All Forum Posts by: Adam Tafel

@Mason Hickman - most stay for 1-3 months. They book through Airbnb/VRBO, occasionally they will extend their stays and we'll draft a lease. I like the additional liability coverage I get through these ^ platforms, so I prefer to not to sign leases. There's a lot of hearsay going around about Airbnb guests squatting if staying for over a month, but after doing this for 5 years I've yet to encounter this (or hear from any other hosts who've had this happen). 

@Marian Smith - most are here to work. Medical staff and various other industries. Some are locals displaced from their current homes paying with insurance claims (water damage, fire, etc). Families in between closings on their homes, divorce/separations, folks moving to town looking for a short-term while they find a house or apartment (also provides good leads for me as a Realtor). The key is to not accept a local who "just needs a place for a few months", the reason has to be valid. 

@Paul Sandhu that's awesome! I had a big 5 bedroom townhome for a few years, rented it out to traveling construction crews. Those guys were the best, they'd work 12 hour days, come home, make dinner, go to bed. Never heard from them. Paid rent up front with a company check. 

@John Underwood - lost a little in March, broke even in April, and I've been full since May. Next vacancy is Sept 1st. People still need furnished housing when the unexpected happens, regardless of covid. Any yes, a STR will probably make more money, assuming the owner is able to handle much of the day to day upkeep. Those cleaning fees are a killer!

Dumb luck (and a ton of work) got me into REI. In 2015 my girlfriend was spending 6/7 nights at my apartment. She had a cool little studio in a cool part of town, and we threw her apartment on Airbnb. A traveling nurse booked the place for $1650/mo (her rent was $620/mo). Wow, that was easy. I need more apartments!

This was before the phrase "Airbnb Arbitrage" was coined, and all my friends thought I was crazy. I had managed to get 3 owners onboard with my business model, and soon had 8 apartments in my name. I was working full-time as a bartender at the time, and quickly realized I didn't have the time to manage weekend turnover and shorter stays. I learned that if I increased my minimum stay to 28 nights I could still double my rent and minimize my effort.

I also learned that many of these medium-term guests book last minute. There'd always be sleepless nights towards the end of the month, with nothing but vacancy in my future and $8000 in rent due on the 1st. Sure enough, time after time, the apartments would fill up. My goal was to be the ONLY guy with nice, furnished rentals available for someone in a pinch at the end of the month. It still works.

Somewhere along the way I noticed that my dog-friendly units had almost zero vacancy. I bought a few SF homes and used the same strategy. I've since scaled back the arbitrage business, in order to focus my time on investing and my full-time career as a Realtor. Here is what I've learned along the way:

1. Dog owners are willing to pay more. I average around 80% over market rent on smaller apartments, and double market rent on SF homes.

2. Dog owners don't have many options. I'm always checking up on my competition, and I'm usually one of a few options for a month-long stay in St. Paul/Minneapolis. Many are forced to stay in extended-stay hotels.

3. Dog owners are easier to manage. They tend to be more responsible and less picky. They are usually grateful to have a nice, reasonably priced place to stay, and less critical/needy as guests. They leave great reviews.

4. Dogs leave hair behind, but (typically) don't damage anything **knocks on wood**. I've been doing this for 5 years, have probably hosted 100 guests with dogs, and I've yet to experience any real damage.

5. Cleaning fees kill you in the Airbnb business. Unless you've got a high-end property in a vacation destination, it's incredibly difficult to make numbers work hosting guests for 1-5 nights at a time. Paying someone to deep-clean a house full of dog hair once a month makes much better financial sense. 

I will continue using this rental strategy until it no longer produces amazing returns. Does anyone else have a specific rental niche that's worked well for them? I'd love to hear about it. 

Rents are a bit optimistic- Rentometer is a great tool, but south Minneapolis varies quite a bit. A simple 1-2 mile radius can be a little misleading. Double check your rental comps with a quick craigslist search, by typing in the name of the neighborhood ("powderhorn"). 

Otherwise it looks good, keep up the good work! 

Highly recommend occupying for a year. Much better loan terms, lower downpayment. In the US there is also a capital gains break if you occupy for 2 and sell before owner for 5. A little short-term discomfort (moving twice in a year) for long-term benefits. If you have goals to purchase more investments you'll thank yourself later. 

What are the terms on your credit line? Could you use your credit for a downpayment and obtain conventional financing? Give us a little more info and we'll be able to help. 

The first rule of negotiation: try not to say your number first. You can do the analysis to determine at what price the deal makes sense, and look at comps. If he comes in low, that's a good start. If you come in high, you overpay; if you come in low, you could offend him and kill the deal. It's not always possible to pull this off, but if you can manipulate the conversation and get him to throw out the first number you'll be in a better position. 

Give us a few examples of the types of repairs? Are they little things that a hands-on owner could do themselves, or legitimate issues? You might just be having an unlucky first year, or you could have a bad PM.