Author Topic: Buy country house for use primarily for airBnB/homeaway  (Read 476 times)

tyir

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Buy country house for use primarily for airBnB/homeaway
« on: September 09, 2017, 08:10:21 PM »
I've been kicking around the idea of buying a property in the country which would be mostly used for short term rentals. The idea is to have a place we could use a few weeks a year but have it pay for itself with short term rentals.

I'm wondering if anyone can share how realistic this would be. Obviously it depends a lot of the popularity of the area (Quebec, in the Laurentians) and other factors. I'd also want it to be relativly simple to operate (i.e. can be cleaned between rentals without us having to go since it would be 1-2hour drive). I'm not expecting to make a ton of money and I'd be happy if it was in break-even territory and would let us stay there a few weeks a year ... but I'm not even sure how simple it would be to break even.

Is there a way to execute this well? Thanks

waltworks

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Re: Buy country house for use primarily for airBnB/homeaway
« Reply #1 on: September 09, 2017, 09:35:09 PM »
Vacation rentals that are purchased "just so we can stay there when we want" are inevitably money pits, unless you get very lucky, because that's what *everyone* wants to do, and none of them run the numbers, so they all pay too much, and you're competing with them.

If you want it to be hands-off (ie, cleaning and management handled by someone else) plan on coughing up 50+% of your gross to the manager. Run numbers based on 75%, since you'll also have to pay for capex and maintenance, then see where you're at.

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SnackDog

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Re: Buy country house for use primarily for airBnB/homeaway
« Reply #2 on: September 10, 2017, 05:56:24 AM »
A good rule of thumb would be 30% renter occupancy and 25% of gross rentals to the property manager.  Use these in your financial due diligence with a very complete forecast of all the costs.
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Freedomin5

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Re: Buy country house for use primarily for airBnB/homeaway
« Reply #3 on: September 10, 2017, 06:40:56 AM »
It is doable. We are doing it right now in the next province over (Ontario) up near Algonquin park. You do have to run the numbers carefully though. We will likely breakeven, which means the rents should just about cover all costs, so don't look at this as an "investment" as it is unlikely to grow at the same rate as funds that you dump into a low fee index fund.

Jellosalad

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Re: Buy country house for use primarily for airBnB/homeaway
« Reply #4 on: September 12, 2017, 12:29:23 AM »
We built a little cottage on the Maine coast, mostly for the fun of building it, even though our primary home is in Colorado. Built to be extremely low maintenance, it's been perfect. Now, having had the FIRE epiphany, we rent it out through Air BNB when we aren't in it. Found a local gal who's thrilled to do the cleaning work for the turnovers, and a nosy neighbor to make sure the tenants behave (and we grill them before accepting them in the first place,)  It's worked great. Turns out I love sharing out the house and having my guests gush about the same things I love about it.  And all mortgage, taxes, and my travel expenses covered. I can't believe we didn't do this until this year!

SeattleCPA

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Re: Buy country house for use primarily for airBnB/homeaway
« Reply #5 on: September 12, 2017, 07:26:29 AM »
This vague comment...

Some financial decisions we make are basically idiot proof. E.g., if you save for retirement using tax-deferred accounts (like an IRA or a 401(k) plan) and use cheap index funds, you basically can't lose. And you basically can't make a mistake.

Your decision IMHO isn't like that. You can make a great, good, fair, so-so or terrible decision.

I'd say that some of the comments you get here and elsewhere are just reflecting this.

But I also think if you're super-careful you can get something like what you propose to work great.

I said this in another thread active right now, but I'd try to turn your cost of using into a nightly rate and compare that to what you would pay for nightly lodging if you didn't own the property.

A handful of notes:

1. If an honest denominator gets large, you can make the economics work. E.g., if place costs $16,000 (which is probably low) and you use 40 nights a year (which is a LOT), your nightly cost is $400 a night (which is "Ouch!")

2. If the place costs $12,000 and you use 120 nights a year, your nightly cost is now $100... and that might be reasonable.

3. If you can truly cover a ton of your costs via rental income, that'll make a big difference. E.g., if after all rental income and expenses, your true cost is $1000 a year and you can enjoyably use the property for 100 nights, you're use now costs $10 a night. That would be a good deal for many people.
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Rubic

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Re: Buy country house for use primarily for airBnB/homeaway
« Reply #6 on: September 12, 2017, 09:00:25 AM »
Some financial decisions we make are basically idiot proof. E.g., if you save for retirement
using tax-deferred accounts (like an IRA or a 401(k) plan) and use cheap index funds, you
basically can't lose. And you basically can't make a mistake.

This is a great point and should be emphasized more often.  Why look for 6 foot
hurdles to jump, when there are 1-foot bars available to step over?