Lately we’ve had an influx of questions about short-term rentals like Airbnb, VRBO, and HomeAway. This idea is attractive for many people, because there’s certainly the potential to make a lot of income in a short period of time.
And since Natali and I have personal experience renting out our vacation home, we thought we’d share our opinions on what it takes to successfully become a short term-rental host! You’ll learn about insurance costs, tax advantages, and why it’s so important to do your homework before diving into the world of short-term rentals.
This episode of Investing in Real Estate is sponsored by Fund&Grow. Fund&Grow helps investors access business lines of credit with 0% interest. For $500 off your startup fee, visit morrisinvest.com/funding.
Book a call with our team: https://goo.gl/qr6iat Show notes: http://morrisinvest.com/episode412
Just listened to your podcast on Airbnb. Yes, you made some mistakes. The biggest one being turning a place you love into a shorterm rental. I agree with Natalie, it is easy to feel violated in that situation. My husband and I have a 3rd floor apartment to our overly large house. It was built in 1906 as a single family house and the third floor had been for the servants. Sometime in the 1930’s (stock market crash anyone?) it was converted into three- two bedroom apartment each with living room dining room single bath, and kitchen and front and rear entrances. It changed ownership often from 1933 to 1963. From 1963 to 1999 it remained in the same family. It changed hands again, then got caught in a domestic dispute, with one party trying to “firebomb” the other party out of existence. My husband purchased it in 2001 with the intent to restore it to a single family home (also our forever home). 23 rooms, 5000 sq. ft. We decided to keep the third floor as an apartment as we had lots of family that would visit and spend a month at a time. It also provided a place for us to reside while we were renovating the rest of the house. We then started booking the apartment with corporate recruiters who had to relocate families for a few months, etc. In 2015 we decided to try Airbnb. Our first rental was a disaster. Our fault. It was a long term rental. OUr mistake? Beginning to accept rental payments outside of Airbnb. Hadn’t read all of the fine print, ad didn’t realize the amount of insurance that Airbnb was offering and that the damage done to the apartment could have been reimbursed, had we continued with the Airbnb service. We were too nice and did not enforce the rules.
We needed this to work though, as we had another building that we just lost the high paying tenant on, and we needed to lease that house out as well. Fortunately it had already been furnished. We now consider ourselves semi-pro at this and added another property this past Fall. We had had so many requests, we had to turn people away. We are in two different towns about 2-1/2 hours away. We couldn’t deal with the one property if we didn’t have reliable people taking care of it. Our guests are often repeats, and almost all are business related. The winter months are taken by a State legislative delegate for we are within walking distance of the Capitol Campus. The balance of the year sees it share of wedding, and reunions, but travelling doctors and repeat business clients take up the rest. We are on track to gross $30-$32K from that property. The third floor apartment sees it share of wedding, funerals, reunions, graduations, etc. however, being business oriented, we have quite a few month long or quarter long guests with work in the area (oil and gas). The third floor apt. (yes our home is an asset producing property) has gone from $8K the first year to $16K the year we just ended, and we have no doubt we will exceed that amount this year. The most recent property that came online in September was the other half of a duplex that we had purchased in Feb, 2018. The one side is a permanent tenant (2 bedroom 1 bath) for $700/mo.
The other side (3 bedroom 1 bath) is the AIrbnb. From Sept. to December it was leased to a couple for a reunion (1 week), 2 business travelers (2 weeks) and 4 oil and gas workers for 8 weeks. We grossed $8k for those 4 months. Currently January is leased at $1350, and anticipate the rest of the year to be leased out shortly.
We’ve made some mistakes along the way. We’ve also made some really good friends and work really hard for the repeat guests.