Real life airbnb numbers analysis - north side chicago

Podcast Guest on Show #132

Brie SchmidtBusiness Member

Moderator

Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes

8y

@Danny Duran and I are both about to hit our 1 year with Airbnb. I was planning on doing a comprehensive analysis and sharing it on BP

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3 Reply

Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes

8y

Is this a whole house rental? That makes a big difference (people will rent for parties). Also, a Wrigleyville Airbnb is going to be near the top of the range for any place in the country simply because of the city, the neighborhood, proximity to public transportation, and proximity to the city's center. This is NOT, I repeat NOT typical of an Airbnb rental.

5 Reply

Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes

8y

Ray Harrell there are all sorts of AirBnB home categories. This one is in an expensive, prime location that demands a premium and likely probably has a high ARV as well. I think the posters 20% premium over normal rents is very typical and a good, realistic example. . These types of posts are actually useful as opposed to unrealistic, aberration examples in which the poster is just showing off with some abnormally high return.

Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes

8y

@Steve B., it's a realistic example for THAT property in THAT neighborhood. The majority of Airbnb rentals are not in prime locations like that, and I doubt if they bring in nearly that much of a return. I know because I've been hosting on Airbnb for almost 4 years, so I get all the insights.

My listing was high occupancy (summer months), across the street from public transit, great neighborhood, private room with private bath with jetted tub, one block from the beach, and I struggled to get $10K per year.

I don't want people to get the wrong impression about how much they can make only to invest money and be disappointed. I live in Chicago, not terribly far from Wrigleyville, so I know that area and what rents command and how popular Airbnb rentals are in that area.

John Clark

Member since 2018 · 1k+ posts · 1k+ votes

8y

"I struggled to get $10K per year." -- Ray

You struggled to get $10k gross, or $10k net?

Bob Floss II

Attorney · Northbrook, IL · Member since 2017 · 719 posts · 549 votes

8y

@Henry Lazerow What is your total investment in the coach house? Do you own just the coach house or is it connected to another rental property?

Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes

8y

@Ray Harrell your experience is close to mine. I had two AirBnB’s here in Portland and I got rid of both of them due to issues with city harassment and conflicting interest with my AirBnB host PM. Nevertheless I think AirBnB can work for many people although a lot of people believe they are more profitable than they usually are. Certainly the margins are decreasing due to both increased government regulation and market saturation.

But professionals like Neil Collins here in Portland, who self-manage effectively, and can deal with government wonkage effectively still have profitable margins. For me an extra 20% just wasn’t worth the headaches.

Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes

8y

Net. I had no management fees. My point is that even with steady occupancy, getting $50K per year is not typical outside of a super touristy area with tons of amenities, and an entire place property that is immaculately decorated. Even a hotel with 100% occupancy at $100 a night will only get $36.5K per year...GROSS!!!!!!

Posting these number is like Oprah saying, "Look, if I can do it, you can do it too!"

Syed Lateef

Professional · Chicago, IL · Member since 2012 · 197 posts · 131 votes

8y

@Henry Lazerow I appreciate this analysis! Thanks for sharing

The repairs and maintenance line item i would assume you would have that if you had long term tenants too. If thats the case i would remove that when calculating how much more you would have made over long term rent

Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes

8y

@Ray Harrell I think whether the profit is viable or not is contingent on the homes ARV which was not disclosed. If this is a million dollar house than the return isn't impressive , however if this is a 500k house then they are doing pretty well on the net.

Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes

8y

I'm saying that kind of revenue on ANY Airbnb rental is not typical! That person is renting his place for over $600 per night. most Airbnb rentals are between $40 and $200 per night. Even at $200 per night with 100% occupancy that's $73K before ANY expenses, and NOBODY on Airbnb is getting 100% occupancy. ARV doesn't come into play, because Airbnb guests aren't asking what your ARV is. They want to know how it looks, where it is, what's included, and how much per night.

Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes

8y

@Ray Harrell It's all about ARV because the quality of the absolute return is directly related to the underlying assets value.

Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes

8y

@Steve B., perhaps, but I've really been focused on gross revenue. Very few listings generate that kind of revenue.

Syed Lateef

Professional · Chicago, IL · Member since 2012 · 197 posts · 131 votes

8y

@Ray Harrell I am not sure why your so upset of him sharing this data. They are some people in the high end market in Chicago where this can be valuable for them.

My client in Fulton Market made $17K revenues in the month of June on a 3 bed 3 bath loft.

The data he provided is still worth while to share

2 Reply

Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes

8y

@Ray Harrell I do agree with you that there are an annoying number of self-aggrandizing, non-useful, phoney, Oprahesque posts which show unrealistic, absurdly high margins on a statistical outlieing flip, rehab, or SVR. However I thought this post seemed pretty realistic.

Usually these self promoting posts get a hearty round of praise from the complete newbs, and are completely ignored by anyone actually knowledgeable.

Investor · Chicago, IL · Member since 2016 · 1k+ posts · 930 votes

8y

Realistic? Yes! Typical? Absolutely Not! Again, you're missing my point.

Podcast Guest on Show #132

Brie SchmidtBusiness Member

Moderator

Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes

8y

@Ray Harrell - I think what you are trying to say is the numbers need context. To bring in $8k a month in AirBnb on a $700k house vs renting out a private room in a $150k condo is very different.

Just like when people say they want to cash flow $100 / door - Is that door costs $50k or $150k? $100 a door can be either great or terrible depending on the whole picture

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Bob Floss II

Attorney · Northbrook, IL · Member since 2017 · 719 posts · 549 votes

8y

@Brie Schmidt Exactly my point. I have several clients that want to do Airbnb in Chicago but they have to find a property with a good rental demand for a purchase price that will give them a good ROI. The rental numbers look good but I was looking for the total investment to put into context the ROI.

2 Reply

Henry Lazerow

OP

Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes

8y

@Syed Lateef I agree repairs/maint. are not properly reflected in the comparison. Those were items directly related to the new rehab anyways. Without those in analysis it increases margin over standard rents.

@Ray Harrell It's a 3br 2ba coach house. Small house in the rear of a chicago lot where the horses at one point lived. In front is a 2 unit building.

@Bob Floss II It's a clients they own whole property I can't give out specific rehab financials but will say it was not a cheap build. They used quality materials and the same crew that does 1.8 million single family builds. Overall the current rents got the cap rate well above similar properties in neighborhood for a bit of context.

I am a HUGE fan of coach houses just did another deal with one and got the pro-forma significantly higher then any other 4 units in area. I also feel like as these coach houses get torn down more and more for new construction there will be less and less of them which may create a rarity/premium from a long term buy and hold standpoint.

Calvin Lipscomb

Brooklyn, NY · Member since 2016 · 316 posts · 130 votes

8y

Originally posted by @Henry Lazerow:

@Syed Lateef I agree repairs/maint. are not properly reflected in the comparison. Those were items directly related to the new rehab anyways. Without those in analysis it increases margin over standard rents.

@Ray Harrell It's a 3br 2ba coach house. Small house in the rear of a chicago lot where the horses at one point lived. In front is a 2 unit building.

@Bob Floss II It's a clients they own whole property I can't give out specific rehab financials but will say it was not a cheap build. They used quality materials and the same crew that does 1.8 million single family builds. Overall the current rents got the cap rate well above similar properties in neighborhood for a bit of context.

I am a HUGE fan of coach houses just did another deal with one and got the pro-forma significantly higher then any other 4 units in area. I also feel like as these coach houses get torn down more and more for new construction there will be less and less of them which may create a rarity/premium from a long term buy and hold standpoint.

Hmmm, I am long term buy and hold investors at this time for clients and myself. I think you raised an interesting idea in seeking properties like this. And when the market truly gets overheated you can sell the coach house during a 20-30 year hold period.

Elliot Rudmann

Chicago, IL · Member since 2011 · 15 posts · 6 votes

8y

@Henry Lazerow - thanks for sharing those numbers. Was this particular coach house apart of an HOA? I see a lot of coach houses in Lakeview/LP/Wicker that have an HOA fee even though they are completely detached dwellings (maybe because they share the same pin?). I would think the involvement of any such association could be a hindrance to running a legal short term rental since so many restrict them.

Jeremy W.

Investor · Chicago, IL · Member since 2014 · 144 posts · 34 votes

8y

Cool, thank you for sharing @Henry Lazerow. Seems like they have a nice little cash cow. Go Cubbies!

My only surprise is that they didn't make more...

Rick BassettBusiness Member

Property Manager · Greater New Haven, CT · Member since 2010 · 377 posts · 434 votes

8y

We converted 2 of our houses to STR's when tenants broke their leases during the winter.

One was 4 bedroom that typically rents for $1,800/mo as an LTR, we averaged $2,200 per month on Airbnb/VRBO with that one. It basically broke-even until the prime rental season kicked in when we rented it as an LTR. We spent $4,000 on furnishings and fixtures to get it running.

The other is a 5 bedroom that typically rents for $2,000/mo as an LTR, we spent $5,000 on furnishings and fixtures to get it running, that one took a while to generate a following, it was hovering around $2,000 in Airbnb/VRBO rents, so it was losing money with utils and the like. It has since climbed to $4,000 - $5,000 per month in STR rents and we decided to keep in online as STR through the summer of 2019 to see how it does.

We've only been doing the STR's for about 9 months but have earned Superhost status and have about 40 5-star reviews, so that is helping to drive interest. We are in an area that is not a vacation destination, people come here for family and life-related events such as; weddings, funerals, family parties, etc. We also do not get very many business travelers as we are in suburbs.

Bottom line: some money to be made, but not much for the amount of work involved. I do like having one of our units available to lodge family, friends and long-term tenants coming from out of town to view our other properties.

Rick

475-900-3100

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PJ Kolnik

Chicago, IL · Member since 2017 · 81 posts · 87 votes

8y

Henry Lazerow great job showing these numbers, I have been running an Airbnb for about 6 months and in my opinion, if you’re not in wrigleyville, it’s all about the sheer size of the unit. In general, your returns will be directly correlated to how many Queen beds you have in the unit, how good the pictures are, and how many positive reviews are there. I handed mine over to a management company and I’m expecting to probably my market rent + ~10%.