what to account for when estimating for a airbnb rental

17 Replies

I've been debating on buying a property to use as an airbnb rental. I'm familiar with estimating for a property that will be a long term rental, but not this. I wanted to see if I might get some tips on what I may need to take into account when working out my numbers on an airbnb.

Possibly things like:

what are typical management costs around airbnb and what does this include?

what are average cleaning costs, if they are not part of management?

how many days per month should be estimated as rented vs vacant?

is it better to rent furniture vs buy? 

what are typical costs around furnishing something like a 2bed/2bath house?

30%.

$100

12

Buy

Some people will say $5000-$8000, but I do it for under $1000.

@David Hedges it is impossible to answer your question without more specifics. Please go back and read as much of the old posts in this forum as you possibly can, your question has been asked dozens of times.

You can't answer your question because it depends on so many factors. Where is the property and what is the market like? Is it a ski area that rents 3 months of the year? A condo near Disney in Orlando? A residential apartment in NYC?

Cleaning costs on a 2 br cabin in Pigeon Forge vs. a 2 br apt in Brooklyn NY vs a 2 br home in Malibu will be wildly different.

Look up Luke Carl's enemy method and you'll have a much better start before asking the next set of questions.

Joe

@Joe C.

Thanks for the reply I’ll go review.

I had been looking at the key west, fl area, thinking it should get good year round use, with the exception of when there are hurricanes.

Greetings! My experience comes from Orlando area:

1) what are typical management costs around airbnb and what does this include? 15%-20% Reservation Fees. 

2) what are average cleaning costs, if they are not part of management? 4 bedrooms $120; guest pays that

3) how many days per month should be estimated as rented vs vacant? 75% occupancy rate 

4) is it better to rent furniture vs buy? It depends on the furniture condition and design. 

5) what are typical costs around furnishing something like a 2bed/2bath house?  $8k -10k plus labor $1k-$2k 

Do you want a place “to use sometimes” or do you want a a place that is hand-picked for its income potential? 

@Nancy Bachety

I’m more interested in income potential, though the idea that I could stay there as an option does sound nice. It’s more likely though that I’d rarely if ever stay in it.

Also I would pull as much data as you can before selecting a property. I pulled AirDNAs on all my interested markets before making an offer. You'd be surprised how much different the income potential is in one beach community versus another. 

Also don't forget closing costs in Florida tend to be higher than you'd expect. 

Most of the answers you seek are market specific. I operate a number of short term/vacation rentals in the Colorado Springs area, both my own and others and have run numbers on properties for lots of investors. Rather than try to answer your questions with numbers because answers will so dependent on your market, here are some costs that you should consider categorically that you might not be thinking of from your experience with long term rentals: 

- Insurance (that covers STR activity--not just any landlord policy)

- Utilities (including internet and possible streaming services at minimum)

- Hot tub maintenance if applicable

- Replenishables (paper towles, coffee, etc)

- Laundry service (maybe this is bundled with cleaning) 

- STR specific taxes in addition to property tax

- Trash/recycle

- Yard care, snow removal

- Licensing cost from your city if applicable

Hope that helps! Have fun; STRs can be a great experience and definitely can be a great way to turbo your cash flow even if you are buying in a hot market. Using the property for yourself is fun too! 

@David Hedges if you are trying to juice your returns then you must learn to self manage remotely imo like most of the STR owner's do on this site, myself included. It's very doable if you have some time flexibility to engage occasionally as needed and are willing to learn a new skill set. Why give away 20% gross revenue when you can self manage and enjoy great returns? Good luck!

@Tim Thornton  @Ezra Benjamin Harris  @Nancy Bachety  @Joe C.  @Paul Sandhu  @Valentina Naumenko

I have a more general question.  

I appreciate all the answers and have been reviewing info throughout the forums, but are there any tools you use for analysis for your STR or are you mostly using a combination of tools. I have been trying to use some of the tools here on BP but they aren't really designed for STR so Occupancy rate and such have wide variance on overhead costs and can look crazy high compared to LTR since thing like management fees and capex show as part of gross rents.

@David Hedges

Below is what I see with our Airbnb/short-term rental buyers in Denver and Colorado Springs. (But of course, as @Tim Thornton said, every market is going to be specific.)

  • I see STR management fees between 20-25% of rents in cities like Denver and Colorado Springs. Up in Summit County in say Breckenridge or Keystone, vacation rental management can be upwards of 50% of rents.
  • For a 2br/2ba, I'd say between $75-$100 for a cleaning fee.
  • I think occupancy rates for short-term rentals aren't the best metricbecause that will fluctuate with season. What you care about is revenue averaged out over the year. I'd take a look at AirDNA's Rentalizer tool. You have to sign up, but it's free and will estimate a given property's potential revenue. I just did an analysis of some of our investors' Airbnb properties. I looked at what AirDNA thought the revenues would be and what revenues turned out to be, and they were quite close. (Close enough to use as an estimate.) 
    • Caveat: This may work for markets like Denver and Colorado Springs where there are a good number of Airbnb properties so the sample size is strong. If you're in a tiny town, this may not be so accurate.
    • All that said, what we see in our two markets for a well-run short-term rental is 80-90% occupancy during the peak 7-8 months and 50% occupancy for the slower periods.
  • Buy your furniture. 
  • We had a duplex in Colorado Springs that we ran as an Airbnb. Both sides were 2br/2ba. We spent approximately $6,000 on each side. That's mostly IKEA, Amazon and American Furniture Warehouse.

Good luck!

Since you identified you primarily want to use this a str for income, that should narrow down your markets. Hone in on them on airdna and then the rest is legwork, online and connecting with agents, other hosts, etc.

Thanks everyone this is all great info.

@Luke Carl  thanks for the link, I had looked up the method but the video helped bring it all together and made a lot of sense. 

I've also realized some of my assumptions on management costs may have been a bit high initially. The info on furniture is very helpful though in planning. 

I use a variety of tools, but the best one for estimating your income is definitely the other comparable listings nearby on Airbnb and Vrbo. I like to look at their calendar to make sure it's not blocked most of the time or intentionally overpriced (I live here but I'll leave if you pay me enough). You can tell a full time investment property and get some good market research done at the same time. You'll have a better idea of what features and locations work well, and what kinds of photos grab you. If you scroll through the calendars you'll be able to see how their prices change throughout the season. Some change (the smart ones I think) and some stay the same all year round. Pick a few properties that are close to what you want to do and study them. If you devote a cup of coffee and 30 minutes to it once a week you'll learn a lot about when they book up and when they don't etc. Or even better, find out who's running it and buy them lunch or send them a gift card or something and ask for a 45 minute call if they aren't nearby. That will be a treasure trove.

@Jonathan Stone an experienced realtor in the VR/STR space can tell you in 30 seconds or less what the estimated gross revenue is on a given property. There are tools in addition like Airdna, Mashvisor, studying comps in a given area (ie on the Abb/Vrbo platform) but imo someone who operates in that space locally (realtor or local investor) is going to be the most helpful/accurate/easiest medium for info.