Hi, fellow investors

I have been an investor for 4 years and recently I purchased my first airbnb condo unit. I feel a little scared but at the same time excited, as I have been wanting to try this model for a while but did not start till now.  I wonder whether I could get some advice on how to operate this unit, so that once it is closed, I could move quickly to next stages. 

Basic information of the unit: high-rise condo, 1be/1ba, 630 sqft, no short-term rental restrictions

Targeted customers: younger customers who are here for main tourists attractions, as the unit is walking distance to major attractions in the city

Scenario #1:

1. Remove the carpet and refinish and stain the tile hardwood floor under the carpet into coffee (or slightly lighter) color
2. Replace the kitchen countertops into white granite countertops
3. Lower the breakfast countertop and replace it with a larger white granite countertop (with possible two extra legs), making it an eating area.
4. Paint the kitchen cabinets into white, replace handles into stainless steel handles with simple geometry
5. Replace all appliances into stainless steel appliances
6. Replace all furniture to more modern, light- or wood colored furniture
7. Paint the wall into Silver Ash GR-W11
8. Have a virtual fireplace as the TV stand

Scenario #2

1. Changes all the steps in scenario #1
2. Open up the kitchen completely, remove the coat closet and make the kitchen and living room one room.
3. Put an island between kitchen countertops and living room.

Which model in your opinion works better and why?

I heard that recently the quality of airbnb customers is worse as there are more people using airbnb for parties. So, I would like to improve the condition of the place if possible and use higher prices as one of  filters. 

Any opinions/suggestions will be appreciated!

Lee

@Leon Lee I would determine what it will be worth after x amount of work vs what I paid for it and decide if all of those upgrades are worth it. Carpet clearly needs to be done. Not sure how you stain a tile hardwood or even what a tile hardwood is 😂

I wouldn’t listen to whoever told you Airbnb guests aren’t good. They don’t know what they’re doing. Also you can’t have much of a party in 600 sq ft.

So.... #1 congratulations. #2 read this entire forum and believe everything @john Underwood says

Luke, here is what I am talking about. Maybe a cork floor? it's super ugly. 

Thank you for the heads up! I will do more research and browse old posts on the forum!! 

@Leon Lee . The before and after rehab numbers have to make sense regardless of the fact that it's an STR. It will only be worth what it will be worth regardless of how much the income is. Yes those floors are ugly. Get you some new floors no big deal :) you'll be glad you did!

Originally posted by @Leon Lee :

Luke, here is what I am talking about. Maybe a cork floor? it's super ugly. 

Thank you for the heads up! I will do more research and browse old posts on the forum!! 

That's a parquet floor!  It'll probably cost just as much to refinish that as to rip it all out and put in some luxury vinyl plank - so if you're going to do that level of rehab anyway, just replace it.  Staining it isn't going to get rid of that ugly pattern anyway.

Second everything @Luke Carl says - make sure that your ROI is going to increase BEFORE you spend all that $ on granite etc. How much of a difference in your nightly rate/annual revenue is it going to make to have a rehabbed kitchen vs. maybe just changing the hardware? Etc. It's all a numbers game. Look at your competition and see what the new/rehabbed units are renting for vs. something more like how this one currently is. Is the difference worth the expense? Maybe, maybe not - that's what you'll want to figure out. (but yes, higher prices will help as a layer of protection against crappy guests!)

In addition to not over improving for the value of the condo compared to other units in your building, you need to think in terms of STR rates.

Look at your option 1, 2 and just doing the basics. Then look at other STR units in your building and general area.

What is the most per night a 2 bedroom condo is getting, then look at how these 1 bed room condos are fixed up. Are you  close to your 1, 2 or a basic rehab?

Let's say the most you can hope to get is $100/night due to competition and similar units just have a basic rehab. Then you going all out to do a major rehab will not be a good return on your investment, at least as far a STR is concerned.

Just compare and rehab smartly.

If your option 2 will get you a lot more money per night  and the investments justifies this level of rehab then go this route. 

I would put it in a spreadsheet.

What is the time to recoupe your different levels of rehab vs what you can expect to net per year based on different levels of rehab and possibly different levels of occupancy.

If you can expect to recoup your expenditure in a few years due to much higher pricing and maybe even higher occupancy, then it is worth the investment. If you spend 50k to bling it out and will take 15 years to get this money back then I wouldn't do it for a STR property.

My neighbor 2 doors down has blue formica countertops, 20 years old white appliances, he doesn’t have a concrete path down to the lake like I have, he doesn't have a screened back porch overlooking the lake like I have. 

He is still killing it due to supply and demand and no one says anything bad about his blue countertops because they saw them in the pictures and didn't care.

So if he changes these things out will he be able to charge more? No. Because he is already getting the top of the market price and is staying full. 

Something to consider.

Analyze the market and your competition. Use the @Luke Carl 's "enemy method".

Only then will you know what level of rehab will be a good return on your money.

@Leon Lee Just my two cents I would get rid of some of that furniture in your bedroom.  It looks crazy crowded in there from the picture.  I have multiple units under 500 sq/ft and there are many creative ways to have storage without bulky items.  It will photograph better and feel more roomy to your guests, which is helpful in small spaces.

@Julie McCoy @Luke Carl @John Underwood

Thank you all very much for your helpful suggestions! They are really helpful!

I have a few follow-up questions and would appreciate your help on them:

1. What are the best ways to get the financial pics of these airbnb places in the building? I heard of AirDNA before but would like know whether there are more website resources that you all use to probe such information. Another way is to go to Airbnb and check the prices of other units in the building, but I was told that price for those 1be/1ba could range from $50 to $750/night, depending on whether there are big events around. For long-term rentals, it seems checking Zillow rent, RentOmeter and guessing from how many people apply can give a pretty good feel about the market.

2. I got some information from an investor friend who bought several units in the building. She mentioned that with fully renovated units (more like Option #2), a monthly gross income of $3300 or higher is expected. She also mentioned that now is probably the worst time as the monthly income was over $4000 before the pandemic. I also checked P&L statements from a couple of units in the building with obsolete designs and furniture, and the numbers don't make sense at all as an investment. I purchased it with around $160K and plan to input about $15000 for Option #1, and $30,000 to $35,000 for Option #2. Using the spreadsheet for long-term buy and hold properties, if I could get $3000 gross per month with $15,000 renovation budget (Option #1), my cap rate is about 7% and Cash on Cash return is 6.5%. This is after budgeting for almost everything (i.e., CapEx, PM, taxes, HOA, etc..). But if I get $4000 gross income per month (after the pandemic), the COC return is 25%. Does that sound within the reasonable range for Airbnb?

Julie, thank you for letting me know the name of that ugly floor! Although having new LVP may be more efficient for maintenance in the future, for some reason, I always like hardwood floor better and the feeling of walking on it with barefoot. I wonder whether that matters to guests according to your Airbnb experience, i.e., guests comment on hardwood floors or units with hardwood get booked more easily. Just trying to brainstorm :-)

Thank you again for the info!

Lee

@Leon Lee

https://www.biggerpockets.com/forums/530/topics/818478-determine-how-much-an-str-will-make-using-the-enemy-method

Originally posted by @Kyle H. :

@Leon Lee Just my two cents I would get rid of some of that furniture in your bedroom.  It looks crazy crowded in there from the picture.  I have multiple units under 500 sq/ft and there are many creative ways to have storage without bulky items.  It will photograph better and feel more roomy to your guests, which is helpful in small spaces.

Kyle,

Thank you for the advice! YES, I will get rid of all of these furnitures! To be honest, I almost feel benefiting from them because if they are so popular and guests love them, I probably wouldn't be able to get the unit with the current price. The condition of the unit is actually not bad at all and it looks like it was renovated not a long time ago. 

I am planning to replace them with more light- or wood-colored Morden/mid-centuary furniture that looks clean and warm. I think they will fit the demographics of guests there better. I am also planning to paint the unit with light-colored paint (sliver ash) to make it look bigger. 

Thanks again & let me know if you think if some of these ideas need heads up!

Lee

Originally posted by @Luke Carl :

@Leon Lee

Thank you for the link! I bookmarked it and reading the thread!

https://www.biggerpockets.com/forums/530/topics/818478-determine-how-much-an-str-will-make-using-the-enemy-method

Decent hardwood will easily cost twice the price of a quality LVP. Your guests won't care if it's "real" hardwood or not. Most hardwood is engineered and thus not "real" anyway.  You may not like walking on it but would your guests really notice? Replace all the flooring with a good LVP in a lighter color. You won't regret the durability. Taking down the walls to open the kitchen and putting in an island gets my vote. But the driver should be the return on your rehab costs. Enjoy the remodel! You've obviously put careful thought in it. Best wishes.

Originally posted by @Glenna Wood :

Decent hardwood will easily cost twice the price of a quality LVP. Your guests won't care if it's "real" hardwood or not. Most hardwood is engineered and thus not "real" anyway.  You may not like walking on it but would your guests really notice? Replace all the flooring with a good LVP in a lighter color. You won't regret the durability. Taking down the walls to open the kitchen and putting in an island gets my vote. But the driver should be the return on your rehab costs. Enjoy the remodel! You've obviously put careful thought in it. Best wishes.

I second this.  Even the luxury vacation rental properties I sell in the Smokies have LVP in them - guests beat things up too much for hardwood to make any sense (the older properties that do have hardwood generally have awful-looking floors after several years of hard use).  Nobody's going to complain your floors were LVP instead of hardwood. 

@Glenna Wood @Julie McCoy Thank you both for the suggestion! I will go for LVP for sure! Yeah, I saw several units in that building with redone but roughly used parquet hardwood floor. LVP sounds a more durable and economical choice! 

Your cleaners will thank you too. LVP is so easy to maintain.

Man, parquet floors get no respect...