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Hi, everyone! I’m Matt, and I’m currently on the hunt for my first AirBNB-dedicated property.
I’m seeking advice from hosts with experience on the best places to buy a vacation rental in the midwest with all things considered (location, taxes, ROI, restrictions, home price, etc.). My budget is the less than or equal to $300,000 range, and I’d like to stay in Wisconsin, Illinois, Indiana, or Michigan.
To give some context: I was initially looking in the north Illinois area, specifically the “Chain O’ Lakes,” but without much luck. My thought is that Illinois may not be my best option, due to the high taxes here. Thus, I began looking at the surrounding area. My realtor recommended a few places in Wisconsin (St. Joseph, Browns Lake), and a few Google searches for “best AirBNB locations” recommended Milwaukee, WI and Indianapolis, IN. I really don’t mind if the location is more nature-ey (lakes, camping, etc.) or more urban. I’m simply looking for the best overall short-term rental investment.
Thank you in advance for your valuable insights, and for helping a young aspiring entrepreneur make the smartest move possible.
More important- what will your style of management be? As a new host you will have many pitfalls in front of you.
Have you signed up with Airbnb to see the offerings and occupancy in the areas you are interested in?
Firstly, many locations are bringing in restrictions on non live in hosted properties.
Your cleaners will make or break your listing.
Your neighbours can make hosting hell.
What will you do when there is an issue at your listing? Even simple things like who takes out/ brings in your garbage bins?
What market are you aiming for?
I have 4 listings and have been doing this for 4 years. I live around the corner and am available 24 hours a day.
I’ve certainly considered the drawbacks of living far away from the property. As I’m sure you know, it can be done.
Also, I think we’re getting away from the meat of my question, which is whether there are any midwest location suggestions the community can offer where they’ve found success and where the restrictions (or lack thereof) allow for a good host/guest experience.
And my question about the pitfalls wasn’t general. Rather, @Debthecat mentioned that “as a new host,” I would face many pitfalls. Just wondering about this doom-laden comment.
I was only sharing my views after hosting for 4 years.
Airbnb is not host friendly!
I can see most of your profits leaving your pocket when you are not close. I could not be a long distance host.
You will also need to look at what insurance is available to you for STR.
I strongly recommend that you read everything on this site - it will give you a good idea of what the hosting world is like.
Lastly- why would any host want to increase local competition? This is an odd time to start hosting… many hosts have either closed down, limited their listing or converted to LTR.
Whole homes have a party problem, and new efforts by Air to try to control the party problem will not be very helpful. You MUST have external cameras on the house (which you must disclose in your listing.
Personally, I would never do anything but on-site hosting, since that eliminates about 75% of the known management issues. You need to have someone nearby who can be at the house to deal with emergencies at any time, someone that you trust to deal with shutting down a party or a bad water leak at 2 am., and who can meet guests at check-in to ensure that only those who are on the booking arrive, and who will remind guests that they live nearby and will be checking to make sure that there are no problems on a regular basis.
You should browse through most of the posts on this site to see the wide variety of solutions to problems, and so that you can anticipate the problems you might have. There is a lot of good information here on almost every aspect of short term rentals. If you have a particular question, a quick search on the site will bring up a wide variety of opinions on teakettles, duvets, sheet fabrics and colors, decor, and management styles. We’ve had some long debates and great fun with many of these topics.
So look around here, and then come back when you have questions that aren’t answered here. One thing we do ask is that if you find an old thread from several years ago and you want more info on the topic, please post a new query instead of reviving a 3 year old post.
As others have said, the posts on this site will tell you about those pitfalls. You really need to read the posts, since most of them are from someone dealing with a problem. Browsing through the posts will give you a good idea of what the problems are. You will also see many folks coming here, asking for advice, which we freely offer, and then ignoring the advice because it wasn’t what they wanted to hear.
Specifically and anecdotally it seems that new hosts have more than their share of problems. Like people who bargain for a discount then have a big party where the house gets trashed. If I’m up to no good I’m not going to pick a host who has been renting for years and has hundreds of good reviews.
One of the things that new members here really hate is our tendency to not answer the question. Our first impulse is to tell you what you’re doing wrong, or how you should be doing things differently.
You should also be aware that this is an international English language forum. There may be some people here that live or rent out in the upper midwest area which you have your eye on who would like to help out a future competitor, or there might not.
The other thing it might be helpful to know about the membership here is that we have very few remote investor hosts or as I like to call them, absentee landlords. Most of us live at or near our property. For many if we don’t live at our rental it’s a true second home as much or more than an investment property. So there might not be that many of us who have gone through the kind of process you are now.
All that said, I think Debthecat has some good advice. One is what sort of market do you want. Do you want families looking to rent an outdoorsy place on the shores of a lake or river? Or a small but nice condo that would appeal to a business traveler or couples visiting a big city? If you say you don’t care and you’re asking your agent to look at all properties in the 200-300k range in 4 states you’re going to drive them and yourself crazy.
Also you have to think about your cashflow and the current pandemic. A downtown Indy rental might be great when there are conventions, concerts and sporting events but how will it do over the next few months?
With many kinds of property prices are high right now. If you can watch the market and be patient you could have a good opportunity. If I had $ to invest in a rental property I’d be looking in a city because cities will come back after people are done “fleeing to the suburbs” and when we go back to more like normal (that could be 2 years from now). If I had money and wanted a second home for my own use I’d have different parameters.
Given that tourism is down in many, many places—and given that property prices are up (at least where I live in the Midwest), I don’t think this is a good time to invest in any kind of vacation rental.
My only suggestion is that if you buy something, you should be certain (through a business plan) that you can afford it, even if you get a fraction of the rentals you might want.
And one more thing that might not have been mentioned: Someone did say you need insurance that is specifically for a short-term rental property. That’s true. The other thing is that you absolutely cannot count on Airbnb’s “coverage” to cover any kind of loss. Very unreliable.
@salebote One reason that responses here are going “off topic” as far as you’re concerned, is that you are sort of putting the cart before the horse.
You seem to have some idea that you’re going to make an investment which is going to bring you a good income, but you don’t seem to have bothered to spend any time reading hosting forums and aren’t even aware of the pitfalls of remote hosting. Eve hosts who live nearby their Airbnb can have issues with partiers trashing whole house listings. Nor have you said or maybe even thought about what market you are going to try to attract.
You know which hosts were screaming bloody murder when Airbnb refunded guests for COVID? The remote hosts who were over-leveraged and couldn’t go 2-3 months without guest payments without having to default on the mortgage.
You need to realize that having a Airbnb isn’t some sort of easy money. It’s hard work if you are going to make a success of it and as others have mentioned, starting up an Airbnb in the middle of a pandemic, when travel is limited, isn’t the best business plan…
It is essential for you to have a business plan, at a minimum projected income and expense statements and a cushion for business interruption (unless covered by your insurance; note COVID is generally not a covered event for that purpose) and major repairs. You are looking for a cap rate of 9-10% for moderate housing, down to 6% for high income areas.
You say your agent is managing STRs; they should be able to give you sample income/expense statements as a start.
I concur on other timing comments here. The rental income over the short term will be good in vacation/more remote spots due to COVID; accordingly, prices are up for those types of properties as people seek an escape hatch. That said, buyers prefer turnkey properties, and if you have money/skills/time a fixer-upper might be more cost-effective. Consider climate change and flooding risk if you are looking at Great Lakes properties.
KKC is right; city property prices are likely to be depressed over the short term for the same reason and there may be some good deals from a longer term perspective. I do not wish to encourage you to be a bottom feeder off the next wave of evictions or small landlord bankruptcies, but current U.S. housing market and policies are bigger issues and beyond the scope of this topic. You can bet there are deep pocket investors who will be happy to scoop up depressed city property at bargain rates (see 2008 foreclosure aftermath). A city property is also more amenable to LTR as a backup plan.
I’ve noticed it happening more and more here, hosts that I suppose were our competitors (similar style listings) have given up. One just round the corner is completely closed up, he had two apartments and a studio, all with decent reviews and his occupancy rate looked to be not bad either.
Just this morning I noticed another host has put their place up for sale, we actually stayed here for a week while sorting out the shit for our place.
It’s something OH and I have discussed, this current situation will decrease our competition but what I’m seeing now is the good well established guys giving it up, not the faceless investment hosts.
The curious situation is though that on Airbnb the number of properties in our area has shot up, by a considerable amount. However once you look closer, many are new without reviews and many are, I think, recently reactivated properties who haven’t had a live guest for over a year, or in some cases two years.
BDC & VRBO give a better picture in respect of availability of properties, and it is down, by around 30% I reckon. The increase with Airbnb is down to folks being skint and Airbnb is a quick and easy option for listing.
It makes sense to me that some people at it awhile have decided it’s just not worth it to risk getting a disease that we now know causes long term complications. Others, seeking some income in uncertain times are getting into it or reactivating old listings.
There’s new attention being given to the connection between poop flushing and aerosol transmission. So in listings with shared plumbing some folks might be nervous about that. That’s in addition to ventilation issues in some places.
Respectfully, it’s not the same for everyone. I’ve found it to be one of the easiest jobs I’ve ever had. It depends on one’s situation, personality and listing. While the “pay” for some might be low, when I consider everything it seems quite fair to me. It’s only since covid that I’ve had to do a different calculation. Now the “cost” is higher so it’s not as worthwhile.
I’ve helped 3 new hosts Get started and helped my direct competition with referrals when I can’t accommodate the guests.
Competition is going to happen no matter what I think or do.
I have the choice to develop positive business relationships and may get referrals and certainly mutually share information about repair services and cleaners OR be a self-preserving island with no Local peer support
Now may be the perfect time to start hosting. The money & quantity of rentals may be low now but a slow start so a new host has an opportunity to “figure things out” could be good
I’ve been hosting 6 years. Due to multiple financial pressures:
—One is now a 12 month lease
—The 2nd is listed for a 12 month rental starting 11/1. I don’t have a tenant yet BUT I’m considering selling it to get my equity (laid-off, need $$ and in the past 2 weeks HVAC died & had to be replaced and significant HOA assessment looming)
—-The third I’m seeking to do a 6 month rental then hopefully STR again next summer.
So I’m not exactly giving up, I’m trying to adapt to the current market conditions.
Plus my area is over saturated with STRs with many being offered at ridiculously low prices.
It won’t always be this way.
Reactivated properties—I think the Airbnb techies flipped a switch in their website “enhancements”. My snoozed listing popped up as active early and a Different discontinued Listing popped up as active.