My plan as a complete newbie host

Hello all. I am sorry if Newbie advice posts are frowned upon. I just really do not know where to turn to find out more information. I recently stumbled upon a house in a city that I am planning to move to in a year or two. It is my dream home in so many ways. The timing is just not right to move there right now, but since I am really interested in like a 3 street area of this town, finding the perfect house in the perfect price range and perfect location has me now trying to find a way to buy it. Putting a long term tenant in it seems less than ideal. I have used Airbnb many times when traveling. I like the idea that I could use the house as well when I want to as a vacation place. Yes there is the expense of furnishing it, but otherwise the house is turn-key. I really do not know how hot the market is where the house is. There are about 8 other listings in town (small-ish beach community in Michigan). One woman seems to dominate the space. She has three homes on Airbnb, one of which is very close to the house I am looking at. That house in particular is very well booked for the next month or so. Her prices are around 130 a night. My house is larger, and has a better location (2 blocks from the beach). The price estimator says I can make $530 a week on Airbnb. How accurate is this? What other research can I do to see if this would be a viable option? I would need to make at least around $1200 a month to cover expenses. I really appreciate anyone’s advice. Thank you.

Everyone’s tolerance of risk is different, but I’d personally not buy a place without being 100% sure of the market and the returns. If it’s your dream home and you plan to live there, then you can’t really go wrong with real estate as a long-term buy. But a whole lot can go wrong in the short-medium term, and it’s worth considering those variables before you jump in.

To start, Everbooked is a neat pricing software that gives great data regarding returns from AirBnB based on the overall zip code, size of the house, seasonality, etc. I think they offer one month free, so I’d be using that to get a better idea of what you can expect for returns. Also as a “duh” statement, some months will obviously perform better than others. Personally, I’ve outperformed the metrics on Everbooked but I don’t pretend for one second that next month could be the same–I could be down. So, I’m personally focused on year-over-year averages.

With this said, I’d make certain that you have a nice cushion in case anything happens. A new air conditioning unit, for example, can cost $2-4,000. In addition, Air can kick you off for no rhyme or reason, which makes it very risky if you absolutely are counting on it to pay the mortgage. Then, you’ll need to be absolutely certain that you can rent the space long-term for at least this amount. Err on the side of caution when considering any such scenario (for example, expect the house to be vacant for a month while finding a tenant).

None of us can say what’s best for you and your financial situation. This might be the best decision you make and you’ll look back wondering why you didn’t do it sooner, or you might regret this very expensive anchor. Or maybe it’ll be somewhere in between where everything’s fine but you realize it’s not for you (or it’s easier than you thought), and it all works out in that you sell/hold with no problem. So, nobody’s advice (including mine) can tell you how this’ll work or what option is best. We can just throw our two pennies in the arena and wish you all the best.

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Do you live close enough now that you could go to the house to take care of any emergencies? If you search this board you will see repeatedly that seasoned hosts caution against hosting from a distance especially when you are new to hosting. I would suggest that if you are determined to give long distance hosting a try, you create a spreadsheet detailing how much you can charge vs. how much you will have to pay out to housekeepers, co-hosts (to meet and greet your guests), handypersons, etc. I assume that you won’t be able to find a housekeeper with enough flexibility to clean between back to back guests, so you will need to have a guest free day between each booking.

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Very good points…I appreciate it. I can afford a few months of vacancy if I had to. I could pay the mortgage and costs if needed, although I wouldn’t be able to have much fun in my life for those months! I have been in the real estate field (agent, office manager, worked for a mortgage company, and now a title company) for 5 years so I guess it makes me less nervous to buy a second house.

The house is only about 20 minutes, on average, further from my work than my current home is. So its very reasonable to get there after work. I currently drive an hour or more to work… I could even stay that night if needed and go to work the next day. I would not be able to meet my guests, however I could use a keypad type system and change the code when I clean the house. I would be totally willing to drive to work from this home every day, its my significant other that wants to find a job closer.

There are certain hosts on the board who invest in properties specifically for Airbnb use, but they are very very experienced and do their homework in terms of the area and what ROI they can expect to get. If you really love the home and can afford the mortgage even if there are no renters then by all means go for it. I would also advise installing a security camera as well. There are plenty of discussions on this board regarding hosting from a distance, even if you are only 20 minutes away.

I wonder about the woman who has three houses in this city…last year, she had two, now three. I wonder if she has invested in them simply for Airbnb purposes. If so, she myst be doing pretty well…and they are all very well remodeled (the one she has was basically a $14,000 tear down that she rehabbed). Security cameras is a good idea. The house is in a nice area of this town, but there are parts of the town that have some pretty serious crime.

Where is it J? If you don’t mind revealing? :sunglasses:
You really can’t base your potential off of what someone else is doing. They may have been hosting for a really long time.

Where at in Michigan? I know a lot about MI real estate, especially SW Michigan, and can advise on the Airbnb-ability if needed. :slightly_smiling_face:

Hi Natalie. The home is in Port Huron.

It’s hard to say regarding the woman who “has the three homes.” I put that in quotes because she might just be a property manager for a local vacation rental company, and she may not actually own said homes. You might want to reverse-image the Air listings and see if the property comes up elsewhere. You can then see if her profile picture is in any rental company staff site. Or, maybe she was smart and got these homes for a pittance after the crash. Or, her great-great-great-great grandparents founded the town and she’s flush with money and local properties, haha. Who knows. You can always book in one of her places and ask her yourself. :wink: I’m always happy to share experiences with local hosts (and I love picking their brains, too), so she may welcome doing the same with you.

One way or the other it doesn’t matter. Each property can be completely different in terms of how well it does. It’s relative.

@jgushman13 -

EllenN is 100% right about putting together a business plan on a spreadsheet. You’ll have to guess on the occupancy rate for your area (maybe someone on the forum can help), and you’ve already researched a nightly rate. But don’t forget about insurance (higher than just regular insurance because of the AirBnB aspect), property taxes, maintenance, utilities, linens, cleaning, amenities (coffee, tea, board games, etc), the 3% fee AirBnB takes. All of that tends to eat up the revenue pretty. Don’t forget your time - you’ll end up spending a lot of time on guests, answering inquiries, etc. , so you may not have a lot of time for fun the next couple of years if you go into short-term renting.

Just be sure you have a “Plan B” that works. When we bought our second home, I looked at the total expense of letting it sit idle, and saw that I could afford for that to happen, but I’d have to stop saving to my 401k. Not an ideal plan, but it was switching from one investment to another, although the real estate was the poorer investment.

By the way, if it’s a second home and you rent the whole house out at once, you might also want to advertise on Homeaway/VRBO, and Vacation Home Rentals, as many guests search there for whole-house rentals. I have a vacation home in the Caribbean that we rent out in its entirety, and we get 80%+ of our guests from VRBO/Homeaway.

I checked out Everbooked, I am just not sure how to know how likely the place is to be booked? City is Port Huron, MI. Doesnt seem to be a whole lot of data for the area.

When you first calculate, this seems very doable. But when you factor in all the expenses - your time, wear & tear, insurance, licences, mortgage, property tax, guest supplies, maintenance, emergency situations (plumbers, glaziers, electricians, cleaners etc.), renovations, replacements and much more.

We are lucky enough to have back-to-back booking for the majority of the time but the profit margin is between 30 - 40%. So be sure that you’ve done your sums correctly. :slight_smile:

In their market reports, Everbooked usually lists occupancy rates by the month, including the hosts in the first quartile and in the median range. I’m not sure if it’ll give as extensive of data in smaller areas, though.

I have no idea where this is but I imagine it is lovely. Nevertheless I am in a lovely (touristy) area too. But I still can’t rely on Airbnb to fill the rental completely. I have to promote the listing and also rely on repeat guests to be fully booked. That’s work.

You got it Robert! I work in the northern suburbs and currently live between Detroit and Ann Arbor. You are correct that there are a lot of people who frequent the thumb in the summer. Winters are what have me concerned as well.

You have to factor in the seasonal thing. Some of us are more seasonal than others. I am in Kona Hawaii. You think that would be year round back to back booked but in summer it totally dies. Right about June 1 through about sept 1, I could not even give my place away. As a long time host, I know these aren’t random patterns. Every single year this is what happens. Very few people want to fly to Hawaii in the summer when it’s so nice where they live. I make the bank in the winter and put it away for a rainy day because that day is the first day of June. I would imagine Michigan seasons are super short. You might have three months max in that location when you can really make some money.

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I only have experience with Lake Michigan beach towns in proximity of Chicago but I’d imagine you have a Detroit and Ann Arbor market.

The summer season along our lake (New Buffalo, South Haven, St Joseph, etc) is largely booked up a year in advance as people “hold” their spots One week minimums are standard from June-Aug. I’m paying $1200 for 4 nights at a 2 br cottage that is a block from the beach – it’s a very simple bungalow, not nicely furnished or updated. Vintage, used furnishings, etc. I would venture to say that most of these homes do not find their high season bookings via AirBNB. They probably book through their own private sites or VRBO and then they pocket the AirBNB markup. For low season yes, as hosts drop minimum stays and winter calendars are largely empty. June-Aug is when hosts try to cover their annual costs although there are definitely some winter weekend getaway possibilities and I’ve looked into taking the kids out of the city in the winter for a weekend in the “country”. Places that are 300/night in Summer are 100/night in winter and calendars are still empty.

I agree with Dudley that large homes have a niche market as families meet for annual summer outings, etc. There are also possibilities of writing retreats for academics and artists, things like that. Figure in your commercial insurance costs.

That’s pretty much what it is in the desert for our place in the Coachella Valley: Palm Springs, Palm Desert. Rancho Mirage. With the Coachella Festival it’s extended into part of April so I can count on 4 pretty good months, but after April it goes flat.