So my wife and I are looking at buying a duplex (technically it would be a house / cottage scenario) in Colorado Springs.
Instead of renting it in traditional way, we are thinking about using Airbnb to rent it out. It seems to have a much higher return on investment.
Is anyone doing anything like this?
Also, how would you run the numbers to make sure it would be a wise investment?
These types of rentals have been growing the last few years, but I've never heard of any full time investors doing this. While the nightly rents may be higher, you also have to consider the significant increase in management and risk. Anytime you have that kind of high turnover, you're going to have vacancies, no shows, home wreckers, and the hassle of managing the whole thing. It's like anything with higher returns. The money is there if you're willing to put in the extra work. It's just a question as to whether it's the best use of your time. Good luck.
@Darren Smith thanks for the feedback. I would agree that it might not be the best use of time and it's definitely not a traditional route.
I was thinking, it might be better to have an Airbnb tenant than have a traditional tenant living next door.
I guess they both have pros and cons.
@Jeremy Kleier I currently rent out a spare room in my house in Denver and I might a pretty good chunk of change from it, and it's only one room compared to what you're thinking of renting an entire unit. I think it sounds like a good idea. I've only had good experiences with Airbnb so far (I started renting out my spare room last May), I haven't had any destructive or worrisome renters (the host/guest reviews come in handy because guests won't be accepted to hosts' homes if they leave a bad impression), you can set your own cancellation policy to ensure you still get paid even if guests don't show up (which has never happened to me), and I personally think it's less wear and tear on your home because they're not living there permanently and most guests are usually out and about exploring the town during their stay. The only downside I can think of is the increased cleaning due to higher turnover of guests vs. permanent renter (but you can always add the cleaning fee to the reservation amount if you want, I just add $10 to every reservation for my time). If you have any questions, I'd be happy to share more of my experience.
I am a full-time investor, and I'm doing it for some extra cash flow. I've found the guests to be very good and clean. If you find a local cleaner who can change the sheets, clean between guests for you, and you have a simple place with a clear ad and instructions, I don't think it's too much work.
My AirB&B unit generates about double in net rent of what a normal unit would. You charge the cleaning fee to the guest, and I would charge at least as much as it costs you to clean, if not more. I charge $39 for cleaning (in Oakland - a higher cost area) for a small 250 square foot or so unit with no kitchen and no living room. More of a hotel room..
2x-3x unfurnished long-term gross rents aren't unusual for well-managed places in good areas. Look at Airbnb to see what's going on in your area..
Cottage would work great for something like this.
I agree with @Tara Hall , the guests are usually out doing something and just sleeping there.
On top of that, you have the option to switch it over to long term, rent to someone you know, etc..
Set a minimum stay so you don't have to turn over too much, and thorough instructions so you don't have to answer them, and a lockbox outside for the key so you don't have to let people in (cleaner or guests).
Search for AirBnb or VRBO on BP too to get more tips. Good luck!!!
But I would buy just counting on the regular rents, and this will be gravy if you get it.. I would do this on the next place that I buy for sure, based on my success so far..
@Jeremy Kleier I looked on airbnb for listings in Colorado Springs. There are 125 listings. The average price per night is $127, while the average vacancy rate is 64.57%.
60% vacancy rate is pretty high, but it might be lower for your particular property type. Do these numbers make airbnb look like a wise investment for you?
I think you will find this vacation rentals bp podcast informative.
@Micki M. does this with her first condo. She can weigh in with her experience.
Were you reading my mind :) I spent the last 4 hours thinking about our first vacation home purchase that I hope to make in the next 19 months or so.
We plan on buying a single family home. I am going to run it through two "different" criteria. The first criteria is making sure it is a great house as cheap as possible in a great neighborhood fitting our needs. The second criteria is for the house to be able to cover all of its expenses with room based on the average data of its equivelants on VRBO.
My husband is active duty navy. so our goal with this house is to buy a gutter, fix it up and than rent it as a vacation home so it covers all of our costs and we have a house to visit.Since it will be in a VERY expensive area we want someone else to start paying off our mortgage AND have a place holder so the houses don't get more expensive. We are doing VRBO because the house is too expensive to follow our traditional model.
If you want to compare notes let me know :)
Thanks for the mention @Bill S. . @Jeremy Kleier as usual the naysayers are the people who aren't using this strategy. They have valid points and concerns but if we weren't comfortable with managed risk, we wouldn't invest in real estate right? Having your unit right next door is ideal for handling turnover, and what people don't realize is you don't have to operate it like a hotel. My HOA has a 60 day minimum lease requirement which I choose to follow. Most of my rentals are 60-90 days which keeps turnover to a minimum so it's less hassle and less expense. And since you live next door, if there are times you'd like the space for visitors or vacant for some privacy, you have control over that.
My guests are people here for hospital rotations, grad school, relocating, etc and I've become friends with several of them. Airbnb's social media component and verification system really helps with vetting tenants. You can always try it and change your mind. Let us know how it goes, and feel free to hit me up with any questions.
@Jeremy Kleier short-term rentals can be a viable strategy, depending on your goals, location, and numbers.
Short-term rentals command higher rent, but you also have higher expenses due to marketing, cleaning, furnishing and other business expenses. Variable occupancy makes income less predictable.
Also think about:
-target market. will you rent to tourists, travelling professionals, college students, etc.? who would stay there and why? advertise, furnish and price accordingly. good points from @Micki M.
-run your numbers both ways, as long term and short term rental. if it's not working as a short-term rental, it's nice to have the option to transition.
-consider 30-day furnished rentals versus nightly. I know someone in Austin, TX, who's done very well with this model. He gets higher rent than annual, has had low vacancy, and much less turnover and wear and tear.
-definitely research online listing sites, as others have said. A cottage could have tremendous appeal and help you differentiate from others in your area.
-check into local regulations. do you need a special permit or tax filings? are there any restrictions?
Supply and demand for short-term rentals have grown exponentially, thanks to companies like airbnb and homeaway. There's huge potential in this space, in my humble opinion.
Thanks for all your feedback. I think we found a property and we are going to jump in.
We will see how it works out.
Thanks so much for all your input.
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