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So I’m looking to purchase a property for airbnb rentals but I don’t have a specific city in mind. I will not be living there, in fact regardless of where it is I won’t be near it, but the place could be a possible vacation spot. I was thinking of reaching out to turnkey since I will need a full time property management company and ask them where the ‘slam-dunk’ cities are and where they wish they had more inventory but I’m not sure if they are the best source of advice.
Off the top of my head I am thinking Ft. Lauderdale, Miami, San Diego (as you can tell I am interested in beaches).
But an even greater concern is whether the short term rental property management market has matured to the point of being trustworthy. Long term property management has been around for decades and is much less ‘hands-on’ than what is required of of the short term management companies like Turnkey, Pillow, Guesty, etc.
How do i go about finding out which, if any, are reputable, and trustworthy?
Also, if anyone has any cities to recommend I’m all ears.
IMHO, this is a very risky move at this time in the industry. Please make sure that you have a solid, written business plan and that you have a vacation rental spreadsheet that outlines any and all possible expenses. I would never do this unless I had already intended to purchase a property for a long-term play and am just looking to break even. Somewhere on this forum is a good blog article that outlined how expensive it was to run an Airbnb. Start reading a lot of negative stuff.
Some things to consider:
You will need commercial insurance which is $$
Housing prices are climbing fast in many areas, if you are paying cash is your cap rate >5%? Is it worth the risk, really?
Budget unexpected flights because you will be going there more often than you thought
If you hire a management company, expect that their commissions will keep rising as they capture the markets - make sure you account for all the revenue sharing you will be doing with them, the government, etc
Personally, I wouldn’t consider any kind of budget travel - especially offsite - because competition will always be greater when you compete on price.
Find a niche that is incomparable. Make sure that your property is an apple surrounded by oranges so that comparison is subjective and your rates can be higher. This is harder when you are offsite and can’t lend a personal touch or manage your own messaging.
If your management company gets you in trouble with neighbors because of noise, etc - what will be your Plan B?
If the city shuts down STR, will your property value go down? What will you do in that case?
Note that depending on where regulations go down the line you could end up with nexus in another state forcing you to pay taxes that you had not expected. Also, when I was considering this, I looked for a property that was zoned in such a way that I would be legally protected regardless of how city ordinances went. I have recently decided that taking on another would be too risky and unless a no-brainer falls into my lap (with good Plan B and Plan C options), I’ll just stick with my one property and enjoy the bubble as long as it lasts.
I’ve said this before and others will disagree but I don’t think I could host if I wasn’t on the premises. (Our rental is just a few steps away from my own apartment). I know some people can manage it but for me, there are too many things that can go wrong.
I am very skeptical that you could make a profit buying a property to rent on Airbnb.
Mortgage interest rates are higher for investment property than for primary residences.
You are competing against people who are not professionals; therefore they price their rentals quite low.
Most of us find that if we have to pay someone to clean, much less manage the rental we won’t make a profit.
Many cities are regulating Airbnb rentals, mostly ones that are not owner occupied. For example, the Los Angeles City Council is proposing a measure that would limit rentals to owner occupied and limit owner occupied rentals to 90 days per year. Santa Monica, West Hollywood and San Francisco have already limited or banned Airbnb.
I read a lot of reviews so that I can see how to improve my guests’ experience. One complaint I see repeatedly is that the guest didn’t meet the owner. This is regardless of how clearly the fact that the owner is not on the premises is spelled out in the listing. Airbnb guests tend to like to interact with the owner.
A year ago I thought about buying another home for short term rental, but I am glad I haven’t due to the tremendous new completion that has come about in the last year. I am still doing okay with my property but there is certainly more competition.
I’d love to connect and talk more about vacation rentals!
I work for an online marketplace where homeowner can find and compare local property managers. You have the option of going with traditional property management, or you can choose to be paid a guaranteed amount for all of the available weeks.
All of the managers competing in the marketplace use our standard contract, so you can accurately compare their offers or prices.
We actually had a homeowner nearby who was making $150,000 with her Palm Springs home!
The money was entirely guaranteed, and she had a management company do all of the work for her.
I would agree and say that different sites attract different guests. If you are working with a management company and approaching your vacation rental like a business, it’s more likely that you’d be on VRBO or one of the other OTAs where guests have different expectations.
VRBO also has an API (unlike Air) that allow managers to automate more easily. Trouble is, VRBO was just purchased by Expedia - and when you recall what EXPE did with Vacation Spot years ago it will be pretty clear that things are going to change big time so long-term bets are risky right now. They gutted Vacation Spot and integrated the listings into their own dinosaur platform. Bye bye Vacation Spot.
Any guarantee of revenue by an OTA would happen after the property has been purchased and would still be at the mercy of local ordinance issues, etc. This is still a HUGE investment and risk unless you already own the property or were going to buy it anyway.
I lived as a renter for years in the house, then bought it eight before housing went through the roof (so perhaps not a good place right now ha) with the vision of it being a full rental property within a year. Started renting my spare bedroom while living there, then converted to full home rental.
Now I’m doubling my mortgage monthly.
Look for a place that is:
-easily accessible to local sights as well as public transit, grocery store etc
a tourist city (essential)
CENTRALLY located to as many tourist or popular destinations as possible (this is huge)
I happen to live 5-10 mins from the major univeristy in WA state… This gets me so many families visiting their kids, dropping off for college and graduation, as well as all the sporting events. graduate students etc – exactly the demographic I want to rent to. Late 20s or older.
have a garage
live close to popular activities
Obviously you probably can’t find a place with ALL these things but keep in mind when picking one
Last thing, I was able to manage my property while halfway around the world for 2 months so I disagree with anyone that says it can’t be done. Just be sure you have an emergency contact in case something happens.
I do live close to my current property so it does help. But I am already planning on getting s place in a popular tourist Area and Good for home buyers looking to rent. (I’m thinking scottsdale, arizona) if I do, living permanently very far away I will use Pillow to manage the property unless a better one comes along.
Hope I helpes at least a little bit! Best of luck!
Good luck finding anything under $600k that is central. I recently found a place by Mt Baker Station that was around $400k. Trouble was it was on a rotting, plywood foundation. If you end up with a condo you will pay HOA fees and have noise issues.
Prices are about $500sf. Unless it’s a luxury rental you won’t make any more money after expenses than you would starting a cleaning service. I still think that you should buy if you are doing it for a long-term play.
What @JSquared said. I should have said look for places similar to seattle(?) Ha. People are literally getting 50-75 even 100k more than asking price, buyers paying cash, homes go in 24 hours is really common.
We’re in Europe so things are a little different here but we’ve recently bought a second property to Airbnb.
Our house is currently undergoing major renevations and an extension so we need to move out and rent somewhere for 3-4 months. We decided we’d look to buy a good city centre apartment we could live in ourselves during the renovation work and then Airbnb.
Interest rates are very low at the moment and over here there is no rate differentials between primary and secondary properties. Interest rates are also fixed for the duration on the mortgage so we’re not subject to rate fluxes.
We aren’t expecting to make a huge income from the property, and we pay 70% income tax on the profits anyway! But demand is very high here and we are confident of more than covering our costs and we are looking more towards the long term value of the property as an investment and having guests pay off our mortgage
We live about 40 minutes away but will be able to manage this and our other air property ourselves.
We have done the sums and know we’ll be able to cover our costs with a long term tenant too - for which there is also high demand, should short term letting no longer be possible,
I am in SOuth FLorida, and managing my daughter’s house. We are 4 miles from the beach and have pool. My advice to look for property with a pool, otherwise you will have a hard time renting it.
If you will have mortgage, dont expect to have any income left after expenses. And also if you will have to pay for manager, you might even pay out of your pocket. Things happens in these kind of properties all the time. People do not take care of it the way you would. Also, your utilities will be much higher as guests have a tendency to open window and run AC and do other silly things that they would not do in their own house.
The good part is that you will have a free stay for your vacation, but i would not buy a property and rent it through Air for income.
Airbnb just sent out an email yesterday regarding new hosting standards. They are going to be taking a harder line on hosts who provide an impersonal “transaction” experience as opposed to those who provide a personal, on-site experience, as Air had originally intended their platform to be used for.
They also need to address the issue of the offerings on their site. Some of us owners are offerings full houses full of anything needed like it was their own house for rent and don’t live in that house. This is offered on their site and they were happy to collect their fees. Why and I being punished here?
My wife and I like buying older piece of crap properties at a great price and fixing them up into a nice place at a profit. If airbnb doesn’t want us here then they need to let us know so we can try other avenues.
I have my home listed two ways…house share/private room and bathroom and the whole house. My first year, I mostly rented the whole house. Honestly, I did not have any issues or problems with guests destroying anything or damages, it went rather smoothly, and my guests all gave great reviews. But it is a hassle for me to leave me home (I have no family in the area) and I worry incessantly. I’m willing to do it a few times per year now, but only for 1-2 nights at a time because it’s a nice influx of cash, I can’t do it longer than that because quite frankly, I get homesick . In addition, due to my work schedule, it’s difficult for me to provide personalized service to my guests, often, I don’t even get to check them in! But for the most part, I am concentrating on the house share arrangement, I just like being here to take care of any possible issues.