I have a property I am interested in purchasing and would like to get some feedback from the board on my idea......
Background/Experience: I purchased a condo in Kansas City in April 2016 to use as an Airbnb property. Purchase price was $122k with a 20% downpayment (~$25k). Things were going well and after furnishing the unit I was accepting bookings almost immediately. In the first 6 months I was averaging about 90% rental rates at $80/night on weekdays and $100/night on weekends. I have hosted 25 trips, received 5 stars on each of them, and am a super host. At the time of my last listing I was routinely showing up on the first page of search results.
Total revenues were $1800-$2000 per month. Monthly expenses averaged about $1k (mortgage + HOA dues, utilities, supplies etc.) and I was on pace for $12k in profit or a 50% ROI in my first year.
This major success came to a screeching halt when I received a letter from the HOA board that "leasing the property for less than 1 year periods" which is not allowed. I went back and looked at my HOA documents which I had neglected to carefully peruse and was forced to make a change to long term leasing. I was able to solve this issue and secure a year long lease almost immediately after my last Airbnb booking for $1,100. Current cash flow is now $200 per month ($2,400/yr) or a 10% ROI plus principle pay down of approximately $2k/yr. Not great but not terrible considering the strategy switch.
Current Opportunity: I have found a single family home in a nice area within walking distance to many local restaurants/bars. The key feature is the first floor is a 2/1 and the upstairs is a completely separate unit with entrance via an outdoor staircase. The upstairs unit is a 1/1 with a full kitchen. My plan would be to live in the first floor and Airbnb the top unit. Similar Airbnb listings in the area are very popular and renting for an average of $60-70/night with what seem to be full calendars and 50+ reviews at multiple properties.
The property is a Fannie Mae foreclosure and listed at $154k. It is in OK condition but from a couple contractors and my own preferences it needs about $10-15k of renovation to get it where we want as far as comfort and style. Comps in the area are in the $150-160k range with some updates.
My Assumptions: At a purchase price of $140k + $15k in renovations I would be looking at a total investment of $155k. My plan would be to put 20% down and fund the renovations from savings - say $45k upfront.
Worst case scenario: I pay the mortgage and live there as my primary residence with about a $750 payment.
Medium scenario: The Airbnb covers the mortgage and I live rent free for the next 2-3 years until I am ready to move
Best scenario: The Airbnb is as successful as my past experiences and I cover the mortgage plus $700-1k in profit each month.
I would stay in the property as a primary residence for at least the next 2-3 years and would then convert to 2 separate long term rentals which at current rates in the area would equal $750 and $450 respectively.
I am interested in hearing everyone's thoughts/opinions and if you think this a worthwhile investment. Also, if anyone knows of quality contractors in the KC area I would be happy to get some additional quotes on the renovation piece.
Thanks in advance!