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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: waltworks on August 11, 2016, 12:46:24 PM

Title: Your thoughts solicited: basement apartment conversion
Post by: waltworks on August 11, 2016, 12:46:24 PM
We have a 2000 square foot (!) basement that sits basically empty under our house, which is in a fairly desirable resort community, so we're thinking about spending about $75k (including furnishings/appliances/etc) to convert about 1200 square feet into a 2 bedroom or 3 bedroom apartment.

I'm curious to hear from folks who have done this, especially if you've done both nightly rentals and long term. In our case, we'd like to try nightly (there are a variety of events here during which enormous amounts can be charged for rent) but the town is struggling, like many, with the VRBO/AirBnB legality questions so we want to make sure the apartment is set up (ie kitchen, laundry) for long term renters (long term rentals of this type of space are completely legal here and would not be a problem no matter what).

So, I guess this is a sort of "should I buy this property" question, in a way.
-Cost up front $75k. We'd just pay cash, no mortgage. We could cut costs back here but we want the place to be nice enough that we'd be ok living in it ourselves (the upper portion of the house would rent for ~$3500/mo).

-Assessed value of the house would increase ~$30k (we'll be pulling permits and doing everything legally, of course) so I'd anticipate about an extra $200/year in property taxes.

-Long term rental rate would be roughly $1200-1500/mo, or maybe a little more if we made it a 3 bed. Not sure we want to do that (3rd bedroom) just because we might end up with parking problems for the tenants in our 4-car max driveway.

-Nightly rentals of similar type go for $100/night in the offseason and up to $300/night during events like Sundance.

-There is a spring mud season, but otherwise the town is very popular for tourists year round. My survey of VRBO and talking with a couple of nightly rental owners in the area indicates I can expect something like 60-80% occupancy and an average $150/night. Being a bit more conservative than that and saying 50% occupancy and $125/night, I'm still at $22k or so gross, which is obviously quite a bit more than the $15k or so we'd gross renting long term.

-The layout has been carefully set up to avoid tenant/owner interaction or hearing each other unless mutually desired. I've got lots of landlording experience, so I'm not worried about fixing broken stuff or screening tenants or any of that.

-We'd retain about 800 square feet of basement (with separate access) for storage. I don't think making a 4/2 basement apartment (ie using all the space) makes any sense, because it's still... a basement apartment.

It looks like a slam dunk to me, which is making me question the whole thing, because I'm inherently wary of slam dunk too-good-to-be-true deals. I guess my worst case scenario involved nightly rentals being banned (and that ban enforced) but even then it makes perfectly good sense as a long term rental (or place for us to live while renting the top part of the house, if we really feel like FIREing early).

Thoughts?  Would you do it?




Title: Re: Your thoughts solicited: basement apartment conversion
Post by: rothwem on August 12, 2016, 05:50:13 AM
Thoughts?  Would you do it?

Fuck yes, I would, that sounds awesome.

Also, are you the same waltworks that makes the custom bicycle frames?
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Ensign1999 on August 12, 2016, 09:08:01 AM
I think I would totally do it.  75K to get 30K equity, and then depending on how you rent it anywhere from 15k a year (20% ROI) to 22K (30% RIO) are great numbers.  As for 2 or 3 bedrooms, it would all depend on how you would furnish it.  Maybe two bedrooms + a murphy bed to increase the living area, but have the same number of beds as a three bedroom.  Decide what your target renter looks like and design towards that.

Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on August 12, 2016, 09:28:18 AM
Thanks guys.

-The 3rd bed idea for certain (part time custody, didn't think of that) situations is a good one. Given that we're already planning to pay for the electrical and HVAC/ductwork for that 3rd bedroom just so it's ready, maybe we'll just cough up a few more thousand bucks and have it finished.

-Yes, I'm the custom frame guy.

-Agree that we need to design for our anticipated renters. We are in the somewhat sticky situation of having the nightly rental option possibly go away at some point, though, so we have to keep an eye on long term (ie washer/dryer and full kitchen, which we probably wouldn't need for nightly rentals). So to some extent we have to try to make it do it all.

Thanks for the feedback!
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: ShoulderThingThatGoesUp on August 12, 2016, 09:45:30 AM
The big risk here is that you have to sell the place before you've gotten paid back the money for it, right? $75k to get $30k equity means that if you got a health issue tomorrow and couldn't keep it up, or you had to leave it for any other reason, you're out $45,000. I am pretty sure you can afford to lose $45k but it's still a serious amount of money.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: totoro on August 12, 2016, 09:59:09 AM
Yes, do it.  Put money into soundproofing between the floors.  I would go for two bedrooms only myself for vacation rentals where you are also on site.  That is the most popular size for our rentals (we have 1, 2 and 3 bedroom) and you get too many people on site with three and not that much more money either for a short term rental and another room to clean.  I suppose you could do three and lock one room off for short term rentals and only use it for long term if you do that later.  I would definitely do two bathrooms.

$75,000 seems a bit high for the conversion.  We've put in two suites and I'd say that soundproofing is number one as mentioned and then I'd do separate hot water tanks, tile in kitchens and bathrooms and wood or high end laminate elsewhere.  Avoid carpet.  It does not wear well and people don't like it as there are lots with allergies these days.  I like a completely separate entry point for the main house and suite.  We have two places with completely separate parking areas and that works the best.

The good thing about this plan is that once it is operational you likely gain the equivalent of $400,000 invested with a 4% withdrawal rate in monthly income for as long as you own the asset for an investment of $75,000.  Of course it is not passive, but it can certainly jump start ER.  And it gives you options for putting up visiting family and friends.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on August 12, 2016, 10:00:00 AM
Yeah, I'm estimating randomly on the equity number. I can't find a reasonable answer on what apartments/mother in laws add to the value of a house, so I'm going with ~40% of the cost to build. I don't think anything in terms of home improvements usually returns more than 50% in equity at most and not everyone wants someone living under them.

So that is a great point. If we had to move, say, the day after the place was finished, we'd be out $45k or so. Definitely worth thinking about, though I think in our situation that risk is acceptable (losing $45k wouldn't matter that much to us in most plausible scenarios), especially since one of the potential solutions in that case would be to move into the apartment ourselves and rent the upper part of the house for ~$3500/mo (at which point we'd basically be FIRE).

-W

Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on August 12, 2016, 12:40:31 PM
FWIW, the $75k includes quite a bit of excavation and concrete pouring, full electrical and plumbing (the existing basement has none and we need to cut the foundation in multiple places), adding egress windows and wells, as well as the interior framing/insulation/paint/etc. That budget also includes furnishing and equipping/decorating the space for nightly rentals and engineering/architecture fees.

Does it still seem high with that included? I'm being pretty conservative and assuming our GC's bid will end up being exceeded in some places as we build it out, and that we'll need to buy new/decent appliances. We may be able to get decent used stuff or find other ways to save money, but I think $75k will cover even going with all new stuff.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: rothwem on August 12, 2016, 12:54:10 PM
I honestly don't think that the basement apartment will add much equity, if any, to the value of the home unless you're adding square feet.  In fact, around here, being classed as a "multifamily" will drop your comps and make your house worth less.  Make sure you don't do that. 

With that said, I still think you should do it.  Think about the math.  Lets say that you can't do the AirBNB or VRBO thing and you have to rent it for 1000/month.  That's still $12000/year, or a 16% return the first year.  There's not many investments that you can get that kind of return from.  And honestly, I think it will be more than that, since I don't think AirBNB or VRBO are going anywhere. 

The big risk here is that you have to sell the place before you've gotten paid back the money for it, right? $75k to get $30k equity means that if you got a health issue tomorrow and couldn't keep it up, or you had to leave it for any other reason, you're out $45,000. I am pretty sure you can afford to lose $45k but it's still a serious amount of money.

Don't be a 'fraidy cat.  That risk sounds fairly small, it sounds like the OP is paying cash for this thing, so the worst case is that he rents it and cashflows. 
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: totoro on August 12, 2016, 02:10:18 PM
Where I live a nice suite adds at least $50,000 but it is a HCOL area and having a suite is the only way a lot of people can afford to buy something. 

I did excavation for plumbing through the concrete floor, new plumbing for bathroom, kitchen, and laundry, concrete work, new access, upgrade electrical to 200amp and rewire separately (for separate metering), separate hot water tank, architectural 3d rendering, and furnishing for a small suite for 35k.   75k seems high but I don't know the prices where you are and we did some of the work ourselves and used second hand nice furniture and cabinets.  What we started with was a main floor unfinished workshop/laundry/storage area.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on August 12, 2016, 02:18:41 PM
In conversations with other folks who have similar setups and our realtor friend, I think the apartment adds some value. Homes here are advertised as having apartment additions when they go for sale, and they appear to sell for a premium.

That said, I'm not counting on that equity for anything in particular here, the intent is to generate an income stream with the investment.

We are in Park City, UT, so very very HCOL and also high construction costs in general. And we're doing roughly 1200 square feet of finished space, which I personally wouldn't consider "small" (though in the context of our ridiculous house/neighborhood, it probably is). The GC is a personal friend and while I don't think he's giving us any sort of particular special treatment, he's also not gouging us. No interest in doing the work ourselves, we have a 2 year old and 4 year old and many fun hobbies - though I will probably build the handrails, since it seems a little silly to hire a professional welder when I am one myself.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: totoro on August 12, 2016, 03:37:22 PM
Seems worth it given the ROI.  I calculated our payback time at three years - our suite was half the size yours will be.   Seems pretty good to me given that we also get the increase in home value, increase in appreciation on the higher value, and an ongoing revenue stream.  I don't think I know of any safe investment that would reliably return at least 20% other than a suite in your primary residence.  In Canada if you use less than 50% of your floor space on a suite the entire capital gain is tax exempt when the home is sold.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on August 12, 2016, 05:09:44 PM
I think you guys are being a little optimistic on ROI. Using 50% rule, I'm figuring ~$11k/year as a nightly or $8k/year long term. Not sure if 50% rule is appropriate here given that there's little/no external maintenance to do and I've already calculated in vacancy, though. Probably not.

In any case, I'd love to be happily surprised, but I'd be ok with a "mere" 10-15% ROI here too.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: totoro on August 12, 2016, 07:03:05 PM
Maybe.  We invested $35k and make 18k in gross rents per year.  The 50% rule is silly in a HCOL area imo.  Same house in a low cost of living area might meet the 50% rule. 

In our case we deduct a floor space % of utilities, property taxes, and mortgage interest as these are permitted deductions.  Fact of the matter is that on a primary residence adding a suite really only adds the lost opportunity cost on your investment to do the reno plus utility increase because you would pay the same mortgage anyway to live there unless you are refinancing to reno (and then you'd have an interest deduction increase).   

The biggest cost is the income tax burden on net profits as we can't claim depreciation without losing our capital gains tax exemption on a primary residence.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: sun and sand on August 12, 2016, 10:17:31 PM
Do it!  I have made basement apartments in homes I have lived in and it is great to have the extra income.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: KarefulKactus15 on August 15, 2016, 08:47:19 AM
Thoughts?  Would you do it?

Fuck yes, I would, that sounds awesome.

Also, are you the same waltworks that makes the custom bicycle frames?

Way to derail my mind.  Next thing I knew, I was off browsing waltworks bicycles.... 

Awesome looking bikes, you must have the hands of a surgeon...
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on August 15, 2016, 09:42:29 AM
Haha, and that's when Kroaler's FIRE was set back several years.... muahaha!

Just kidding. Thanks for all the input, everyone. We're doing it. Hoping to have construction drawings/engineering done this week so we can get permits.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Dicey on August 15, 2016, 12:30:54 PM
Glad you're doing it. You mentioned upthread the possibility of you moving downstairs and renting out the top of the house. Does that pencil out better?
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on August 15, 2016, 02:38:45 PM
Glad you're doing it. You mentioned upthread the possibility of you moving downstairs and renting out the top of the house. Does that pencil out better?

That is an interesting question. We aren't really "house people" in that we mostly use our house as a place to sleep/eat, and spend most of our time outdoors riding/skiing/hiking/etc. So fundamentally, a 1200 square foot basement would be just fine for the 4 of us.

The upstairs of the house (about 2500 square feet, 4 beds, 3 baths) would rent for something in the range of $3500/mo long term. I'm not sure if it would make any sense as a nightly rental due to it's size, but who knows. I wouldn't even try to guess on a number for that without doing a lot more research.

The problem with that scenario is that my workshop is our (ridiculously large) garage. I have lots of 2000+ pound machine tools and welding equipment and all sorts of crap in there, basically none of which could easily be moved into the basement without some real rigging work on my part (and then it probably could never come back up). So I need/want the garage to myself, which hurts the rental value of the upstairs portion of the property quite a bit... I think. We live at a ski resort, so most people are going to want to park in the garage!

In theory, renting out the top part/living in the bottom puts us at FIRE, though, even with no income from my business. FIRE with VERY limited wiggle room on spending, though. 

I guess the bottom line for me is that I enjoy what I do and I don't really want to quit. I have plenty of fun hobbies, but not enough to fill a whole day. I enjoy my customers and interacting with them, and I enjoy messing around with metal. I only work 20-30 hours a week as it is most of the time so I'm not ready to pull the trigger on fully quitting anytime soon. That could change, I guess, which is why I want the basement set up nicely enough that we'd be happy living there.

I HOPE I am not just the kind of person that feels like living in the basement is somehow a step down/lower status/bad and that we *should* live in the top of the house because that's what you do. I will need to examine my feelings on that a bit more, though.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Goldielocks on August 16, 2016, 04:40:34 PM
If you are looking into air BNB... I suggest you consider the following:

1)  Get a Bed and Breakfast type business license.  Many traditional BNB's also list on AirBNB and it deals with the city requirements nicely, and is not that expensive here.   (unless your area is prohibitted from home based businesses).

2)  Make both bedrooms have their own Ensuites, or have a one bed & Bath (no full kitchen) able to be locked off from the other (with kitchen).  It is best if you could choose by season to have two separate BNB rentals, or revert to one large rental apartment lease...

3) 1200 sq.ft is a lot of space to clean... which is partly why I suggest #2.  You can also deal with damage in one "unit" while renting out the other unit if needed.   

4)  In suite laundry is NOT needed for short term rentals, and just an added cost.   Renters here like them, but only 50% of the basement suites have them.  On the other hand, include a small dishwasher in the unit with a kitchen, so most guests will put dishes into them for you instead of leaving them in the sink.

5)  LOTS and LOTS of daylight windows -- dig out larger /more than you think you need, and use better quality materials in kitchen and bath.  Top dollar for your business..

Where this comes from...
My grandparents ran a small motel for 15 years and regretted their choice of building 1 and 2 bedroom suites pretty quickly.  Three times the work to clean / turn over for less profit per square foot.

People like white, bright and clean in their rental choices.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on August 16, 2016, 09:26:33 PM
I agree that the laundry and size are both ridiculous for a nightly rental situation. However, as I mentioned earlier, there is the possibility that:
1) Nightly rentals in our area will be banned (and that ban actually enforced in some way).
2) We would want to move in to the apartment ourselves.

Great points, thanks! We'll definitely err on the side of large on the windows and try to make it as light as possible.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: totoro on August 17, 2016, 07:14:57 AM
Laundry is an important addition.  When you have same day turnover you will be happy with two sets and guests want laundry and dishwashers.  Smaller is better for cleaning.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: KMB on August 17, 2016, 07:48:11 AM
I think you guys are being a little optimistic on ROI. Using 50% rule, I'm figuring ~$11k/year as a nightly or $8k/year long term. Not sure if 50% rule is appropriate here given that there's little/no external maintenance to do and I've already calculated in vacancy, though. Probably not.

In any case, I'd love to be happily surprised, but I'd be ok with a "mere" 10-15% ROI here too.

-W

I don't see how your expenses will be anywhere close to 50%. Increased utilities and taxes should be all that you'll have to pay in addition to what you pay to live in your house right now. Maybe you'll have an eviction or other type of PITA that could come up.

I'm curious what your sound proofing solution looks like. In multi-unit construction the standard would be 2" of gypcrete on top of the upper unit subfloor, plus stuffing the truss with sound bats. But you probably don't have trusses between your basement and first floor and your existing joists probably can't carry the load. Plus you don't want to rip up your existing flooring... Can you ask your designer what your STR (sound transfer rating) will be?

Also, I think 2,000 square feet of space is plenty big for 2 - 2 bedroom apartments. You could share laundry space between them. Have you considered this?
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: rothwem on August 17, 2016, 08:02:29 AM

The problem with that scenario is that my workshop is our (ridiculously large) garage. I have lots of 2000+ pound machine tools and welding equipment and all sorts of crap in there, basically none of which could easily be moved into the basement without some real rigging work on my part (and then it probably could never come back up). So I need/want the garage to myself, which hurts the rental value of the upstairs portion of the property quite a bit... I think. We live at a ski resort, so most people are going to want to park in the garage!


I wonder...do you have enough land to build a freestanding shop?  I'm thinking that if you did that at the same time as the basement reno, you might be able to get a better deal. 
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on August 17, 2016, 09:33:08 AM
I don't see how your expenses will be anywhere close to 50%. Increased utilities and taxes should be all that you'll have to pay in addition to what you pay to live in your house right now. Maybe you'll have an eviction or other type of PITA that could come up.

I'm curious what your sound proofing solution looks like. In multi-unit construction the standard would be 2" of gypcrete on top of the upper unit subfloor, plus stuffing the truss with sound bats. But you probably don't have trusses between your basement and first floor and your existing joists probably can't carry the load. Plus you don't want to rip up your existing flooring... Can you ask your designer what your STR (sound transfer rating) will be?

Also, I think 2,000 square feet of space is plenty big for 2 - 2 bedroom apartments. You could share laundry space between them. Have you considered this?

Appliances will break, carpet/paint/trim has a limited lifetime, pipes can leak, etc. 50% rule includes management costs, too (which we'll handle ourselves, but that's not free money, it's a job). I agree that the 50% rule is probably crazy in this situation, though.

To fit 2 apartments I think we'd need to do basically a giant parking structure (no way we'd get permits for that!) in our front yard. Neat idea, though.

We will do our best on sound transfer. The apartment will be under a portion of the house we seldom use so that will help.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Goldielocks on August 17, 2016, 09:36:41 AM
4)  In suite laundry is NOT needed for short term rentals, and just an added cost.   Renters here like them, but only 50% of the basement suites have them.  On the other hand, include a small dishwasher in the unit with a kitchen, so most guests will put dishes into them for you instead of leaving them in the sink.

He's in a ski resort area.  In ski or beach areas, I personally would not rent a house without laundry.  Nobody wants to be schleppng their wet snow gear and towels down to the laundrymat when they are paying a fortune for a vacation.

 

Ah, but you would rent a room if you did not need a full house.   Access to laundry is always nice, air BNB often allow access to laundry...
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Goldielocks on August 17, 2016, 09:41:23 AM
I agree that the laundry and size are both ridiculous for a nightly rental situation. However, as I mentioned earlier, there is the possibility that:
1) Nightly rentals in our area will be banned (and that ban actually enforced in some way).



Definitely get a Bed and Breakfast license now, then, while you still can.  They don't cost much here, and would allow you nightly rentals even after nightly air BNB rentals are banned.

Nightly rentals are a bit of work to turn over for the next customer... so seriously think about lock off rooms and limiting the size to make it easier for you to match the price with the work involved.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Dicey on August 17, 2016, 09:48:36 AM
Walt, I just spent a week in Aspen and was shocked at how many places did not have garages. In the rent out the upstairs scenario, it might not have quite the negative impact on rent you think it will. Next, is rothwem's suggestion a possibility?
Finally, since you're in a resort area, anything you do to make the place multiple-tenant friendly will likely have a greater than average payoff at resale, especially if everything's permitted.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on August 17, 2016, 10:20:16 AM
Yeah, Aspen is an even weirder place than Park City! All of this is up in the air, really, and I think all of these ideas are intriguing:
-Move to basement, build separate shop (probably hard to get a permit for this, but who knows... we have 1/2 acre of land), rent out up. Result: giant piles of passive income minus shop building costs (maybe 30k? No idea on costs for something that needs heat/electical but not plumbing)?
-Move to basement, rent out up and keep garage in use as shop. Result: giant piles of passive income minus losses from not having garage available as part of rental?
-Move to basement, rent up, quit working. Result: potential boredom, limited passive income but just enough to get by on current spending. Small kids will need stuff and college, etc.
-Stay up, rent lower. Result: small amount of passive income.

I could be talked/convince myself into any of those but for now building the thing at least makes sense to me. If there's any interest I'll keep this thread updated as we go.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on September 15, 2016, 02:31:49 PM
I'm bumping this necro-thread to solicit some additional advice.

Things have not gone particularly well with this project. The county seems to be unable to provide accurate information on code requirements and permitting, so we still have no permits (a month after we intended to start work). That's bad. What's even worse is that the costs seem to be piling up to infinity - what was originally going to be a $50k or so job has already ballooned to $80k - and that's *before* any of the usual surprises/problems that always happen in construction projects OR furnishings/appliances! I'm sort of anticipating that the project will end up costing $100k...or more.

So as a followup - would anyone still do this? I'm thinking of pulling the plug on the whole idea.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: KarefulKactus15 on September 15, 2016, 06:23:53 PM
The cost are getting crazy.  I *think*I can build an entire freestanding 3/2 house in my area for that kinda $. 

But I'm no real estate investment guru. Maybe someone else can provide their thoughts.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: FIFoFum on September 15, 2016, 07:09:56 PM
That doesn't sound promising.

Also, just reading through the thread, I didn't see anyone mention that even if the airbnb option remains or you can get an actual b&b license instead, you still would have to want to manage (or pay to manage) a hospitality business. The returns can be much higher than long term rental, but the work you do is a lot less passive. Not clear if you have the interest in doing that or paying for it (and once paying for it, that is more cost to add in to the calculus).

So if it really is just a long-term rental potential, is it worth it for $100,000K +?
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on September 15, 2016, 07:12:53 PM
I have to admit I'm dumbfounded. Every single thing ends up being some sort of massive disaster/cost increase. The sewer district wants $2500 per room to sign off on plans. The fire department requires the *whole house* be rewired for new integrated smoke alarms and *possibly sprinklers* as well! The planning and engineering staff don't appear to talk to each other or have the same set of requirements. Permit requirements seem to change week to week so every time you've satisfied one requirement, another new one pops up.

I think I'm probably just going to kill the idea, and pay the engineer and architect for their time. Maybe at some point in the future the plans will be useful for something.

Sigh.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: bpleshek on September 16, 2016, 03:22:57 PM
Just to put some math on it.

Just on the basis of cost and forgetting about the increase in equity for the moment, the $75k initial expense would take using your numbers 750 rental nights(at 100/night) or 62.5 rental months at $1200/month.  That does seem like a long term strategy.  I don't know the area that you are in, so maybe i'm totally off base, but even your 50% occupancy rate on the nightly rentals seems quite high.  Maybe the monthly rentals would have better occupancy, but 62 months is over 5 years.

Still that's a decent return on investment.  I'd want to make sure about my numbers before I started.  The idea above seems "back of the napkin" so far.

As to your info about the updated wiring, sprinklers, sewers stuffs, it still might not be a bad thing.  But the addition of $10k just to sign off seems like it might be excessive(3BR+kitchen/living area).

Good luck,

Brian
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on October 05, 2016, 02:55:55 PM
Update, for those still interested (Buehler?)

We did some finagling, redesigning, and kept showing up at the building department and managed to eliminate about $5k worth of permitting/fees as well as maybe $10k worth of construction costs (partially though getting more bids, partially by making better use of the existing layout/window wells and HVAC). So that's good.

We've also discovered that in a fancy-pants resort town people are *constantly* remodeling and dumping appliances, vanities, mirrors, TVs, etc. I think we'll end up furnishing/outfitting the place with really nice stuff for well under $5k.

So I'm hopeful that we'll end up coming in between $60k and $70k. Which seems like a great setup (right around 2% rule as a monthly/long term!)

We are hoping to be done in 3 weeks or so. Framing and waste lines are done, HVAC is done, plumbing is happening on Monday... but of course all it takes is one delay to push everything back. We'll see if (when) we get tripped up by a sub.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: With This Herring on October 06, 2016, 09:20:19 AM
Posting to follow.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Ensign1999 on October 06, 2016, 09:50:21 AM
Really glad you were able to work through some of the red tape and press forward.  I hope the rest goes well for you guys.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: pbkmaine on October 06, 2016, 10:01:47 AM
Please post photos when you are done!
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on October 06, 2016, 12:14:31 PM
I will take a few photos when I get a chance. I think my indoor photography skills might not be up to the challenge of showing anything useful in a framed but unfinished space (ie, it will look like a big grey space full of 2x4s) but who knows.

We have a long string of inspections over the next 10 days (plumbing, engineering, HVAC, then electrical) so I'm sure we will have some minor disasters in the process. Who knows.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on December 05, 2016, 08:17:05 PM
Sorry, no photos yet. But we're almost done. End cost looks like (with all the furnishings/appliances) it'll be about $70k. AirBnB tells us we can get something like $800/week. We'll see if that's the case or not.

Unfortunately we're going to be finishing up just before the holidays (big $ time of year for vacation rentals here) but will be out of town ourselves - and we'd rather not be out of town during the break-in/test-out period, so I think we'll refrain from listing it for rent until we return in early January. It's almost physically painful to give up what would likely be $1000+ in rent, but I don't want someone to be unhappy with something (or something important to be missing/in the wrong place) and start things off on the wrong foot.

If we happen to be up and running by, say, December 15th or so (unlikely but possible) then maybe we'll get a few people in during the last week we're in town and see how things go before making a final decision on the holidays themselves.

Exciting times!

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: sammybiker on December 06, 2016, 04:27:24 PM
Good move I think to wait until you set everything up - you'll learn a lot with the first couple of airbnb rental periods and this is a key time to really lock in excellent reviews so that you can slowly bring prices up to what the market will bear.  Don't forget to take advantage of the free PRO photos that airbnb offers.

Looking forward to seeing photos soon! :)
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 11, 2017, 06:04:07 PM
Just FYI, for those few who are still interested - it's done. It took almost 2 months longer than expected and ended up costing $73k (including all furnishings).

You can see the (crappy photos by us taken just to get the listing up, pro will photograph tomorrow) the listing here if you're curious:
https://www.airbnb.com/rooms/16693811

Advice/feedback on any of the elements of the listing (or pricing strategies) would be great. I'm far from a marketing pro!

We have 3 bookings thus far covering 10 days (so we're basically booked out for the Sundance film festival/end of the month) and will net about $1800 after costs of stuff like utilities, soap/shampoo, and cleaning supplies. I'm hopeful that a few good reviews at the beginning will get us a lot more bookings for the remainder of ski season, and then we'll see if we can attract some business in the summer from mountain bikers and others.

No actual dollars have hit our bank account yet (not until next week) but things are looking pretty good so far!

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: CowboyAndIndian on January 11, 2017, 06:59:16 PM
Waltworks, really cool basement apt. The pictures on airbnb are quite nice.

I see no reviews there, you need reviews for the airbnb if you want more occupancy! (Probably because you have few or no guests)
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 11, 2017, 07:59:11 PM
Yeah, no reviews yet - we have some bookings but the first guest won't arrive for another 5 days. We will be busting our butts to get some good reviews but no way to do that without actually hosting someone!

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: KMB on January 12, 2017, 06:51:27 AM
Looks great and kudos to you for working through your local approval process and pulling the trigger! Hope it turns out to be a great investment!
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: rothwem on January 12, 2017, 07:08:44 AM
Nice looking place! You might want to post a picture of the outside too, so people know what house they should be pulling up to.  We had that problem with an AirBNB we stayed at in Asheville--it was a basement apartment with a rear entrance.  We pulled up, but there was no house number and I had no idea which house was theirs. 
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: markbike528CBX on January 12, 2017, 07:34:53 AM
posting to follow,  looks like we have a friend renting the basement soon, so now we have to fix it up for him, and improve it for future renters too
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Dicey on January 12, 2017, 10:11:55 AM
Hi Walt,
Nice to see how you've brought your vision to fruition! Keeping in mind the goals of highest renter satisfaction and revenue with least amount of damage to your beautiful unit, I have a ton of thoughts, which I hope will help contribute to your success.

We've made multiple trips to Aspen in the past year and stayed in four different places. Your place looks awesome, but I do have a couple of suggestions, mostly based on our recent experiences. Some of this might seem nitpicky, but you're looking for great reviews and repeat business, so here goes. I also read enough of your stuff to know you don't tiptoe, so I won't either. Here goes, in totally random order.

Surface area to drop shit: it's hard to have too much of it. Since you have no dining room table, there's one less spot to dump crap right off the bat. I'd look for every way possible to increase that. Renters aren't really interested in filling cupboards and closets neatly, they're on vacation.

The ski racks are a good start, but you also want lots of pegs for coats or wet gear is gonna be piled on your floors and upholstery. I'd look for a much longer bench to put where the smaller one is now. Think something simple and sturdy, like a decommissioned church pew. Craigslist offers them up on a regular basis. They're simply built and can easily be shortened to the exact length for the space.

Coffee table: needs to be larger and sturdy as all get-out. With no table and stuff piled on the counter, the coffee table's going to need to take more of the load. Buy used, of course.

Area rugs are super cheap on CL, I'd put a good sized one in front of the sofa and maybe a runner under/in front of the suggested long bench, at a minimum. Polypropylene is the way to go, cause it's easy to clean. Buy inexpensive and replace as needed. I used to be in the area rug business. I still have contacts, p.m. me if you can't find anything, but I'll need lead time. The mats in the gear corner are good, but I'd go bigger, literally, as big as possible. Also, some kind of drop zone for smaller stuff like keys, sunglasses, goggles, right next to the front door. A charging station other than the kitchen counter is handy too. Doesn't need to be much more than a shelf with a power strip or hub, just not on the kitchen counter.

Is there room outside the front door for a bench to sit and remove boots so some of that mess stays outside without being an eyesore?

The surface area quest continues in the bedrooms. Look around and ask yourself where people are gonna put their crap and make it as easy as possible for them to do so. The armoire is nice (Is it secured to the wall so it can't tip?), but hard to dump stuff on top of. Can't tell from the photos, but the space on the nightstands could be an issue. DH uses a C-pap and I like to read at night. At several places, the bedside lighting and surface area was woefully inadequate. Moving beds in search of outlets was a drag too.

Bathroom, same thing. Lots of sturdy hooks for wet towels. A place to set/hang a blow dryer to keep it off the counter. Floating shelves wide enough to hold piles of fluffy towels and toiletry kits without tipping over. Also, consider installing splash guards in the shower to avoid water damage to the floor.

Regarding exterior photos, I understand if you don't want a picture of your entire house for privacy purposes. Can you create or highlight an existing feature that can serve as an identifying marker? Something that people can recognize easily that lets them know they've arrived? (My sister once bought a house with a wishing well. Removing it was on their long list of DIY asap projects. It turned out to be such a convenient and sure-fire marker that they decided to keep it. Years later and 1700 miles away in San Francisco, I met a woman from the same Texas town. When I mentioned that my sister lived there, she knew the exact the house, because of the wishing well. Not suggesting you install a wishing well specifically, but something distinctive, so people are sure they're "home".) It will cut down on late night contact from people who can't find the place.

In my career, I did tons of business travel and developed a soft spot for luxury hotels, particularly when it wasn't my own dime. A week at the Broadmoor? Oh, yes, please. The decor is what sets them apart. Mirrors and oversized artwork are key. Sorry Walt, what I can see of it is too small and not well positioned. Look on CL, at ReStore, or consignment stores for some inexpensive statement pieces. Get some big ass art and secure those suckers firmly to the wall. They create ambiance and look great in the listing pictures, which is key.

(Just back from looking at the pictures again.) Hmmm, why no right-hand return on that bathroom vanity? Can you still get a matching piece? That sink's close enough to the wall that water damage is possible. If not more be sure you've got a good caulk seal at least.

Your kitchen cabinets are beautiful! Figure out a place for people to hang dish towels so they don't drape them over the doors below the sink. I see the evidence of that stupid trick all the time and I hate it. Something that screws to the inside of the door or maybe a cute bar on the end of the island on the fridge side (better). Do not buy the kind that go over the cabinet door, 'cause they always damage the door. Wet fabric and wood is a bad combo. And no, the oven door handle is not enough towel bar space.

Okay, that's the end of my brain dump. Hope at least some of it is useful. Thanks for the report and please keep the updates coming.
~ Diane
P.S. Almost forgot - create a resource binder for your guests. Where to buy [whatever], where the best Happy Hour/craft beer/tapas/whatever is, local attractions that might be off the radar, insider tips & tricks, etc. They'll love it and you for making their trip more memorable.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: CowboyAndIndian on January 12, 2017, 10:17:11 AM
^ This is why this forum is awesome.

Wow Diane!!!
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 12, 2017, 10:42:36 AM
Indeed, awesome feedback!

I'll go through with a few responses (note that I'm not arguing with any of your suggestions, just clarifying a few things.

-We photographed this before some of the smaller items (coat racks and such) were installed.

-We can add a kitchen table (we have a small round one that comfortably seats 4), but were worried it would make the space feel cramped. Maybe we'll stick it in there and see how it looks. I hear you on the surface area to dump stuff! We are looking for end tables for the couch and a much bigger bench now, we'll see what we turn up. The first few weeks of guests are all here for Sundance rather than skiing so lots of gear shouldn't immediately be a problem.

-There is now a coat rack (with 6 large dual hooks) that I think should be sufficient for even fairly large groups. I could be wrong about that, so maybe a coat tree/rack in the corner would be good.

-The coffee table has to be limited in size (and mobile) because the couch is also a bed. So guests will need to move the coffee table to deploy it. I'm not sure how big/heavy I am willing to go (this one is on wheels) for that reason.

-We considered area rugs but decided that the extra cleaning effort would not be worth it. Will reconsider that, it might make the space look nicer. The floor is not horribly cold but it can't hurt for comfort either.

-The exterior entry area is probably too small for a bench or seat to be very practical. We were limited by setback and utilities on that one, it's as big as we could make it. :(

-More surface area in bedrooms, check. Do you think luggage racks are a good idea, or do you thing bigger dressers/tables would work better? Or both?

-Bathroom now has a large towel shelf/bar and 4 large burly towel hooks. We may also add another towel bar.

-The vanity was a scrounged item. We don't have the rest (side) of the backsplash so we just caulked that area heavily and are crossing our fingers that people don't make too much of a mess.

-Dish towel hanging, got it. I did not think about that.

-We have a binder ready and a pretty extensive welcome email prepared as well with lots of "local" knowledge about stuff to do/places to eat/etc.

Thanks Diane!

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: blahblahblah on January 12, 2017, 12:47:59 PM
Nice work!  We AirBnB often and one of the selling points on a location is gear available to borrow, such as snow shoes or a bike to get around town given your proximity to local amenities.  I like that you've included proximity to public transit/mountain shuttle service.  Since you're marketing to skiers (nice work from La Nina this year!) I would either state that those skis are available to use or remove them from the next round of pictures.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 12, 2017, 01:53:32 PM
Great point. Those are some old rando skis from my college days (Work Stinx!) and some really random old rossis from before the days of parabolic (!) Then some of our own personal skate gear we put up there to make it look symmetrical.

So I doubt anyone would want to borrow any of it, but I will make sure to make that clear. I'm not sure I want to get into the business of loaning out gear since I think most people who stay will already have it, but we'll see, I guess. Any thoughts on doing a rental service where we'd pick up bikes/skis/etc from rental shops in town and have them ready to go? Is that something you'd want if you were doing a ski/bike trip? It might be tough for skis given the need to size/fit boots in person, of course.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: With This Herring on January 12, 2017, 07:17:01 PM
Note:  I have only been in a few hotels in the last decade, so take my words with a bucket of salt.

Seconding blahblahblah's question:  I can't tell from your ad.  Are the skis in the photos available to be used as part of the room deal?  Are they available for a separate fee?  Are they just to show that one can hang skis?

It would be nice to have a photo of the sofa bed made up for sleepers.

What is up with the bedroom windows being so dark?  Are they in always-dark window wells?  Is it possible to get a photo of them in daylight?

The pale green comforter is too short and small for the bed it covers.  That will get chilly.

You say you can hold six people, but the kitchen only seats four.  That's inviting people to eat messy pizza on the sofa (which they will probably do anyway...).

Are there spare blankets?  Maybe in the armoires?  Also, it's always nice to have a few fleece blankets available for the sofa, and those would fit nicely in the coffee table baskets.

And no, the oven door handle is not enough towel bar space.

Every place I've lived disagrees with you.  ;)   Dish towels either go there or through the fridge door handle.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 12, 2017, 07:50:54 PM
Heard loud and clear on the skis - we wanted to show what you do with that area, rather than advertise a crappy old ski service! I will figure out a solution for that.

Photos were hastily taken at night by idiots (us) who know zero about photography. We have a professional coming next week (too much snow for them to make it today) and will photograph in daylight. There is a decent amount of light that comes in the windows.

There is a linen closet (we need to take a picture) full of blankets, comforters of various sizes, pillows, etc. Agreed that the comforter in the photo looks bad - I think it's the right size, but was pulled up too far on the bed.

Sofa bed made up photo, check.
 
Still thinking on the kitchen table - the space is a little awkward in that IMO it'll be cramped with the table there, but it's a little... empty without it.

I don't stay in hotels either, we tend to just bounce between friends in ski towns and camp/sleep in van... so this is a new thing for us. I really appreciate all the feedback, keep it coming!

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: blahblahblah on January 13, 2017, 08:15:01 AM
Great point. Those are some old rando skis from my college days (Work Stinx!) and some really random old rossis from before the days of parabolic (!) Then some of our own personal skate gear we put up there to make it look symmetrical.

So I doubt anyone would want to borrow any of it, but I will make sure to make that clear. I'm not sure I want to get into the business of loaning out gear since I think most people who stay will already have it, but we'll see, I guess. Any thoughts on doing a rental service where we'd pick up bikes/skis/etc from rental shops in town and have them ready to go? Is that something you'd want if you were doing a ski/bike trip? It might be tough for skis given the need to size/fit boots in person, of course.

-W

Meh, seems like a lot of work to pick up skis for people, personally if I'm going AirBnB style I'm willing to pick up my own skis/bike.  A list of rental recs in the welcome email could do the trick.

I know you get the ski point now but one last comment, for someone who is just doing a fun vacation with friends/family they will have no idea that those are an old style and even if intended for decor would probably try to use them due to accessibility.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 13, 2017, 11:25:51 AM
Thanks for the feedback - I agree, probably not worth the hassle. Most of the real high roller rich ski tourists will not be staying in our baasement, methinks.

For reference, for those folks who are less familiar with skiing - to use any of the skis (even if you wanted to) you'd need appropriate boots *and* the ability to adjust the bindings to fit them. I'm thinking anyone with that amount of knowledge is not likely to be grabbing random 20+ year old skis to borrow. But who knows, weirder things have happened.

We have a tentative booking for the ENTIRE 2 months of the "good" part of ski season now - fellow is coming by to look at the place in an hour or two. I guess full kitchens are at least somewhat desireable for ski industry folks and medium-term stay people. That would be awesome (we're offering a 30% monthly discount but it would mean no turnover or vacancy for that whole period). Crossing my fingers...

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 13, 2017, 12:39:21 PM
Ha! My wife didn't turn the heat on before the fellow showed up. Not a good impression.

Rookie mistakes...

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Novik on January 13, 2017, 01:25:26 PM

Still thinking on the kitchen table - the space is a little awkward in that IMO it'll be cramped with the table there, but it's a little... empty without it.

I'm the acknowledged worst at visualizing spaces (even ones I live in) so take this with a pile of salt, but maybe a table against the wall with 3-4 chairs around it, and a couple more in a closet if guests want to pull the table out from the wall?
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Dicey on January 14, 2017, 12:27:12 AM

Hi Walt, I'm going to try to answer some of your questions this way and then I'll do another post with some other thoughts.
 
Oops, deleted too much. Will discuss table in follow-up post.

-There is now a coat rack (with 6 large dual hooks) that I think should be sufficient for even fairly large groups. I could be wrong about that, so maybe a coat tree/rack in the corner would be good. Great! Be sure not to use anything that can tip over.

-The coffee table has to be limited in size (and mobile) because the couch is also a bed. So guests will need to move the coffee table to deploy it. I'm not sure how big/heavy I am willing to go (this one is on wheels) for that reason. Ah, wondered about the wheels. Agreed, mobility and stowability (under the tv, presumably) is important.

-We considered area rugs but decided that the extra cleaning effort would not be worth it. Will reconsider that, it might make the space look nicer. The floor is not horribly cold but it can't hurt for comfort either. I was thinking about noise, too.

...Do you think luggage racks are a good idea, or do you thing bigger dressers/tables would work better? Or both? Love the hotel-type luggage racks, but they are expensive and easy to steal. My preference is sturdy wooden benches, wide enough not to tip over easily. I own three, bought them all used and love their versatility.

-Bathroom now has a large towel shelf/bar and 4 large burly towel hooks. We may also add another towel bar. Think in sixes. More on this later. I'd still install a wider shelf on the wall above the toilet to hold more towels and renter's stuff. They'll love you for it.

-The vanity was a scrounged item. We don't have the rest (side) of the backsplash so we just caulked that area heavily and are crossing our fingers that people don't make too much of a mess. Yay on the scrounging! In that case, you handled it perfectly. Should damage occur, you can look for something decorative, such as a strip of some super expensive, coordinating backsplash tile that you get for almost free somewhere since it's such a small amount.

-Dish towel hanging, got it. I did not think about that. On second thought, maybe on the dishwasher side makes more sense, I was thinking of aesthetics, but the DW side may be more functional. WTH, I totally agree with you, but I some folks think it's perfectly okay to drape a wet dishtowel over the door below the sink so it can "dry". Other people put a dry one there for convenience while they're working at the sink and it becomes wet over a period of time. Still others think that's a good place for a metal bar that slips over the top of the door. None of these options is good for that lovely wood. Half the battle is to out think the thoughtless renters.

-We have a binder ready and a pretty extensive welcome email prepared as well with lots of "local" knowledge about stuff to do/places to eat/etc. Excellent. Remember to update it as places come and go or new favorites evolve. Stuff changes quickly and lots of tourist-oriented info is slow to update. Plus people like to feel like locals, so help 'em out, it's easy.

Thanks Diane! You're welcome, Walt. It is a good exercise. It's hard to feel useful when you've been in bed sick for the better part of the week. Also, I'm running out of steam, so follow up post, well, to follow...

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: MayDay on January 14, 2017, 01:20:18 PM
I'd stash a freestanding drying rack in a closet, and leave a note by the front door coat rack that they can get out a rack if they have lots of wet gear to dry.

6 coat hooks is fine for coats, but if a family of wet kids comes back after a day of skiing, they need to drape pants, mittens, hats, etc somewhere.

Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Dicey on January 14, 2017, 02:05:15 PM
I'd stash a freestanding drying rack in a closet, and leave a note by the front door coat rack that they can get out a rack if they have lots of wet gear to dry.

6 coat hooks is fine for coats, but if a family of wet kids comes back after a day of skiing, they need to drape pants, mittens, hats, etc somewhere.
Oh, the drying rack is a great idea! I'd look for something I could install in the shower so the dripping water stays off the floor. A very securely wall mounted rack is less likely to disappear. Let's see what Ikea has...nope, nothing I like on their website. Hmmm, a little google-fu reveals this lovely, sturdy, dare I say stylish thing:

http://www.hayneedle.com/product/greenway-indooroutdoor-stainless-steel-expandable-drying-rack.cfm


Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 14, 2017, 09:29:20 PM
We ended up getting a couple of swing-out drying rack/towel holders (ugh, from... Ikea):
http://www.ikea.com/us/en/catalog/products/60047896/

And we also bit the bullet and got a small Ikea table to go with (seats 4 or 6 if you're friendly). It's rectangular so can be pushed over to the wall to make space (or stowed in the mechanical room). More space to leave crap! Another flat-pack Chinese particle board wonder! Hurray!

There is more art up. We are working on taking a cool panorama of the Wasatch Crest to hang, but today was super foggy and it didn't work out. Had a nice ski to get to a good vantage point, though!

Pro photos to happen next week. Thanks to everyone for the feedback.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 29, 2017, 05:01:32 PM
The followup that nobody will read, probably!

We have hosted 4 sets of guests now (booked solid since mid-January) and are booked for 21 out of 28 days in February. Assuming no last-minute cancellations or crazy disasters, we'll end up making about $4500 for that ~40 day period - or quite a bit more if someone books the 3 day or 4 day gaps in February. Strategizing about pricing/minimum stays is funky!

Not bad! We'll be able to charge more as we get reviews/time on AirBnB, but this first week or so was also the Sundance film festival which boosted prices for the end of January by 50-100% across the board in town for rentals.

Overall I'd guess we'll do about this well during the ski season or a little better once we're all reviewed up, and probably a little worse in the summer. No idea if we'll get anything during the offseason/mud season, but we like to leave town then anyway.

So conservatively, I'm guessing we'll net $2k/month or so after expenses (replacing linens and other small stuff, extra utility costs, etc). Given that we spend about $4k/month overall that's a pretty nice side gig (no way do I consider it passive, though - I definitely wouldn't be comfortable renting it out when I'm not around). Given our index fund investments, I guess the apartment makes us FI sort of overnight, though I have no particular plans to quit working.

We've got our cleaning system down to the point that (with 2 adults working and 2 small children glued to the forbidden television) we can turn things over in about 45 minutes. Guests have generally not needed too much hand holding and they have all been really cool and interesting people (actor in Patty Cake$, some cinematographers, skiers from Texas, and parents of world championship ski jumping competitors from Norway... cool!) 

Thanks to everyone for all the comments and feedback. Unless there are any specific questions, this will probably be my last post on the apartment. If anyone is interested in more numbers, you can resurrect this in a year!

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: CowboyAndIndian on January 29, 2017, 06:45:19 PM
The followup that nobody will read, probably!

I'm reading :-)

Awesome progress.

Keep us updated, whenever you can.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 29, 2017, 07:48:23 PM
I'm sure we could make you a heck of a deal if your DH wants a bike!

Ha, or even if he just wants to come say hi and do a bunch of neat riding. I think my favorite thing about the whole basement setup so far is that we've met such neat people.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: sammybiker on January 29, 2017, 10:47:38 PM
Cool update Walt, glad to hear it's working out so well.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Dicey on January 29, 2017, 11:04:41 PM
Whaddya mean "that no one will read?" C'mon, give us a little credit here <wink>.

How about posting a link to the listing so we can see the final photos?

Glad the report from the first few bookings was positive!
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: LiveLean on January 30, 2017, 08:59:53 AM
Having grown up in Virginia, the one thing I miss living in Florida is not having a basement. (I moved here at 28.)

There's no better bang-for-your-buck than finishing off a basement, both from a home improvement and a home sanity standpoint (i.e. a place for the kids to have all of their crap or a place for parent, usually dad, to escape.)

So whether you're going to convert this to an apartment or not, why not finish the basement off? Sounds like you have some underlying construction issues, but I'm always amazed how many of my friends/relatives up north have been in their homes for years and have never finished off their basements because they're packed with crap that, had it not been purchased, would have more than financed finishing off the basement.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Ensign1999 on January 30, 2017, 10:02:54 AM
Love that it is working out so well!  Congrats...now we will have to keep it in mind as a great place to stay when we head West next time.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Dicey on April 08, 2017, 05:29:01 PM
Hey, Walt. I'm jonesing for an update. How about an it's-almost-the-end-of-the-ski-season recap, pretty please?
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on April 09, 2017, 04:38:13 PM
I'm on vacation trying to avoid mud season so don't have all the numbers in hand but the rough results so far are:

-On the market/available for a little less than 3 months so far (I think we officially launched on Jan 19th or something like that)

-$8.5k in gross rents

~$500 in spending on various things. Most of that is large durable things (air mattress, space heater) we didn't think of and guests asked for, there's also some money going into buying cleaning supplies and various consumables. I think replacing linens/towels will be a significant ongoing expense, they seem to get trashed pretty fast.

-Utilities are costing an extra $50/mo or so. That is basically electricity for the heat pump. I don't think there will be any meaningful extra utility costs in the summer.

-About 2 man-hours of work per turnover of the apartment. Otherwise management has been very easy.

-No (touch wood) bad guests so far.

We have 3 or 4 reservations for a total of maybe 3 weeks booked for the spring/summer (of the 6 months out that AirBnB goes) so we have yet to see how the summer works out. I am guessing it will be slower (no big surprise).

I mean, basically, so far so good. We've had several guests request to stay again next year and great reviews. Good stuff overall, so far I'm happy with both the decision to build it and the decision to try the short term rental thing.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Megma on April 09, 2017, 08:55:54 PM
Great to read the updates! Glad it's going well!
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Dicey on April 09, 2017, 11:04:32 PM
Do you have a Costco nearby?    I got a set of fluffy white towels there last year on special for 6 for $18.   I think the regular price is $21/set.   They seem to be holding up well.
Ha! I was thinking the same thing, lhamo. I'll add that lately, towels just aren't made to last. Every time I buy towels now I break out the sewing machine and zig-zag over all the seams. It makes a huge difference in the longevity of the towels. Unless a guest swipes one, but that's a cost of doing business, I guess.

Also want to add that we bought two of the new "Ballpark Franks"* bath sheets that Costco now carries. Completely not impressed. They feel slimy and not as absorbent as normal towels. Meh. Double Meh. It's a gimmick. And no, I don't use fabric softener.  Stick to the white Hotel Style Towels.

BTW, last year we were shopping at Costco in Palm Desert. We watched as a guy filled a flatbed cart full of these towels. He said they're better and less expensive than what he gets from his hotel supplier. We asked a Costco staffer and she said it happens all the time. Fortunately, we had already placed the ones we wanted in our cart, lol.

*Remember the old BallPark Franks jingle: "They plump when you cook 'em"? Yeah, supposedly these towels expand when you wash them. Have I said "Meh" enough?

Walt: Thanks for the update, man. Sorry to interrupt your vacation.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on April 10, 2017, 09:01:51 AM
To be fair, all of the linens we have now are (very lightly used) scrounged items. As such they may be more prone to falling apart than newer stuff. I'll keep the Costco (yes, we have lots of them nearby, it's Utah!) idea in mind.

My wife claims it's women's wedding rings tearing up the towels.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: mmwannabe on April 12, 2017, 08:19:41 PM
I'm bumping this necro-thread to solicit some additional advice.

Things have not gone particularly well with this project. The county seems to be unable to provide accurate information on code requirements and permitting, so we still have no permits (a month after we intended to start work). That's bad. What's even worse is that the costs seem to be piling up to infinity - what was originally going to be a $50k or so job has already ballooned to $80k - and that's *before* any of the usual surprises/problems that always happen in construction projects OR furnishings/appliances! I'm sort of anticipating that the project will end up costing $100k...or more.

So as a followup - would anyone still do this? I'm thinking of pulling the plug on the whole idea.

-W

Double check your county's code.  My county, in CO, requires a shared kitchen.  If you put an oven in the basement, you actually have to sign paperwork that say's you won't rent the basement out.  I've still finished mine, with a kitchenette, but must indicate a "shared" kitchen when I rent it out.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: SmokeySnow on April 30, 2017, 08:42:34 PM
A little late here, but great job Waltworks. Congrats on achieving super host status as well👍👍 I also live in a ski town (South Lake Tahoe) that is popular in both winter & summer, and rent one side of my small duplex out on Airbnb. It wasn't my original plan when I purchased the property, but it has been working out quite well as allowed me to make improvements to the property I wouldn't have otherwise been able to & also be able to afford my next property.
May I suggest a few small tweaks to your place, that won't end up costing too much? People love great bedding when they travel, and just a small upgrade to new/current bedding, pillows, bedskirts, etc, with a few quick photos will boost the appeal of your listing immensely. Additionally, you may consider some vintage ski type decor for your walls to give people that 'ski town' feel that they are probably hoping for when they visit your town. I was able to find plenty stuff (think old skis, snowshoes, ice skates) for my rental as well as two that I helped overhaul through a combination of thrift stores,  garage and estate sales, and habitat for humanity store.
Hope you are enjoying the Airbnb-ing!
My listing: https://www.airbnb.com/rooms/3888381
Two that I am "additional host" for:
https://www.airbnb.com/rooms/1079231
https://www.airbnb.com/rooms/654832
 
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: farfromfire on November 24, 2017, 03:20:10 AM
Great job Walt works! Sorry-not-sorry for reviving this thread after the recent mention in a newer one, you did a great job. Only nitpick I have as an airbnber is the seemingly low ceilings (or high floors(?), since it is underground). Congrats on the Super host, and I really like the short-term cancelation policy, not enough listings have that.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on November 24, 2017, 04:41:10 PM
Great job Walt works! Sorry-not-sorry for reviving this thread after the recent mention in a newer one, you did a great job. Only nitpick I have as an airbnber is the seemingly low ceilings (or high floors(?), since it is underground). Congrats on the Super host, and I really like the short-term cancelation policy, not enough listings have that.

They are standard ~9' ceilings. Does it really look like they're low in the photos?

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: farfromfire on November 25, 2017, 01:54:00 AM
Great job Walt works! Sorry-not-sorry for reviving this thread after the recent mention in a newer one, you did a great job. Only nitpick I have as an airbnber is the seemingly low ceilings (or high floors(?), since it is underground). Congrats on the Super host, and I really like the short-term cancelation policy, not enough listings have that.

They are standard ~9' ceilings. Does it really look like they're low in the photos?

-W
One photo that gave me that feeling was #7, because of the short distance between the ceiling and the top of the door. But I guess those are taller (8') doors? Same with the door that has very little clearance from the lowered ceiling in that area.
The rest are the living room photos, which I suspect is because the choice of camera lens accentuates the perspective difference. Not a camera guy though.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: adamcollin on November 27, 2017, 01:03:41 AM
Do share the pictures.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 14, 2018, 02:23:38 PM
1 year update!

We ended up netting about $15k (before taxes). Not as good as I'd hoped, mostly because:

-Summer was totally dead. Other folks who work in hospitality locally told me things were slow everywhere here, so maybe that was a one-time thing - but I was surprised that we really got no guests at all from about May though October, even at $65/night.

-The central rockies (UT and CO, as well as AZ and NM) are going through the worst snow year in about 40 years. Thanks to manmade snow, the resorts here did manage to open - but a week late, and with very limited terrain. We got no skier bookings until the end of December/holidays, and the first 2 weeks of January were empty as well. Unfortunately the bad snow will probably affect bookings for next year as well as this winter.

So while we accumulated a ton of positive reviews (and met some extremely fun and cool people) I think we may finish out the ski season and then rent long term. Even at a slightly below-market $1250/mo, we'd end up making around the same amount of money - with no cleaning and booking work/stress.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: calimom on January 14, 2018, 06:15:11 PM
Do you market to the Sundance film festival visitors? (I think I have your location correct)

Sounds like it did ok overall. One advantage I'd see of having an Airbnb suite is the potential to have family and friends stay there when  visiting. Not for everyone though!
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 14, 2018, 07:29:36 PM
Do you market to the Sundance film festival visitors? (I think I have your location correct)

Sounds like it did ok overall. One advantage I'd see of having an Airbnb suite is the potential to have family and friends stay there when  visiting. Not for everyone though!

Yes, we were booked for all of Sundance (and will be again this year) at ~$200/night or more. That's great, but it's only 2 weeks out of the year.

The reality is that the nightly rental option needed to be *way* ahead of just renting long term to be worthwhile. It's basically even. IMO there's not much reason to keep putting time/effort into nightly rentals at this stage.

I agree that it's nice to have space for guests, but the house is ~4200 square feet, so that's never been an issue anyway. We can easily accommodate another family of 4-6 people without even using the apartment. I guess if we wanted to host a family reunion/big family ski trip it would be great, but I don't know if that's ever in the cards.

-W
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: Dicey on January 14, 2018, 08:48:46 PM
Thanks for the update, Walt. Sounds like you have the best of both worlds. Renting long term for now. When the snowpack improves, you'll always have the option of switching back. And forth. Or not. Sweet to have options.
Title: Re: Your thoughts solicited: basement apartment conversion
Post by: waltworks on January 14, 2018, 09:29:57 PM
Oh, yes, I'm certainly happy we did it.

I think the lesson (for me) is that hands-on hosting/hospitality is something you need to pay yourself really well for, if you're going to go the nightly rental route. My wife really wanted to do nightly rentals and try it, and we'll keep it up for a bit longer (ski season could turn around, you never know).

If you add it up over a full year it's probably pushing 100 hours of total work that we put in. 100 hours to make $15k is pretty good! But as a long term rental I'd be shocked if I had to spend more than, say, 20 hours in a year (we sold the last of our SFH rental properties this year, but I have 15 years of landlording experience). And, um, 20 hours is a lot less than 100. Plus there's no need to stress out about going on vacation and having someone book the place randomly when you're out of town.

TL;DR - AirBNB is cool. It can be more work than it's worth.

-W