's" are a low hanging devil fruit. At best most people are apathetic towards them and at worst people actively campaign to get them banned all together.
Many municipalities take a measured approach by limiting the number of places in a specific geographic area along with some taxes that make it still feasible. California isn't known for measured responses.
@David Lowe what is the shortest lease allowed in your area?
The opportunity:
7 bed house in North Park, San Diego. 1 shared bathroom per 2 bedrooms. Large communal kitchen, living room, outdoor lounge area. I want to create a coliving community.
The questions:
1). What could I charge per room per night bearing in mind each bedroom shares a bathroom with another bedroom?
2). There is an opportunity to turn 1 bedroom with its own bathroom into a communal area/extra bathroom for the community. You lose a bedroom but you gain a bathroom in case one of the bathrooms is occupied within the shared arrangement. Keep it as a bedroom or turn it into a lounge?
3). Who would you market this to?
4). What channels would you use to market this?
1. Can’t be answered because we don’t know what your cost are
2. Never turn space that you can sell into space that you can’t sell
3. 37% of the United States lives with roommates so you have a huge target
4. Facebook Instagram and Coliving.com
@David Lowe would you have any interest in renting by the room to long term guests? It would be management intensive but highly lucrative financially.
I have a 7 bed 5 bath house hack in Vegas and it's a cash cow.
There is some homework that needs to be done so it's a great place to start in the forum asking questions.
The first thing you need to do is to understand the regulations and what is coming down the pike in SD. I have heard that SD had outright banned short term rentals but then changed their minds. Keep up on what's going on there. You may find a different market a better place for your vision.
The second thing I would advise you to do is to research Airbnb to see what individual rooms are going for. You can search by the location and then filter on private room. See what the going rate is for properties similar to what you'd like to do.
Communal space doesn't pay as much as rooms do.
Market it to people who are traveling solo. Students, interns, nurses, athletes, backpackers, etc
Airbnb sounds like your best marketing channel
@Dan H. Thanks for the really interesting insight. I appreciate the thorough info and your wisdom. Still learning about City vs State regulations. How can a City pass something and the State not? How does anyone know what they can and cannot do if the City & State can't agree on anything? That seems crazy and a system that is destined to fail. I heard that San Diego legalized cannabis but the Feds can essentially close businesses down if they don't like them.
@Michael Baum Thank you. How can I make this property work in your opinion? Owner of the building is looking to re-finance so is looking for $7k/month as a rent.
@Jermaine Chad Ingram As long as you have a Transient Occupancy Registration Certificate, you can do short term rentals. Owner wants to charge me $7k/month
@Spencer Cornelia As my mission is to promote coliving in the US, then yes. Do you have any suggestions for property managers in Las Vegas as I have not invested in that market. I only did preliminary research for a real estate investment about a year ago. What makes it lucrative/cash cow and if it is that good, why has it not been snapped up? Can you send me location and more info (DM or email me through the Qwerky website) ?
@David Lowe Ok, so this is an arbitrage situation? Dang, I see that as the last line. My opinion is to stay away.
Ask yourself these questions.
If not, then I would pass. This is a great risk IMHO. What is the monthly rent for a place like this in the area? I did a quick search and there are not many 6-7 bedroom's for rent and they are running about $5600 a month. There are some outliers that are 12k but they have pools, spas and ocean views.
I sounds to me like the owner has found someone to pay market rates or slightly more for the place. My 2 cents.
@David LowePM me if you want more details, but I'll try to lay out as much as I can. I have a home that's similar. Used to be owned by a non-profit and they housed 2 people per bedroom so the rooms are relatively large: all 200+ sf and two large closets per bedroom. There are 2 rooms x 1 bathroom upstairs and same layout downstairs. There also is 1 room up and 1 room down with it's own bath (so total 6 bedrooms and 4 bathrooms). 4 of the rooms have their own exterior entrance. The laundry room also has a bathroom so there is another spare bathroom (bathroom #5). Total rent coming in is $5100/month. I rent long term and market on CL almost exclusively. (I also post on a facebook rooms for rent page, but haven't had luck there. I paid for a subscription to market to SDSU students, but that also was a bust as most everyone was looking for a place months out). I'll probably try Zillow, too, for my next vacancy. Given the proximity to SDSU I thought I would get college students, but in actuality all the units are working young-ish adults. I've only ever had one SDSU student, who was a graduate. A couple tenants go to school and work, but neither actually attend SDSU. They are non-traditional students in speciality programs. Leases are month-to-month, with the ask to stay for at least 6-12. In a snapshot I have 2 tenants that are almost 3 years. 2 that are at about 1.5 years, 1 that's almost at a year and 1 that's been there a few months. The trickiest part is that a bad egg ruins it for everyone so I try my best to screen. I have STVRs, too, in my portfolio, but those are A LOT of work and you would need to plan some major investment to furnish each room and keeping things stocked. Being on the hook for 7k/month-- seems very high IMO. To compare - $800 rent breaks out to about $26/night. What is the room rate for that type of property in that location? I can tell you that I have a stand alone 1/1 beach cottage with it's own kitchen, bath, patio space, etc a stone's throw from the beach and there are nights when I'm dropping it to $69 to get it rented. And I'm paying SDGE, cable, internet, linens, toilet paper, etc, etc. Be careful. Is it possible to test the waters on STVR first before furnishing the rooms?
@Colin L. just because I emailed you over the weekend :) This property isn't one that I am making plans for, but maybe one day we'll do an ADU. It definitely has the room in the backyard.
@David Lowe
I have run 3 coliving homes (as well as other standard rentals) in the Denver area for the past 4-5 years. I am unfamiliar with the rules and regulations or rent rates in your area, but I can give some basic advice on owning and running communal living homes.
1) Coliving in the residential or small multifam market tends to break up into three groups: digital nomads (who pay more, but want all the amenities), traveling nurses, doctors, students etc. who will stay for 1 to 6 months (this group had been well known in real estate investing for a while), and people looking for affordable housing (often millennials and retirees).
This last group is the largest in size and the group most able to weather changes in the market. You need to figure out which group you are marketing to. This is sometimes very dependent on location. i.e. Millennials and digital nomads want to live in city centers or hip neighborhoods. Retirees trying to live on a tight budget are often okay with suburbs.
2) Never give up bedroom space for more communal space. You need every bedroom you can get. From experience, I recommend at least 1 bathroom for every 3 bedrooms- but keep in mind that this only works if you charge a lower rate per room (affordable housing). If you're renting to digital nomads who are paying premium, they may require 1 to 1.
3) I rent mostly to millennials in the Denver city center and most often find my residents on Craigslist. Although more and more I'm finding them on apps like Roomster and Roomi. Word of mouth is also great. Facebook has been a waste of time except for posting on local neighborhood group pages. There are also not enough listings on coliving.com to make it yet viable and it is only geared towards digital nomads.
4) I strongly recommend renting month to month. This gives enough flexibility that bad apples can be weeded out while still getting around pesky STR rules. It also allows people to stay long enough that real community can develop. Denver is also anti STR and we have group housing laws that make it 'technically' illegal to rent to more than 3 unrelated people at a time. However, they have now realized how these group housing policies limit the ability of low income peoples to live in the city center, so are in the process of rewriting them.
If you would like to know more about any of my homes and how they function, please let me know. The cash flow in coliving is significant per sq ft, but based on what your describing, I don't think the $7k per month is realistic.
@Wendy Schultz Yes. It's in the balance but at the moment, you can let out your place short term. If that changes, you just need to pay for a certificate to be able to do it. An outright ban will almost certainly never happen because the city figures it is better to make money of hosts than them do it illegally and lose everything.