All Forum Posts by: Sebastian E.

Thanks @Albert Bui!

Also thanks to everyone for your thoughts on this. Clearly the discord on this topic means that these issues need to and will get worked out in the coming years. It is certainly something to take into consideration for folks who are running real estate analyses with Airbnb as a revenue driver. Might be a risky way to assess a deal with the uncertainty on the regulatory side.

@Account Closed Yeah I am in DC and I am required to have business license for my Airbnb which I comply with. 

I think before cities start setting up regulatory agencies to monitor people's activities, it would be better just to strike a tax compromise where all hosts are required to pay a percentage of their income to pay for some of the externalities that come along with Airbnb. The main one in my opinion is that it drives up rents by taking rentable units off the market. If the revenue went into an affordable housing fund that could help mitigate some of those effects. This is obviously wishful thinking as the funds would inevitably be redirected to some other use. 

For me as a host that would drive out poorly run Airbnbs that would no longer be competitive.

I do believe that there are some legitimate concerns but pushing back against these kinds of shifts in the economy usually doesn't end well for the incumbent. 

I understand the concern if one of your tenants is Airbnb'ing his/her unit under your lease which prohibits it. Just curious what exactly is your concern with Airbnb?

Cheers,

Seb

Thanks @Albert Bui! That is really helpful. 

I am trying to understand the math exactly because I am debating this exact question for a 4 unit. I could come up with the 20% down for the price range I am looking at or do 3.5% down on an FHA. If I owner occupy a 4-unit building would the 75% of gross rent still apply to all 4 units or just 3/4 since I will be living in one?

I don't have an exact deal in mind but i'd like to play out a scenario to make sure I understand it correctly. Would you mind checking my math to see if I have it right?

4-unit building
Purchase price $200,000 

3.5% down = $7,000

Mortgage = $193,000 

Monthly PITI = $1,400 (30 years at 3.75%)

Rental income per unit = $500 / month x 4 = $2000 x .75 = $1,500

In this case assuming you can use rent from all 4 for the financing it would pass muster. If I did the deal that would mean essentially the $1,500 would cover my PITI and I would still have to factor in vacancy and operating costs which would kill this deal.

So it looks like in the market I am looking at if I can get in at 50k a door I would need to get closer to $650 / month in rent on the 3 in order to effectively house hack using FHA.

Alternatively, the same deal with 20% down:

Purchase price $200,000

20% down = $40,000 (30 years at 3.75%)

Mortgage = 160,000

Monthly PITI = $1,100

Rental income per unit $500 x 3 = $1500

Accounting for vacancy and operating costs still not a great deal. 

Sorry for hijacking this thread! Any thoughts on this potential deal would be greatly appreciated.

Seb

Full disclosure I have had great success with Airbnb...

I am all for it as long as you are operating within the rules of your HOA or rental agreement. Essentially this firm wants to try to handle this as a blanket lawsuit so that they don't have to deal with these transgressions on a case-by-case basis. It's very hard for me to find sympathy for them...

The same goes for the hotels that are complaining.

The future is more democratized, decentralized economy of which Airbnb will play an important part. I really have a hard time seeing the genie going back in the bottle on this one.

As a host I would not be opposed to an across the board additional transfer tax on hosting that would then be put into a fund to support affordable housing. A regulatory or legal approach by cities will ultimately fail because they won't be able to manage compliance, so they will need to get Airbnb on board with a compromise because they need the data from Airbnb.

It's certainly interesting to watch...

@Dennis L Lewis Jr 

House hacking is key on the first one. I realized early that for most people your rent or mortgage is your biggest expense so if you can get that down to as close to zero or negative (meaning you are cash flowing) while living in one (either a room) you can really limit your risk. There is not much that can go wrong in that kind of scenario because you have to live somewhere and you are protected with the income. 

I have been in the DC market since 2010. I did my first deal which was basically just a learning experience as I did not get much out of that deal except learning and then did my first deal which was a multi-unit in 2015. I am out of the market in DC now unless there is a flip opportunity but those are tough to come by because there is a lot of cash action here. I am moving to other pastures now outside of D.C. 

I was just in Nashville a few weeks ago on vacation. Seems like some great opportunities for Airbnb's if you want to go that route.

Good luck!

Seb

Amazing! All the best to you and your family. So much to be grateful for and so many opportunities once you change your mindset from one of scarcity to one of abundance. 

Awesome. Which neighborhood did you buy in? I'd be interested in hearing how this goes as I have been thinking about doing something along the same lines. I take it your goal is to live in one and rent out the other?

Very cool @Dennis L Lewis Jr there is indeed so much to be learned from the podcasts and here on the forums. Lots of great advice and good people to guide you on the journey. It will come down to getting it done though, which is a personal choice. Sounds like you are on that track, which is great considering your age. 

With flips the danger in the beginning is that there is a tendency to underestimate costs of renovation or carrying costs so just be conservative in your estimates. Also, you could think about leveraging your design experience as well in your projects if you did an Airbnb rental for example.

Good luck!

Very cool! If you have people who are willing to help out in Baltimore then i'd also go there. It is important to identify your advantages and having people you trust who can help you manage it is a big advantage. 

I personally prefer not to buy condos as an investment property. @Jaysen Medhurst mentioned the risk of an assessment and I also don't like an HOA telling me what I can or can't do with my property.

The weakness I see in your plan is moving to NYC. It is a challenging city to save in because of high cost of living and high rents. 

Other than that, I also think it's great you are working all these questions out and educating yourself!