BRRR into an Airbnb Rental - Question

[Ryan Boggs]

Hello!

I am buying an a-frame cabin near a lake to brrr into an airbnb rental property. Do you know of a good BP pod episode for this specific situation? I'm sure there are quite a few but I thought I'd ask and I want to dive in and make sure I'm not missing anything. Also, any other recommendations for things to look out for and what numbers that YOU look for? (cap rate, monthly cash flow, etc) Thank you so much!

[Evan Polaski]

@Ryan Boggs, the analysis is the same as a "traditional" BRRRR, with the "rent" piece being a STR analysis versus a LTR analysis. As noted, AirDNA can give you some basic metrics on the revenue side. You need to factor in the higher STR management fees, if you aren't self managing, factoring in Airbnb fees, cleaning costs vs fees charged. Then you need to estimate operating and maintenance costs, i.e. when you own an Airbnb, you provide paper towels, toilet paper, detergent, sheets (and therefore sheet replacements), towels, etc, plus you are paying for utilities, which you don't pay for in LTR (electric, maybe water, netflix/cable/etc).

You also have to assume you are going to be spending for furniture, but won't be able to directly finance your furniture costs.

From a metrics standpoint, for my BRRRRs it was always looking at post refi cash flow, and depending on if I could get all my cash out at refi or not, what my CoC return is on my remaining equity. On an ongoing basis, I look at return on equity, as hopefully the property is appreciating, and if rents can't keep up with appreciation, I have to look at potentially selling and redeploying the capital where I can earn more, but this is all basic portfolio analysis, not unique to any business plan. I.e. syndications, turn key rentals, BRRRRs, STR, LTRs are all available and I want my money in opportunities that can maximize my risk adjusted returns.