Should I believe AirDNA?

Question

I am new to the STR game and looking into buying my first one. I have been doing a ton of research and have used some of the free tools on airdna to help me decide where to invest. I found a property in North Lake Tahoe that looks good but I am not sure if I should trust the numbers I get from airdna. The cabin is a 3/2 that should sleep 8-10. It is listed on the MLS for 699,000. According to Airdna it should rent for 473 per night with 40% occupancy for over 68,000 per year. If these numbers are close to true, this looks like a good investment. What do you all think? Do you trust their numbers, or do you use another source to estimate your ROI?

Michael Baum · Answer

Hey @Torey Chumbley, use the AirDNA as a baseline. Then go do your own research with VRBO and AirBNB. Look at cabins that are similar to your possible purchase and check their stats.

That is the best way to estimate your nightly rate and occupancy.

Check out this thread - https://www.biggerpockets.com/...

Enemy Method...

Ryan Moyer · Answer

As to the original post I guess I will be the lone voice of some minor dissent here.  And you should note as I type this that the people above are much more experienced than me and you should probably trust what they say over me.

I know that checking airbnb/vrbo calendars is the method of choice around here, but I think most of the people here that do well with that are in less seasonal markets than Tahoe (which may give some indication of how the Tahoe area is as an investment) and have experience doing it in years that are not major outliers due to Covid and hence are more predictable.

I think checking calendars runs into issues when you talk about seasonal areas, and doubly so when you talk about a completely not normal, outlier year.

Seasonally, I'm sure looking through Tahoe calendars they look great right now with the holidays and ski season starting up.  That is prime time in Tahoe.  How you can use January data to predict what Tahoe occupancy will look like in May is beyond me though.  Likely most homes are pretty fully for Dec/Jan and probably pretty much completely empty calendars in May right now.  So what does that say about May?  Obviously it's seasonally less impressive than January, but those houses aren't going to stay empty for all 30 days, nor are they going to book up for 28+ days like they are in January.  So what will May numbers look like?  Somewhere between 0 and 28 days occupancy, which isn't very helpful.

This is doubly true in this year with Covid.  I believe there was some data that came out that said the average time from booking to trip date was like 3 months traditionally, but is 10 days this year.  So even what we can guess are likely somewhat high months like June-Sept are probably underbooked right now (and my own experience as a Tahoe traveler who was looking at summer dates at this time last year and am now re-planning that same canceled trip this year kind of confirms this).  So a house that has 4 nights booked in July right now will probably end up with more than that.  But as many as January?  Who knows.

Of course everywhere is seasonal to some extent, but somewhere like Tahoe is max seasonality and there's just nothing in markets like the Smokies or Destin that compares to the seasonal differences of winter vs. spring in Tahoe.

Then there is the Covid factor.  In some markets bookings are way down to a normal year.  In some markets bookings are way up to a normal year.  We know someone with a home in Southern Utah they never really come close to cash flowing on, except this year they're blowing it out of the park.  If anyone looked at their calendar this year and tried to apply those numbers to what they think they'll do in 2022 when things are back to normal they are likely going to be walking into a big mistake.

AirDNA has its issues as well.  Fundamentally ADR x nights booked is a reasonably reliable way to calculate gross, but owner usage of the property really puts a wrench in things.  They say they have an algorithm that can detect owner bookings and pull those out but I am skeptical of how well that could really work.

The advantage is that they offer data for the whole year so you can see seasonality instead of having to completely guess how things will look in summer based on winter bookings, and they have multiple years of data so you can see what things look like in a normal year.

In the end I think it's important to look at both AirDNA and calendars.  And you can even talk to local property management companies and see what they say, of course knowing that they are probably rounding up.  Sometimes realtors can pull someone's gross numbers that they know in the area too.

As to how good of a deal it is, based on the numbers you gave I would say just OK.  It's probably not the kind of numbers that are going to get most people around here excited, but if your primary goal is to get a vacation home in Tahoe for your own use ("vacation home for free", and all that) you can probably make it work.  Otherwise from an investment standpoint that same amount of money put to work in somewhere like the smokies could potentially pull in double that gross amount.

Personally I initially started looking for something like that in Southern Utah and once I really dug into the numbers I decided instead of laying out $50,000 with a $500,000 mortgage for a vacation home we used a few times a year and lose a little money or break even beyond that I'd rather just invest that same amount into a better market like the Smokies and make enough money to take several really nice vacations per year, staying at places way nicer than the place we were looking at buying, and still have money left over.  Obviously that is up to personal preference as I know for some people having their own place where they can keep stuff is more important than cash flow.

Another nice bonus to investing in areas that are popular here is you don't have to worry about any of this because people on this forum are typically happy to share numbers.

John Underwood · Answer

I concur with Michael.

Justin Anderson · Answer

I concur with the other concurrances.  (In short, it underestimates revenue in my main market and for others it has overestimated).

Michael Baum · Answer

Hey @Torey Chumbley if you are interested in the PF area, chat with Avery Carl. She knows everything and specializes in STR's.

Erik Stenbakken · Answer

@Torey Chumbley  Yes. Pigeon Forge has been a good location. TONS of info on here about the area. Be aware that when you see "this makes" in MLS and such that 95% of the time, it means Net Nightly Rent + cleaning fees. I'm sure you know to subtract property tax, etc. But if you baseline that on the "income" presented, you'll be way off. You have to see reservation spreadsheets with net nightly rate on it. Even major booking platforms do this. I'll get an email saying, "Congratulations! You just got a booking for $1800." But that includes cleaning, taxes and fees. It's not by accident they use those more, uh, *exciting* numbers. Treat them with caution.

Torey Chumbley · Answer

@Erik Stenbakken, I agree, gross is not net. Being a small business owner I am very familiar with the "it's not what you make, it's what you keep" phrase. I will be very careful to include all the expenses. Expenses are easier to calculate, potential income is much more difficult. Pigeon Forge is an area I have thought about. Have you been happy with your investment there?

Erik Stenbakken · Answer

@Ryan Moyer  This was the Florida coast. I think it was a 6/5. Could have been a 5/5. Someone else had the subscription to AirDNA and showed me a screen shot for a laugh. Home price was close to $800k. I did not make an offer ;-)

@Torey Chumbley  That was an extreme "way off" example I noted before, but a real one.

I bought an STR in Pigeon Forge that two years ago AirDNA said could earn up to $120k/ yr. We had numbers nothing close to that. At. All. Good numbers, yes, but not over $100 the first year. Nor the second (see below).

Also, keep in mind that MOST, not necessarily all, are quoting GROSS take for the house. As in, nightly rent + cleaning fees + other fees. That's **not** money you'll ever keep. But you should know that's often what's included in a statement like, "That house makes $70,000 a year." Well, if cleaning is $275/ea and you have 60 turns in the year, you have to subtract $16,500 from "what it makes" since that money goes right through your hands. This convention of "what it makes" can vary by market location. Be VERY careful you are doing your math apples/apples.

Ryan Moyer · Answer

What market and size home was this?

Torey Chumbley · Answer

@Erik Stenbakken, good advice! Can we trust anything we get from AirDNA or is most of the other info accurate?

Should I believe AirDNA?

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