The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: theSchmett on May 12, 2016, 07:57:40 AM
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My parents are considering retiring somewhere far flung, and in order to keep them close by at least part of the year I've been thinking about buying an apartment for when they are here, and when they are not renting it out via Air BNB, or using a similar arrangement.
I live near the beach, and a theater and arts district, and near some vibrant downtowns, so I think there would be interest.
I am wondering if anyone here has any experience with Air BNB or a similar situation.
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I highly recommend reading Afford Anything's experience with this. http://affordanything.com/blog/
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I highly recommend reading Afford Anything's experience with this. http://affordanything.com/blog/
Here's the start of the four part series: http://affordanything.com/2014/03/20/airbnb-experiment-impulsively-started-vacation-rental-business/ (http://affordanything.com/2014/03/20/airbnb-experiment-impulsively-started-vacation-rental-business/)
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so I think there would be interest
My advice would be to do the research first and find out some hard numbers.
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Make sure you look in to the status of airbnb and its relatives in your local jurisdiction. There's no guarantee it will be legal in 5 years, or that you won't be paying unexpected taxes or fees, or subject to new building code requirements.
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This is all good stuff thanks everyone!
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Make sure you look in to the status of airbnb and its relatives in your local jurisdiction. There's no guarantee it will be legal in 5 years, or that you won't be paying unexpected taxes or fees, or subject to new building code requirements.
We do it with our primary residence, and apparently Denver is about to pass a law requiring lodging tax/licences, which is a pain, but it's been great for us! There will be downtime so as long as you don't absolutely require it be rented to make mortgage or something, you'll probably be fine
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Unfortunately, while I would consider breaking even to be a profit, I would need it to be cash positive.
Looking through Zillow I found an interesting candidate, although twice as expensive as I would want it is 3 units, one of which is an office, but VERY close to the downtown and one of the theaters. If the office stays rented out that would cover most of the mortgage, but we are talking almost $600k asking price which is quite a lot! And property taxes in my part of the world are high. But what can you do.
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Hate to be a downer, but many local governments do not allow them, but I caution you that even if they do (or don't) what do you think about the liability? Your insurer probably wouldn't cover a claim if they knew about the home being used in a transient nature (e.g., slip/fall, fire, crime). My guess is your mortgage company would have an issue as well.
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Not a downer, I appreciate you raising the issue. I'd have to look into it, and see what the municipality thinks.
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Wait for a one unit since the three unit is higher than you want.
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Be sure to research airbnb rates and occupancy levels before you commit to a purchase.
Keep in mind that it is very easy for people to get into the airbnb business. Because of this, rates can fall to a low market level quite easily.
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My sister recently started doing this and has had much better success with VRBO than Airbnb. Apparently VRBO has much better customer support, which is good for her if she has a question, but also draws in more renters who are scared of airbnb.
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Unfortunately, while I would consider breaking even to be a profit, I would need it to be cash positive.
It's doable to be extremely cash-positive, especially if youre in a desirable area in a touristy town. Our experience has been feast/famine however. So you could run into a cash-flow issue on down months if you aren't careful. But that's sort of the draw/gamble with Abnb/VRBO, higher rates when booking, but less dependable cash-flows vs. long-term renters.
That, coupled with hazy laws concerning Abnb/VRBO, requires that you are either financially flexible, or have a good back-up plan if new laws get passed. Abnb is absolutely perfect for us because we don't need the money, just use it as a nice excuse to pay the mortgage, or some % of it, every month.
Also, if you're not going to be living nearby, be sure to factor in hiring a cleaning company between stays.