Ok short term folks, need advice on a purchase?

18 Replies

So there is a property I’ve been eyeing and we’ve been contemplating doing an AirBnB/Short Term Rental. Primarily we’re looking at the bigger markets, like the Smokies. However I’ve come across a little property close to home that sits near a local lake that I think would make for a decent one. When I say decent it’s cause our area isn’t a tourist destination, but I think I could fix it up and market it to where it could make us decent money from the locals that would look to have a little getaway here and there and it would be someplace fun for me and my family to go that would not be too far away

That being said it’s not like I’m looking for this to break the bank or be a crazy source of good income for me, but if I went the AirBnB route my concern is in doing so what kind of roadblocks may I run into? That being with local cities/governments and rules and regulations? Things of that nature. Like in the description it says subject to the lease with the city?

Just curious of roadblocks or things I should research before really pursuing and possibly placing an offer

Thanks in advance for any and all feedback

@Cory Lucas

Do you have an agent?

I would be asking what the lease is referring to? Is this a situation where you buy the house but lease the land? We have forest service cabins like that in my area and they expressly forbid any commercial activity which includes short term rentals.

Beyond that, you need to know what sort of regulations your city/county might have for short term rentals. You should be able to search the county and city website and find those rules if they have any.

@Dustin Allen cool! That’s kinda what I’m curious of is where do I need to go and find that info out. It’s a pretty small rural town, not sure if the website will provide the insight, but I’ll give it a look. I do have an agent and will see what he can find out on the lease. Thank you

Originally posted by @Cory Lucas :

@John Underwood agreed! I’ve seen your comments on other posts, seems like you’re in on the short term game?

Yes, and I have a house on the lake with Dock. It stays slam full! 

Hey @Cory Lucas , like @Dustin Allen said, I would find out what kind of lease that is. If it said the city, then it most likely isn't a USFS lease. Those are very common in Idaho. You can get a place for a steal, but you never know when that lease will be pulled and the property sold.

Priest Lake in North Idaho had a ton of USFS lease lots right on the lake. Many little cabins up to pretty nice log homes, all on leased land. Almost all of them went up for auction in 2018/2019. I believe lessee's had first right, but a property that was sold in 1980 for 25k and built up to make a nice place was suddenly worth 450k. Alot of people couldn't afford that so out it went.

Just be careful on the lease. A city lease could be anything. Land, septic, etc.

@Cory Lucas you want to be pretty full to make an str work. You will be paying utilities, furnishings, cleaning, advertising, etc. You don't have that with longterm. Strs are great, but in my opinion, not worth dabbling. I don't know your market, and it may be plenty busy with locals. The bonus of your area is less competitive than the Smokies!

@Cory Lucas   Is it near Robinson Illinois?  There is a refinery there.  You can make a killing renting to travelling workers (welders, pipefitters, boilermakers and other such ruffians).

@Cory Lucas I would literally call the local zoning board/city council members and ask about STRs. You don't want to me on the worng side as it will bite you in the end. Also make sure it's not in an HOA or other such. As they almost always eventually turn against STRs

@Cory Lucas as someone pointed out, call the zoning department. In Chicago, there is a licensing fee and some alderman have already cut off new applications for the time being. Another good resource if you're not familiar is AirDNA. It doesn't need to be a huge market to have a profitable STR. AirDNA can give you some insight into what its demand and profitability would be.

@Tony Angelos good stuff, thanks for the insight. I’ve heard of AirDNA, but I was not familiar with what it’s used for. Appreciate the tip

There are several gotchas in short-term rentals, whether you use Airbnb VRBO whatever it is you're using. It's short-term. Travelocity any of these sites which Airbnb and VRBo are your two main sites for rentals, which you have to look for is the city ordinance. For instance, I can give you an example in Sugarland, Texas, which is over by Houston or down by Houston, the city has an ordinance against Airbnb, I should say that said this way, you need to look to see if there is a city ordinance against short term rentals. If there's not, then you're good there. The second thing you need to look out for is are you in the middle of an HOA? Or is this out in the country where there is no choice? One, the number one thing that makes short-term rentals really, really good is that there is a low inventory of them in most cases. And you look at it and say, why is there low inventory. The reason there's normally a low inventory with short term rentals is number one, there's a large amount of Hoa communities that you can't use them in or their city ordinances against that. That means that your restriction is on the supply of them because not as many people can do a short term rental based on those two things. Homeowners Association won't allow it, the city won't allow it. Okay, so that's what you want to look for. If you pass those two thresholds, then the next thing I would do is I would tell you to run a test market, go out and list that property on the short term rental sites and see what kind of pressure comes in. Because you don't want to buy an asset that you think's going to be well as a short term rental, and then find out later it's not and your business model failed, based on the fact that you didn't understand what the pressure market is, oftentimes we're all do is I'll tell the client if you can, and you have time, and the seller will allow you to it allow you to do this, you can actually go to the seller and say, we'll buy the house subject to getting the gauge on what the pressure is on the short term rental market. And you can go in and you can list it on the short term rental market. And you can set it up. So it's not an instant booking. But they have to ask you, or they have to ask you, you can respond or turn them down, it does affect your rating on the short term rental site. But you can turn them down and basically say, it's not available right now we're in the middle of renovations or whatever it is, that is your story that's in truth. You can give them a reason why it's not yet ready. But what it allows you to see is how many people are coming in and asking you to book that home. And that will give you an idea of how much you're going to make on your short term rental. There are also plenty of sites out there that you can go to that will show you what their estimates are of doing a short-term rental in that area. I haven't used those sites for myself personally, because I have a team and staff that does all our short-term rentals. And so we're constantly running comps on a weekly basis and on a consistent basis to see where our values are. And we're gauging pressure off of our own properties. Oh, one other thing is this. Make sure you pay attention. If the house is seasonal, or the area's seasonal, you need to base your rates based on what you can bring in in the season that's on and what you won't bring in on the season that's off. I have a property that's down at the beach that I know I can rent it for six months out of the year and the other six months, it's pretty much a dead property. Okay, so you have to keep in mind what actually is the income you'll bring in on the asset during the on and off-seasons. Those are the things you want to look at when you're looking at doing a short-term rental.