Rental - Approached with Airbnb deal - Thoughts?

[Flyingstache]

Hi Everyone,

I have had a rental property for a little over 2yrs & just had an opportunity pop up that I have questions about. The home is currently rented for $1,200/month + utilities but the tenant is moving out at the end of November to move closer to family. I already have a few folks interested in renting it for $1,300/month + utilities.

Yesterday I was approached by someone who asked if I had any rental properties available that they would be able to use as an Airbnb property which they would manage. They stated for this house, they would handle all management/cleaning, furnish the home, & would pay me $1,500/month + utilities. This is a local resident who I have known for many years & has had a lot of success with Airbnbs.

This process/idea is new to me & I wanted to hear your advice on what questions I should ask, any issues you see, & if you think I should pursue this or continue to use the home as a long term rental.

Additional background -

House - was purchased in 2022 from a co-worker for $153,500. It is a 2 bed 1 bath home with 823 sq feet in central OH. Home was fully renovated in 2020 by the previous owner. Estimated value between Zillow & Redfin is between $195k-$220k. Interest rate is 5.85% & payment is $970 including including insurance, & taxes. The area around the home is improving & a $100 million dollar enhancement project was just announced for the area.

My situation - wife & I are both teachers & 33yrs old. Just welcomed our 4th child last week (I blame any typos on lack of sleep!)! We have no debt other than our mortgages (personal residence & 2 rentals). Our hope with getting into the real estate game was to provide some additional funds for ourselves & give more flexibility with future financial situations.

Would love to hear any thoughts, questions I should ask, concerns you have, & any advice! I appreciate the time & knowledge you share! Have a great day!

[Metalcat]

I would want to see all of the terms of the contract before even considering this. Also, an extra $200/mo doesn't sound like enough to even cover the increased expenses from the inevitable increase in damage to the property. Also consider what impact it might have on your insurance.

Also, who would bear legal costs if there was a major issue with a guest?

[uniwelder]

I agree that $200/month isn't worthwhile for likely more aggressive deterioration of the home.

I also have a personal issue with turning homes into vacation rentals.  In my area and many parts of the US, the housing shortage is particularly frustrating when there are so many Airbnb houses around.

edited to add-- Something else to ask is who will be paying for exterior maintenance.  With a long term renter, they'll probably be mowing the yard, cleaning the gutters, raking leaves, etc, but that will now need to contracted out.  Same goes for interior maintenance and repair issues.  I imagine there are likely to be more problems with appliances like the stove, clothes washer, and dishwasher.  There's always a learning curve to new appliances and when you have new people in the house every week, that's a lot of first time experiences.  I'm thinking of 1) preheating the oven while there's something meltable/flammable inside, 2) putting way too much detergent in the washer and overflowing the drain, 3) not using the exhaust fans of the bathroom or kitchen, or the opposite problem of them running 24 hours, 4) stovetop boil overs.  Is your clothes washer top or front loading?  Someone using a front loader for the first time when they have a top loader at home has lead to all sorts of issues in my experience. 

[zygote]

On top of the points others have made, if you already have several people interested in the place for $1300/month, are you underpricing for your market? You may be able to get $1400 or $1500 a month even as a long term rental with less of the hassle.

[GilesMM]

How much would it Airbnb for per night? What is typical annual occupancy? Resort area?

[SunnyDays]

Nope, nope, nope.  For all the reasons others have listed, plus the neighbours will likely end up hating you.  Lots of people rent short term to have parties that they don’t want to have in their own homes.  Noise and damage will follow.  Keep it simple with long term tenants.

[clarkfan1979]

Hi Everyone,

I have had a rental property for a little over 2yrs & just had an opportunity pop up that I have questions about. The home is currently rented for $1,200/month + utilities but the tenant is moving out at the end of November to move closer to family. I already have a few folks interested in renting it for $1,300/month + utilities.

Yesterday I was approached by someone who asked if I had any rental properties available that they would be able to use as an Airbnb property which they would manage. They stated for this house, they would handle all management/cleaning, furnish the home, & would pay me $1,500/month + utilities. This is a local resident who I have known for many years & has had a lot of success with Airbnbs.

This process/idea is new to me & I wanted to hear your advice on what questions I should ask, any issues you see, & if you think I should pursue this or continue to use the home as a long term rental.

Additional background -

House - was purchased in 2022 from a co-worker for $153,500. It is a 2 bed 1 bath home with 823 sq feet in central OH. Home was fully renovated in 2020 by the previous owner. Estimated value between Zillow & Redfin is between $195k-$220k. Interest rate is 5.85% & payment is $970 including including insurance, & taxes. The area around the home is improving & a $100 million dollar enhancement project was just announced for the area.

My situation - wife & I are both teachers & 33yrs old. Just welcomed our 4th child last week (I blame any typos on lack of sleep!)! We have no debt other than our mortgages (personal residence & 2 rentals). Our hope with getting into the real estate game was to provide some additional funds for ourselves & give more flexibility with future financial situations.

Would love to hear any thoughts, questions I should ask, concerns you have, & any advice! I appreciate the time & knowledge you share! Have a great day!

The extra $200/month is most likely not going to cover your increased costs of running it as a short-term rental. If you decide to do it, I would make your friend responsible for long term maintenance and mowing the lawn because that is something that long term tenants typically do.

If the house was in a vacation area in which you could use it for personal use on occasion, then it might be a go.


 

[Flyingstache]

Thank you all for your replies & insights as it is much appreciated!!!

Many of you brought up similar thoughts & concerns that I have. It was an interesting proposition but seems like too many factors are involved that could lead to a negative experience!

To answer some questions - it is not in a vacation type area. Just a simple suburb in central OH!

I could charge more for rent but haven't at this point because I had a great tenant & was happy with our arrangement!

Thank you again for your time & wisdom!

[theoverlook]

Also worth noting some central Ohio suburbs have banned or severely restricted short term rentals. They're banned outright in Worthington and Upper Arlington, and restricted in total rental days in Bexley and Dublin. Bexley also requires you to still use it as your primary residence in addition to limiting rental days. So it's possible he could find himself on the wrong end of regulation here.

[Telecaster]

I'm going to play contrarian and say this doesn't sound that bad, so far.   You said they are going to provide the furnishings, which presumably means they are going to maintain the furnishings.    That's the bugaboo of short term rentals.   Stuff breaks more often, towels get stained, things go missing, all that.   But if they are taking care of all that, but it becomes more like a long term rental.  You'd be getting a decent bump in rent for no work.  I definitely think that is worth considering.   

[Brystheguy]

I would consider it. People keep saying it's a hassle, but it's not a hassle for you. You're just collecting monthly rent like usual. Damages will be handled like any other tenant at the end of the lease. Even if you're not in a tourist area, people still want places to stay that are better for families. Ask that there be a three-day minimum to avoid the one-night party crowd. In our Airbnb in a ski town, I find there is less wear and tear on our unit with stays of less than a week than those that stay long-term. The short stays are out and about doing things. The long stays they are spending more time in the unit doing nothing.

[Dicey]

Have you considered what they will be making on your property? How would you react if they were making double the profit you are, or more?

[Archipelago]

At the risk of coming across as getting on my high horse and virtue signaling, I wouldn't consider it out of principle & ethics. But I am heavily biased. I own long-term rentals. The average tenant stay is around 3 years for my rentals.

Converting ordinary residential housing into AirBnBs is not beneficial for neighborhoods. A house that was occupied by a family but later converted to a short-term rental effectively means the neighboring houses no longer have neighbors. I believe decent, lasting human connection in neighborhoods is good for community.

Short term rentals open the door to partying and nuisance. If the house(s) next door turned into an AirBnB, I would feel pretty disheartened seeing random strangers and vehicles constantly coming and going to the house all the time.

AirBnB and other short-term rental platforms were / have been successful because they effectively circumvented housing regulations. Each house that gets bought up by investors and converted to a short-term rental is one less house available for local folks. It's also increased the demand & contributed to housing shortages.

AirBnB's surge in profitability has led to astronomical fees passed on to consumers.

For an extra $200/month it just doesn't feel right.

NO - I am not trying to demonize people who own AirBnBs. I think AirBnB the original concept for people to cohabitate your own living space is an awesome idea. I just think the STR industry went way too far and incentivized profits without any foresight into the consequences those actions.

OP I think you're making a good decision sticking with it as a long-term rental. Thumbs up!

[Dicey]

At the risk of coming across as getting on my high horse and virtue signaling, I wouldn't consider it out of principle & ethics. But I am heavily biased. I own long-term rentals. The average tenant stay is around 3 years for my rentals.

Converting ordinary residential housing into AirBnBs is not beneficial for neighborhoods. A house that was occupied by a family but later converted to a short-term rental effectively means the neighboring houses no longer have neighbors. I believe decent, lasting human connection in neighborhoods is good for community.

Short term rentals open the door to partying and nuisance. If the house(s) next door turned into an AirBnB, I would feel pretty disheartened seeing random strangers and vehicles constantly coming and going to the house all the time.

AirBnB and other short-term rental platforms were / have been successful because they effectively circumvented housing regulations. Each house that gets bought up by investors and converted to a short-term rental is one less house available for local folks. It's also increased the demand & contributed to housing shortages.

AirBnB's surge in profitability has led to astronomical fees passed on to consumers.

For an extra $200/month it just doesn't feel right.

NO - I am not trying to demonize people who own AirBnBs. I think AirBnB the original concept for people to cohabitate your own living space is an awesome idea. I just think the STR industry went way too far and incentivized profits without any foresight into the consequences those actions.

OP I think you're making a good decision sticking with it as a long-term rental. Thumbs up!

Two houses in my neighborhood were purchased by individuals who ran them as Airbnbs. For almost a decade, it was exactly as Archipelago describes. The one around the corner was recently sold and is now owned by a family with small kids. The one across the street from me has just been converted to a long term rental. I'd rather he sell it, but perhaps the new neighbors will be an improvement.