Sometimes you don’t need capital, you just need credit. Also many hosts are doing rental arbitrage, that is, they lease a place and count on making more on Airbnb than they pay in rent. The consensus of active forum members here on the topic of arbitrage is that it’s crap and we aren’t friendly to members who post about it here.
In debt up to their eyeballs? Would no doubt be living in a homeless camp if all their debts were called in.
its not necessarily true that an investor with several properties may be in trouble if debts are recalled - it depends on the equity within the property.
and i think that lenders of money seem to prefer to continue getting long term returns rather then see their loan return back to them in hard cash. the reality is that so long as the property hasnt been overvalued and a much larger sum of money hasnt been loaned against a low value property, the lenders money is safe and producing a return against their investment, recalling a loan and having the money just ‘sitting’ doesnt produce any return and might not be a good financial decision.
I’m impressed with the work you’ve put into the analysis and with that kind of approach you’d probably do very well as a host.
I also agree you’d get waaay more than what Airdna says, but the reality is that doing something closer to home might be the best. I’ve also watched a lot of videos and there’s an opinion that 3-4 bedroom houses will by far make you the most money. And some people don’t buy them, they RENT them and then arbitrage the difference. By renting and then using on Airbnb, you are not in for the whole mortgage but definitely the rent. Lots of considerations with that model and it’s risky, and so is your initial idea.
Bottom line is your level of comfort with risk. And the consequences if you don’t succeed. Every entrepreneur’s issue, right?
Don’t forget that in addition to the task of delivering your product, you still have to put in TIME…marketing it on multiple channels, either managing it from afar or up close. It will take a lot of time in the beginning but it gets much easier once you find your groove.
Here’s yet another idea: become a local co-host yourself. Use someone else’s risk as your learning curve if failure of a house purchase would bankrupt you. See if this really is for you, and whether it suits your lifestyle and family needs.
Good luck with whatever route you take!! We’ve been hosts since 2016 and have enjoyed it, but if we stopped tomorrow it’s not financially a big deal.
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Both our Airbnbs are large houses. It works because we paid cash for one, and the other has only a small mortgage that’s almost paid off, plus I do all the management and a lot of the cleaning myself.
If I were just getting into AirBnB, I would not buy large houses. I’d get one or two bedrooms, and under 1200 sf. Better yet, 600 sf or less. And I would not put a full kitchen in— just a kitchenette—enough so they could make coffee, toast, breakfast, sandwiches, etc., but not cook a full dinner. When we have had problems getting a house turned over in time, it was usually because the kitchen was heavily used and the stove left a greasy mess.
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Not true for us. The small two bedroom AirBnB house we had made us the most money. But then, we are not in a tourist area. Most people coming here are coming to visit family or coming for work. So I imagine which kind of house makes you the most money depends on your market and the kinds of guests you attract.
And the flip side of that is that they can also cost you the most money. A house that size is usually advertised to accommodate at least 6-8 guests, sometimes more with hide-a-beds, bunk beds, etc. As most experienced hosts know, more guests means more potential for damages, a big mess, being loud and disturbing neighbors, blasting the AC or heat in the whole house, leaving all the lights on, endless hot water showers, more wear and tear on furnishings and appliances, and so on.
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Yes they cost more to operate but then they cost more to book. It’s the profit that is what matters…people been doing this for a long time and making $$$.
What Muddy said is very true. And guests aside, a larger house is just more money to maintain period.
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Obviously.
When you watch those kinds of videos, they don’t tell you what prevents hosts from making a bigger profit on a large space.
What I was trying to say is that you could possibly make the same profit on a 2 bedroom that sleeps 4 as a 4 bedroom that sleeps 8 when you take everything into account. The amount of linen and bedding you need, how long it takes to wash it all, the utilities used in doing so, the amount of toilet paper, paper towels, soap etc. used, the hot water and electricity and gas used, the extra wear and tear on everything, etc. etc. Not to mention the hours more involved in cleaning a larger place that accommodates 8 or more.
And it also isn’t only the profit that matters, unless a host puts no value on their time or stress level. A 1 or 2 bedroom house is not nearly as apt to attract partiers as a 4 bedroom.
I think most hosts would prefer not to have to try to get a huge houseful of rowdy guests to quiet down, evict all the extra people found there, apologize to the neighbors, and spend days filing damage claims with Airbnb, and more days putting the place back together again, than to have an extra $50/ night in their pocket.
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This 100%. All things being equal, a 3 BR is a proven and better investment with higher returns and generally faster ROI for both LTR and STR. There is little additional maintenance or cleaning for 3 vs 2 BR. We’ve been in the real estate and landlord game for a long time. You make money on Bedrooms.
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Yeah a “2 BR” condo or apt with a great location may also do well, but will exclude certain bookings. 1 BR are more limited, for obvious reasons.
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It is all a numbers game. If one desires maximum profit, an extra BR or two gets one there.
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The biggest profit (not including capital growth) is usually made on the property you pay the least for when comparing like for like (number of beds and location) when doing LTR …
you shouldnt leave capital growth out of the equation, weve got properties (LTR) that initially just ‘wiped their feet’ on monthly return, but increased greatly in terms of capital growth - but as we all know, property prices can rise and fall … and i agree 100% with Jefferson, its all a numbers game and the longer in youre in it, the likelihood is that your margins will get bigger.
We have one 3bd 2bath house with a pool and one 2bd 2bath with a slightly better location. We get higher rents for the 3bd, and usually our check at the end of the month is higher for that one, but not always. At the end of the year, due to higher maintenance costs of the bigger house, they end up bringing us about the same profit.
I think bigger houses bring bigger families bring more wear and tear.
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What if having a 2 bedroom makes your living area and kitchen pretty tight? Would you still go with the 2 bedroom? I’m trying to decide to keep my area as a 2 bedroom or knock down a wall for the living/ kitchen area to be bigger and and just have a 1 bedroom
You probably haven’t missed anything. Many have invested having missed something and are regretting it. The piece that is often underestimated is the cost of insurance. It’s also good to do some quiet investigation into whether the state or municipality is considering regulations that could greatly influence your success. If I had it to do over again I would probably seek out temporary workers (there are many in the healthcare field) who need several weeks or even a few months to minimize my turnover while providing some flexibility for my own visits. That changes the applicable regulations, taxes and insurance, but could work. A lot depends on how protective NH is of tenants. It might be a hassle in my state.
Maybe you can add an exterior door and a private patio for home share guests with private entrance at your house:)
In my city they are about to pass a bylaw that STR must be owner occupied. Be aware that those kinds of things are possible.
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