AirBNB: An interesting house hack model?

34 Replies

Tonight I am in London.

London is a place I visit often and was my home for three recent years.

During our time living in London, we - my family of four - visited as many places across Europe as practical, knowing we would not be here forever.

We stayed most comfortably in AirBNB apartments during those visits.

This evening I am staying via AirBNB with a family in their spare room.

I have enjoyed listening to @Brandon Turner's advice to interested new investors about the practicality of house hacking as a first step.

AirBNB reminds me of a house hack.

Are any of you in BP Nation using AirBNB to begin or expand your real estate investing?

If so, I would be interested to hear about your experience.

Many of the people we stayed with in the past few years I know are slowly building portfolios of AirBNB rentals.

Are you?

Please let me know.

Thank you,

Jonathan

@Jonathan Cope  I actually rent out my spare room and love it...I consider it a small beginning to the investment world. It covers about half my mortgage on average and I only have to rent it out half the month. I enjoy using airbnb while traveling like you.

@Tara Hall  

Congratulations. 

That sounds like a great investment start. 

I am always impressed when folks find a way to make their spare assets work for them. 

The sharing economy seems like a great way to defray costs and build experience. 

I hope it continues to work well for you. 

Thank you,

Jonathan

I have a ski cabin that I use AirBNB and VRBO and knock it out of the park.  Brings in double what I could rent it for...and I have a free place to stay midweek when I ski.  We are working on a property downtown right now that we plan to use exclusively for AirBNB and VRBO. 

My wife an I use it when we travel almost exclusively (she currently is staying in one in SAC while she is taking a class), and have friends and clients in Portland who have ADU (granny flats, accessory dwelling units) and rooms that they rent that pay their mortgage and LOVE it.

In terms of using it to increase your RE holdings the only issue I have been running into is not being able to qualify using the short term rental income.  As long as you can carry the debt it is fantastic.  Make sure your area does not have issues with nightly rentals, we are very fortunate here that they are allowed but some areas only allow 30 day rentals.

Good luck.

Airbnb is not a house hack IMO.  It's an income opportunity that requires running a business.  Way more day-to-day operations than a rental.  Not passive.  Additionally, it's probably just a matter of time before cities and counties seriously crack down on short term vacation rentals. Offering short term accommodations to the general public is different from other types of housing.  I love airbnb, but let's call it it what it is.  It is not part of a sharing economy. It is fees charged for services provided.  Health and safety inspections, business licenses, hotel taxes.....it's coming.

@Account Closed

You make a fair point as it concerns short-term vacation uses.

My view is informed by my own uses, which have tended to be longer in duration.

We've used properties for weeks at a time.

At the moment, I am an AirBNB lodger with a family. I'll be with them for a month in their spare room.

It is terrific cost opportunity for me and a key part of the family's financials.

From that perspective, I do see cases where the model does trend toward the sharing economy.

But your point is well made and true, I expect, as it concerns upcoming change.

We stayed in Paris this summer for a week while I was visiting for work. Paris is the third most visited city via AirBNB.

Their government is beginning a new program to identify AirBNB hosts so as to begin gathering tax. It is coming as you say.

Hopefully some of the model will have legs, however. I have enjoyed it to date.

Thank you for your thoughts.

@Robert Bowles

Congratulations on your successes.

That is great to hear.

The pricing model seems quite advantageous in many cases.

Have you successfully outsourced the guest arrival, turnover work and cleaning?

As @Account Closed notes, that tenant work for short term visits could be arduous.

I presume doing that work well is also key to your ratings and feedback.

What an interesting point you raise about financing. Am curious how other operators are addressing this constraint?

No doubt lenders are being approached more often now with requests for such financing.

Will be interesting to see if the lending market moves toward or away from such borrowers over time.

Good luck with you next unit.

Thank you for your thoughts,

Jonathan

Originally posted by @Jonathan Cope :

Robert Bowles

Congratulations on your successes.

That is great to hear.

The pricing model seems quite advantageous in many cases.

Have you successfully outsourced the guest arrival, turnover work and cleaning?

As K. Marie Poe notes, that tenant work for short term visits could be arduous.

I presume doing that work well is also key to your ratings and feedback.

What an interesting point you raise about financing. Am curious how other operators are addressing this constraint?

No doubt lenders are being approached more often now with requests for such financing.

Will be interesting to see if the lending market moves toward or away from such borrowers over time.

Good luck with you next unit.

Thank you for your thoughts,

Jonathan

 Jonathan, I've been able to automate the guest check-in and out process and the maid with a lockbox, and online booking, from Airbnb. I haven't seen the last 5 guests, or the maid, and operating it as if I'm living out of the country, even though I'm next door. Not too much time once it's set up. But I have a simple place..

I think that if done very well, it can be managed relatively efficiently. But I think it takes some of that vacation rental expertise to do right and keep the reviews excellent...

@J. Martin  

Well Done!

That is terrific to hear. 

I enjoy your description of managing from overseas while next door. 

Having managed property from overseas these last three years while we were in London, I really appreciate how powerful well-operating service can be. 

Will you be expanding to additional units using this model?

Were any of the automations trickier to arrange than others?

Congrats on your success. 

Thank you,

Jonathan

@Jonathan Cope I'm definitely using Airbnb as a house hack strategy. I own two condos, and bought them both as owner occupier. The one I moved out of is a full time Airbnb rental, and thanks to the increased rents I get from it being furnished it pays both my mortgages. I just (like 10 minutes ago) bid on a SFH foreclosure during the owner occupier phase.

I can't flip the house in the short term (to keep the transaction legit and to take advantage of Homestyle financing) and have no desire to take on a $300k mortgage, but it seemed like such a great opportunity that I sat down with my spreadsheets to see if I could make it work.  My plan is to keep renting condo #1 on Airbnb.  I'll probably rent condo #2 as a regular lease for the security since I haven't tested it as a short term rental yet.  And once my house is rehabbed I'll Airbnb the top story master suite (which is going to be gorgeous) for 7-10 days a month and that should cover the balance of my mortgage payments.

For those who like numbers

Condo #1 HELOC/HOA $350/mo, rental income $1400/mo

Condo #2 Mortgage/HOA $900/mo, estimated rental income $1100/mo

House Mortgage $1400/mo, est rental income $1000/mo (7 nights at $150)

Bottom line: Money out $2650, Money in $3500

@Micki M.  each seem to be using a similar approach. 

Is that for peace of mind in your case or for some other reason?

Best of luck with your new venture. 

Thank you for your thoughts and numbers,

Jonathan

I don't use it but know people in Harlem who do and are making an absolute killing. I am considering using the model for my rental in Brooklyn instead of having normal tenants. Mngt is the key issue for me.

@Les Jean-Pierre

New York seems to be AirBNB's number one market for demand.

I can imagine that transitioning to a new model would be interesting.

Management will clearly be important, as I expect expectations will be high for potential tenants.

Good luck with your plans.

@Jonathan Cope  I handle my bookings myself online and do a meet & greet, and I have professional cleaners come in.  I generally do 60-90 day reservations so my turnover is only 3-4 times/year. I was having trouble booking December so I reduced my minimum stay and ended up getting a one month and a five month booking so I'm solid through May 2015 right now.

Renting the SFH suite 7 days/ month gives me peace of mind that even if I don't get a commission paycheck I can still cover my mortgages. I don't like having roommates so I'd rather do a short term thing now and then.

I love that you see all this as conservative, it freaks me out each time I analyze adding a property because I don't think of myself a buy & hold strategist.  But house hacking is helping me acquire the passive income I want so I can do things like flip houses out of state, buy notes, and not be so client dependent.

There are services that help you manage your property. I don't know anyone who has used them however. I have a regular job so I can't meet people when they arrive. I guess I could use some sort of electronic lock. The biggest issue is that my property is in Brooklyn and I live in Harlem.

And thanks for the well wishes. The prospect of never dealing with landlord tenant court again and making more money is enticing.

@Micki M.  

I like your plan. 

Given how flexible your model appears to be and how much demand you seem to attract, your model does strike me as conservative and thoughtful. 

If it turns out you need more revenue you have ways to generate it. 

If you need more time you have ways to make your model more automated. 

That seems wise and conservative to me. 

Assuming you have or can build some cash reserves, your business appears to be growing in a direction that is more stable and less eat what you kill commission-based. 

That seems wise, too. 

I find it interesting that you are getting longer-term AirBNB reservations. 

I use them myself for business and find them convenient and price effective. 

One gets to establish routine and build a sense of home over such a duration. 

For you, it limits the hassle and revenue risk. 

Well done. 

I wish you luck with your next phase. 

Congratulations on being rented through May. Nice peace of mind. 

Thank you,

Jonathan

@Les Jean-Pierre  

Interesting to hear that AirBNB is creating the necessary demand to support management businesses for owners. 

I expected that it must be but still good to hear. 

Harlem to Brooklyn is tough. 

I commuted from Hoboken to Columbia for a time. 

Similarly tough. 

Meet and greets would certainly be out in your case. 

Doing away with tenant court sounds wise. 

That is too much hassle. 

Best wishes on building your business and your next steps. 

Thank you,

Jonathan

Originally posted by @Jonathan Cope :

@J Martin 

Well Done!

That is terrific to hear. 

I enjoy your description of managing from overseas while next door. 

Having managed property from overseas these last three years while we were in London, I really appreciate how powerful well-operating service can be. 

Will you be expanding to additional units using this model?

Were any of the automations trickier to arrange than others?

Congrats on your success. 

Thank you,

Jonathan

 Yes, I will most likely be converting a different 2br/1ba apartment in the same building that I currently rent partially furnished to international college students. My stays have typically been from 3 days to 10 days, but I like the idea of going longer. Just got my first 3+week booking, and have a couple 2 week bookings, but I think I would have to bring my price down on a multi-month rental. And in this case, my existing unit is not well-suited for longer-term rentals since it does not have a kitchen or living room. Great for short term though.

It is interesting. This thread made me think about my property in Brooklyn and converting it to an Airbnb rental. At first, I thought I could make more money with doing the Airbnb thing for only ten nights per month. Then, I realized I would be paying for utilities and cable. And I would need a person to clean the place and prep it for the next guests. To beat my current rent I would need 13 nights a month. I would need 15 nights a month to beat what my target rent will be once the current tenant's lease is up. This also assumes I have a cleaning person who is not a flake and that I set up a reliable system for people to enter without me being there. Having said all this, I know people who are making six figures per year in Manhattan. I would consider it a viable option. I see another property that interests me and the Airbnb option did cross my mind. I should also note that the NYS AG just published a report on Airbnb and how most hosts are breaking the law in some form. NYS law allows a person owning a two family or below to rent out space if they live at the premises. There could be a crackdown on building owners who convert apartments to Airbnb rentals. I went on the site a few minutes ago and I don't see some hosts who had three or four apartments near my place that I used to see regularly.

My husband gets orders back east this is what I want to try next! I think with a city with laws conducive to this practice it could be AWESOME. I love that you can pass many of the costs to the tenants (taxes, cleaning). It is more work but I think it can be done very efficiently if run the right way. 

@Jonathan Cope  

One of our meetup members here in Seoul is doing this with her 2 bedroom apartment.  

She has strict guidelines on who she allows to stay with her in her apartment.

1. Obviously good ratings.

2. She wants to see their facebook account to make sure they are not insane partiers or just plan insane.

I've stayed in a couple of AirBnB properties while traveling in Europe and the experience couldn't be any better...In some cases it is even better than staying in 4-5 star hotels because of the local connection that you get by having a host.  The one property that I stayed in Spain had a daily maid and cleaning service that would take care of the place and stock up the fridge while we were out sightseeing. It was great.

I also know some investors in hot locations such as Vegas and NYC that have purchased properties just to list them specifically on AirBnB. I remember one of the investors in Vegas did a case study on his experience last year and the article got picked up by WSJ and other publications. Do a Google search and I am sure you'll find the article.  If I remember correctly; he was making more $$ listing on AirBnB than renting his place. 

In my opinion, just like everything else in real estate, the success of AirBnB depends on its location. 

I have been using Airbnb for years and many of the previous comments are so valid:

It definitely supported my Interior Design background and allows the opportunity to make enough to cover the mortgage and bills in a far shorter period of time and, unlike long term renters, they are not going to drill a ridiculous quantity of holes in the walls or decide to paint but they can still do a number on your place...especially if you choose to be an absent host. Believe me, I have horror stories but I will save them for a future post.

When I started in May 2011, I decided to greet my guests whenever possible. It allows the opportunity to "gauge" the situation and you may be encouraged to have longer discussions about what your expectations are as a host. It also makes the experience more personal as my guests can ask questions and I do enjoy my reviews when I selected "just the right spot" for folks looking for a certain Portland experience. Also, if damage does occur or if an item goes missing, I think that I am going to be far more aware than someone that is hired to clean between guests and may be distracted or too in a rush and may miss important details. This is vital as hosts are rated by their guests on several fronts, including cleanliness.

I have been able to add to my Airbnb "portfolio" over the years but now, I am also deciding that I will let one get rented on a more full time basis.....partially to free up some of my time (as you can get held hostage waiting on guests to arrive or readying spaces between guests) but also because policy here in Portland is getting tighter with inspections and letters to notify neighbors. 

What's that? My neighbors now must be notified that I have guests that will come and occupy a bed for the night??? Ridiculous.

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