All Forum Posts by: Jacob H.

Can't speak for that location in particular but I can say that our Airbnb has performed quite well compared to the long-term rentals. It seems to be rather consistent across the nation that STR returns beat LTR returns. STRs are more active but you can expect that with a higher generated ROI. As others have mentioned, if you don't like the guests, they will be leaving before too long.

Only real issue with doing STR is local regulations and permits. Some areas are more strict than others so you just have to be familiar with that; I'm sure that will help drive your decision as well. If it's not going to be more stress and headache than it's worth to get and maintain a permit, STR is the way to go if the highest ROI is your goal, as you mentioned.

I will say that our Airbnb hasn't been as popular this year compared to last year. I think bookings are slowing down in a lot of areas because everything is so expensive that people are just trying to survive these days and aren't worried about taking vacation; could just be here though (Colorado Springs).

As others have mentioned, the way to alleviate fear is to have multiple contingencies. If the market does crash tomorrow, will you be able to hold the property until the value increases and appreciates again? If you have somewhat secure streams of income (W2), then this is a mitigation measure. Additionally, if the STR market doesn't work out, can you convert it to an LTR? If so, will the monthly income cover the debt service and other expenses?

Nobody can predict when the market will crash so we all might as well stop trying. I was told not to buy because the market was going to crash anytime. It's going on 2 years now and all that has happened is massive appreciation.

I think they'll have a difficult time selling if they are doubling the price and valuing it based on business income. As others have mentioned, you could just buy a house in the area that is selling at the market value for a residential property, then convert it into an Airbnb. You're making the same amount that the seller is and you got the property at half the price that they are trying to sell theirs at.

Headboards will typically make it look a little nicer. We have one on our STR and haven't had any complaints. I'm sure it just depends on the style of the space and the bed on if it fits. At the end of the day, as long as everything looks quality, I think you'll be fine.

Since the cost of living is so high where you are, a great way for you to start out is by house hacking. I'm not familiar with your state's detailed restrictions on investment properties but I know they are more strict than a lot of states. I'd definitely recommend becoming familiar with any restrictions before pulling the trigger. 

Anyway, house hacking is beneficial because it combines multiple benefits in one. You have somewhere to live while making money, enjoying the appreciation and tax benefits, and learn about running an investment at the same time. It's a great way to start and even a great strategy for experienced investors. As someone else already mentioned, another strategy to consider is out of state investing if the price of real estate is too high where you are. Live where you want and invest where it makes the most sense.

As others have suggested, syndications and REITs are a great example of being passive but the only problem is as a passive investor in those particular strategies, there probably won't be a lot of learning on her end. If she wants to learn while investing and hopes to scale in the future, she could always consider buying a duplex, triplex, or quadplex and house hacking it by living in one unit and renting out the others; this also works in a single family home, depending on her people tolerance. 

Other than that, a buy and hold strategy with a property manager running the day-to-day operations would be a classic "hands off" investment that'll allow her to learn at the same time.

As others have mentioned, the bookstore and podcasts provide a wealth of knowledge so if you're trying to learn more, that's a great place to go. As to your two questions,

The reality of the best decision to make in these cases are based on a number of factors that only you can truly answer. How much money do you have on hand? How much are you willing to put towards the property, and what is your risk tolerance? These are just a few factors that must be determined.

For the most part, a strategy that works for many new investors is house hacking. This allows you to occupy the property, taking advantage of an FHA (VA if you qualify) loan with a minimal down payment, and to begin investing with a tenant paying part of or all of your mortgage. This can be done in a single-family property by renting out a room or section of the house to a long-term or short-term renter. This could also be done by renting out units if you purchase a duplex, triplex, or quadplex. Anything 5+ units would be considered commercial and wouldn't qualify for VA or FHA - in which case you can expect to be putting 20-25% toward a down payment.

What you'll do will also depend on how expensive the properties are in your market.

If you're looking to free up some cash for an STR investment but don't want to sell the house, have you considered a cash out refinance of the Salt Lake property? I personally don't think I'd be selling that property because of how much the market is growing in Salt Lake. If that continues, it would be disappointing to miss out on, even with the awesome STR market in Nashville.

I would recommend a strategy to enable both investments like a refi, HELOC, or raising money.

I can't speak for all of the companies but Airbnb has a suggested price that is constantly being updated. You can utilize smart pricing and it will automatically change the pricing to match what their algorithm recommends. I typically keep it on manual mode and just see what they recommend; sometimes I increase or decrease the nightly rate based on that. Regardless, I like to keep the pricing within about 5% of that recommended number. Obviously, price is pretty important to attract guests.

Photos are incredibly important as well. Professional looking photos with a lot of natural light will attract many guests as well.

We found that keeping our prices low until we started getting multiple 5-star reviews helped as well. Once you have some 5-star reviews, you'll establish a higher demand and can begin raising priced. There will still be times where it's not as popular or booked. In those cases, we will drop the prices even more to attract people passing through that just need a night to stay.

I would recommend getting more professional photos taken. People are going to click on the listing after viewing the price and photo so make sure listing photo is the best one as well. 

When we first started our Airbnb, we listed way under the market STR prices and busted our butts to make sure everything was perfect (actually we still do). We received multiple 5-star reviews and were then able to start raising the nightly prices.

Yes, if you have multiple restrictions that are out of the norm like not providing toilet paper, you can expect people to think it's a bit ridiculous and pass on your place as well. Take a look at the competition listings and see what they provide or state that they don't provide. You can learn a lot from the competition.