That’s another mistake, and one made by far too many AirBnB hosts. I would never have a rental of any kind where I’m not there to manage it. I say this as someone who managed 700+ units of rental housing for a large landlord for over 3 years. It seems like over half the posts in this forum are about problems resulting from hosts not living on site, especially for whole house rentals.
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I wasn’t able to see the spreadsheet. there is no link to it. edit: I was able to find it.
IMO there you bleed money because you pay someone to manage this for you and someone else to clean. I think 20% should include everything. There are subjects related to this topic on this forum. As I said, at least if you get even, you gain equity in the house.
If I were you I wouldn’t consider renting long term. I had very bad tenants before and ended up remodeling after the destruction they left. If I were you I would wait to see if the property starts to make money in the years to come. If not, I’d sell it. The prices will go up anyway.
Ditto on the long term tenants. My family had a long term renter in a home in the Central Valley in California and after only 2 years they had to evict the renter who lost his job and stopped paying rent for three months. Between the renter and his dog the place was trashed. We will need to spend at least 15K just to rehab it to a condition where we can sell and not lose money.
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What is your objective, exactly? Of course the mortgage principle payment is not an expense, it is a loan repayment. But wanting cash flow to cover the entire mortgage payment, PITI, is a goal for many folks. Maybe you can’t meet that goal, at 95% financed on an investment property.
But you also mention that you wanted to get into a market that, in your estimation, is heating up. So is flipping/price appreciation of the property what you are really after? If so, any profit from STR, excluding the mortgage principle, is icing on the cake.
I agree you should complete a 12 month cycle to flatten out any seasonality on the STR income. You may have more control over the condition of the property with STR, plus no risk of costly evictions, compared to LTR. Are there any business travel marketing opportunities – hospitals, schools, etc. – that you could put some energy toward?
If your goal is just rental income, not necessarily property appreciation, another analytical approach to consider is cap rate, as noted by another poster. This is your net income (again, including mortgage insurance and interest, but not principle) over the value of the property, or return on your investment. This tells you if you would be better off putting your spare cash in the stock market instead. My understanding is that most landlords look for a 9-10% cap rate in low and moderate markets, but may consider a 6-7% cap rate in higher end markets.
Here is AirDNA’s analysis from 2018. https://www.airdna.co/blog/best-places-to-buy-a-vacation-rental-home-2018
Good luck. As others have stated, once you have a year under your belt, maybe consider a hold and sell strategy with LTR, if you still believe you will benefit from property appreciation.
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@Liface2 is your property near a hospital or major university? What would bring your average guest to the area? Also, if you have read several stories about profitable airbnbs, I can’t imagine that remote management would be one of the elements that would make an Airbnb successful. I think that your first experience as a host should have involved day-to-day, hands-on work, including cleaning, etc, until you were well established.
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This is what I was getting at earlier when I asked what made the OP choose to purchase where he did. The AirDNA link is also correct. We have two full home rentals. We have never cleaned it ourselves and both are maintained by an on-site concierge or a lock box, gardeners, pool man, cleaners, and the help of Amazon Prime Now and task apps. I do not think you need to clean yourself but you need to be in a market that can sustain all the additional help. Both full home rentals generate revenue at 3x-6x more than expenses. Our lower performing home we are actually in the midst of selling because the home was not originally purchased to be an Airbnb. It was purchased to build equity (which it did, very quickly in the 4 years we’ve owned it) and the market is peaking. Your long term goal with the property should be dictating what location you choose, what type of home you buy, and thereby the month to month expectations.
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@AFineHouse Lu, your property and target-guest is upscale and is not comparable to the OP so we are not comparing apples to apples. With more modest properties, outsourcing management, cleaning, etc, is not necessarily wise…By the way, your properties are lovely…
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Yes I would say the market would need to allow you to charge $250+ per night in order to justify so much outsourcing. If others are charging below $100 and they are comparable in value it would be not seem sustainable.
In markets such as Joshua Tree (that is mentioned in the AirDNA link) you do not need a pricey property in order to justify premium pricing. Just quirky and unique.
But you’re right. Our investment strategy is different, it’s a relative scale, but no matter what it’s important to go into it with a plan.
On the other hand, unloading the house at this time of the year given all you have done to it should not be a problem.
EXACTLY!!
So many naive people thinking VRs are plug and play. I would never live far from mine
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20% is usually the going rate.
Are you able to add the link to your spreadsheet again?
Going rate for what exactly @Breezey - what sort of services would you expect to be paying a co-host for for a 20% cut and what would that relate to in cash terms?
Surely the rate depends on the services being offered and how long they are likely to take a co-host to do on average.
And of course the rent out rate. 20% of £30 is very different than 20% of £300.
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I am a real estate broker in a vacation destination and many of the buyers talk about doing a STR and this is my advice to them.
Do not expect STR income to cover the mortgage, remember if you do not live here you will need to pay someone to clean and cohost. What you can reasonably expect is that is pays for the costs outside of your mortgage, your taxes and insurance and utilities. Anything beyond that is a bonus. Do not buy this property if you cannot afford to carry it 100% on your own.
RR
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Have you considered charging extra for more guests, such as 3rd and 4th guest.
I would think you need to differentiate your listing from 1 bedroom comps.
Not sure what your market comps are though
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In an oversaturated market, you’re competing against hosts who live on site/in town, do their own cleaning, and don’t have a big mortgage.
I’m not sure what the property manager is doing. A handyman can be paid hourly.
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I am in Pittsburgh myself but my story is a bit different that the OPs. I basically wanted to flip a house with the intention of opening some artists retreat, sell it for profit or rent it out on Airbnb or just move in and sell my other house… I had no idea of what to do with it other than flipping it. I must have seen too many shows like Fixer Upper, I know 
So, I purchased a very cheap 2200 sq ft 4 bd victorian foreclosure in a very cool but underrated part of the city (west end).
Remodeled it extensively and, until I figure out what to do and how to make money by turning it into an artist retreat, I put it on VRBO and Airbnb (my son’s college bill needs to be paid).
My realtor at the time tried to steer me toward buying in the trendiest neighborhoods which meant a lot of $$$$$. No thanks, I said, why shall I put the money in the bank’s pocket when the guests who come here have no idea what the cool neighborhoods are and all they care is to be close to X or Y point of interest. So in my case I’m close to downtown and the stadiums and I have no lack of guests, no matter the seasons. And I didnt spend an arm and a leg on the house itself. I do my own cleaning and management, so I save a lot. The income the house generates pays the mortgage, the bills and then some, so I’m very happy because it basically pays for itself and I gain equity. 250$/night for a house like the OPs is a bit unrealistic price here, like @AFineHouse suggested. For example I charge $150. Perhaps bigger, more luxurious houses could ask for that price. Remember, Pittsburgh is not a big city, the cost of living is lower here and consequently the asking prices for rents and such is lower too.
One time I had guests 4 musicians from Israel who were looking to rent in Sq Hill because they were going to perform at a church there but their manager said the prices were prohibitive for a similar house like mine in sq. hill and they wanted their own bedrooms and room to practice. So they stayed with me and commuted 7 miles to sq hill.
In the OPs case: he is close enough to Carnegie Mellon Univ and Univ of Pitt. I am not sure if their shuttles pass by there because his house is technically in Greenfield, south of the highway, not Sq Hill proper (north of the highway), but nowadays realtor try to claim that houses are in the trendiest and more upscale neighborhoods when technically they are adjacent to them. I think it’s a technique to confuse people and ask for more money.
But in any case, lots of grad students and visiting professors might chose to rent in Greenfield because it is cheaper than Sq Hill and close enough to hang out there.
He could put the listing with the universities’ offices of foreign students and get good tenants this way.
Visiting professors and responsible grad students might be preferable to rent long term if this is an option. Another would be renting to traveling nurses (responsible people). In this way the 20% commision could be forfeited. The OP could manage this on his own and only come here like once or twice per year when someone moves out. And if something breaks, have the tenants report it asap and have the OP personally call his plumber, electrician or whatever to fix it and pay him for the work.
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This is good advice, adrienne! When you read about these rentalpreneurs who seem to have hit a home run – they’re leveraged and cash flow is covering their mortgage (or rent if they are subletting), they’re making a profit from STR on top of that, AND if they are owners the property is appreciating so they’ll gain on that at sale – and if it’s not a total fantasy – when you read between the lines there are always other factors. They started with one cash purchase and built a portfolio of properties from there; they totally busted their butts doing all their own contracting and maintenance, sleeping on friends couches to book more nights, etc.; they are ruthless cheapskates with thrift store furnishings and minimal amenities; maybe they skirted regulations and contract provisions to arbitrage rental rates or get primary home financing for an investment property. Also unless you are a developer/have deep pockets, you are far more likely to make money in a low-mod area than high end, as there is more divergence between cost of property acquisition and rental rates. In the U.S., I would advise a young person to buy an unrenovated properly zoned duplex with FHA financing in a somewhat dodgy but potentially gentrifying area near some major businesses or attractions, learn to do repairs and maintenance themselves, and LTR or STR the second unit.
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Like me. I rent out a guest room that would be otherwise empty, Airbnb paid for remodeling that I can use in the future of the care of an aging loved one or my own hire-in help. Airbnb pays the taxes, insurance and maintenance on the entire home each year. I’m retired and if I weren’t doing Airbnb I’d be sitting around doing nothing. I have a tremendous amount of control of my schedule, don’t have to commute or even get dressed. As another poster stated I’m getting a good salary to clean my own home. I consider it all profit. And some people who buy property as an investment or depend on Air income resent it because I have a competitive advantage but that’s not my problem.
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That’s what I did. Basically I had the money to invest in this and after Trump got elected I was so worried that something was going to happen to the markets so I wanted to diversify and invest in something neutral and since I’ve always wanted to flip a house I hurried to buy this distressed property.
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I think what people are saying is that that 20% usually includes cleaning where here it does not.
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