Any AirBNB landlord/owners here?

nderwater said:

To be most successful with AB&B you need to run your property like its own business — dedicating time for marketing, customer service, vendor management, purchasing, bookkeeping, etc. She’s really good at it and we’ve learned a lot, which is why we are now looking to grow.

Ok, understood.  I am anticipating that work.  Customer service could mean a lot of things, but I can handle that within reason, or use a management company like I said.

Thanks SVreX, that is good info.  I have some research to do on the taxes.  I can't seem to find online if there is a 'personal residence exemption' here or not.  The capital gains part may be an issue.

Occupancy, according to the market report for this area, runs around 41%.

I have head the reviews catch-22 before as well.  From what I understand, many people get some of their friends or family to stay in it at first to give them a chance to work out some of the bugs and get some positive reviews in place.

SVreX, what specific things cause you to label it as 'not passive'?  I'm trying to make sure my expectations are realistic.

As a landlord of a long-term rental, your work is up front to make the place habitable and attractive to a tenant, then your job is pretty much done when a renter moves in... the checks just come in each month.  Your only ongoing involvement with your property while it's rented is when a major problem occurs. 

For a short-term rental you are effectively running a daily business.  We do behind the scenes work each week: posting ads on Craigslist and other places online, measuring and trying to improve our SEO inside and outside AB&B, updating our listing so that it doesn't get stale, checking for and replacing household items that have been used up, broken or gone missing, and coordinating house cleaners, yard maintenance and maintenance issues. Whenever there's an issue with a utility or service, it's our job to notice and to fix (ex: internet was down for two days this week and it required two hours on the phone with ATT to resolve). My wife spends a lot of time answering inquiries that come in via email, text, and social media. We try to meet our guests on-site and give them a walk-through of the property (it pays off in fewer headaches later). 

I'm curious:

Has anyone built a MIL suite or rental unit in their current residence and been able to pay off that investment relatively quickly? 

My wife and I are thinking that the next house we buy we'll either pay an increased price for a MIL suite, or get a little more land and build a detached garage with a MIL suite above. Curious of the ROI vs just buying a separate property for such endeavors. 

A friend of mine has a separate ~400sq ft house right next to his house.  The payoff speed would be nuts.  He AirBNBs both units separately and his return is probably around 80-120%.  

The most stunning part is that there is nothing special about either home, and the location is terrible.

If you're offering amenities that people can't easily find at a hotel, the value prop makes sense. Our guests book because we provide things like:

• Multiple bedrooms in one shared 'space' (preferred by families and large parties)
• Full size, well appointed kitchen
• Deck and windows with a view of the woods
• Private outdoor space
• Dedicated garage and off-street parking

Compared to other single-family homes in our area these are nothing special, but nothing like that is offered at the Comfort Inn or Econo Lodge nearby.

We have a ~600 sq ft detached building on the land of our primary residence we're currently rehabbing for Air BnB purposes.  So far we have a new roof, drywall, appliances, flooring, HVAC, etc invested.  Around 40k into it, and its nearly ready for market.  In our area, Air BnB rooms go for about $125-150 per night.  Figuring a rate of return of 6% on 40K, we'd need to rent it out for roughly a month every year to make that kindof return, or on weekends for 10-15 weekends per year.  Not even counting the additional value to our property.  And we have an in-law suite for whenever friends/ family want to visit.  

In reply to nderwater :

Yes, we'll have all of those, too, except for a garage space (though it will be off-street).  We also have a small farmette thing going on, which appeals to some folks, and plan on offering complimentary "fresh from the chickens' butts" eggs to visitors.  

In reply to ProDarwin :

Nderwater covered it pretty well. 

Dont forget the “BnB” part. It stands for “Bed and Breakfast”. The expectations of the guests are completely different. You may not be offering breakfast, but the guests are expecting something much more like staying in someone’s home than a hotel experience. 

Our guests will find a full gourmet, a deck off their bedroom with a beautiful yard, a bottle of wine, chocolates, bubble bath, a whole basket of goodies. They will be greeted by one of us, have interaction as they want, use of the LR and fire place. 

They are staying in our home, and they know it. They are our guest, not our tenant. 

If you read the reviews, guests are always most impressed by a good host, not by the amenities  

Annual lease rentals are “passive”. Air BnB is not. 

If you think the website is gonna do the work for you and you are gonna just cash the checks, you are mistaken. 

BTW, there ARE people (like my daughter) who will manage it for you (even remotely) and make it a passive experience. It generally costs 30% of the rent. 

I needed it to be passive, and that’s what I am paying. Well worth it, for now. 

Doing it well is more work than you realize. 

nderwater said:

If you're offering amenities that people can't easily find at a hotel, the value prop makes sense. Our guests book because we provide things like:

• Multiple bedrooms in one shared 'space' (preferred by families and large parties)
• Full size, well appointed kitchen
• Deck and windows with a view of the woods
• Private outdoor space
• Dedicated garage and off-street parking

Compared to other single-family homes in our area these are nothing special, but nothing like that is offered at the Comfort Inn or Econo Lodge nearby.

Cool.  My house has most of this.  Outdoor privacy may be questionable simply due to density of the neighborhood (a fence may be in order), but it isn't like you'll find anyone in the backyard bothering you.

Garage parking may be the other issue.  The house has a large garage, but the entrance to it requires pretty much a full-lock 90 deg turn that I have learned not to trust others to make :(

SVreX said:

If you think the website is gonna do the work for you and you are gonna just cash the checks, you are mistaken. 

I totally get that.  I intend to pay people to do much of the work for me.  Most work mentioned so far is pretty much on par with what I was anticipating.

Interaction is the only oddball one.  I have stayed in many many many AirBNB, and only one was a true Bed and Breakfast, and that is the only time I have ever had direct interaction with an owner/landlord/staff.  All other instances all communication was handled via the site/email.  Those were all good experiences, and my thought was that most single family home style rentals would be like this.

In reply to ProDarwin :

You’re right, interaction is the weird one. But it  is very much a part of the experience for some people. 

I’ve had about a dozen guests.  2 were completely private- behind closed doors the entire time. Most were casual contact- cross paths over breakfast, minor talk while preparing dinner, meet on the deck, etc. 2 were clingy, almost annoying. They were always hanging around me, like they wanted a friend or a mommy or something. 

The trick is reading them, and giving them the experience they are looking for. I have 100% excellent reviews, and lots of referrals now. 

Thats what makes it different from lease rentals. I never have to do any of that stuff with a lease rental. 

And the online interaction takes much more energy than I thought it would. Sure, it’s handled through the site. But the guests expect really fast responses, and frequently have stupid questions (like asking stuff that is clearly spelled out in the listing). If you are not available to hand hold them online, it’s pretty much guaranteed they will move on to someone else.

Some speak in codes that you have to interpret. Like the gentleman who said he would bring a male friend (only 1 bed), or the girl who dropped a comment about how she liked to relax with a joint.  

It’s just a different level of managing expectations. 

In reply to ProDarwin :

Just out of curiosity, why Air BnB instead of a lease tenant?  What do you perceive as the better aspects as a business model?

BTW, typical lease tenant managers generally charge 10% of the rent for management services. 

Air BnB managers typically charge 30% of the rent for management services. 

I think that accurately reflects that there is about 3X as much work. That is an accurate reflection of my experience. 

Basically, better return on investment.  Lower commitment as well - if I decide I hate it 6 months in I can simply stop renting it and put the house for sale.

In reply to ProDarwin :

I have found the opposite, but it probably varies by region. 

If it’s all about the dollars, I’d be cautious. It’s a volatile space. 

Warning on that 41% occupancy rate...

Nobody has a 41% occupancy rate. I have an occupancy rate of about 92%. Some people have more like 10%. I guess if you average us together, we are about 41%. 

Occupancy rate has everything to do with how hard you work. 

According to this report, the 10th percentile occupancy rate is 19%, the 90th percentile is 71%.  40th and 60th are 35% and 45% respectively.   I went with the 41% average it because I am conservative.  If it is profitable at 41%, its very profitable at 90%.  I do know the larger places generally have lower occupancy rates.  There are a few that are "in town" that are ~5 bedroom 5bath sleeps 12 type places.

I'm generally pretty good at something if I put my mind to it, so I think I should be able to beat average, but I am not betting my money on it.  Its shocking the number of people I've run into who do it with seemingly zero math, zero research, and not a considerable amount of effort that are doing very well.  Its like they simply stumble into money or something.

Lease tenant here would pay pretty low.  *Maybe* enough to make it work, but only because my house is ~75% leveraged and I have a very low rate on my mortgage.  AirBNB on the other hand pays quite well from all of my searches.  If it doesn't work out I can always lease it, or sell.  This is an opportunity to give it a shot and learn a lot more about it without buying a property specifically for it.

I would love to share with you and the other serious guys here the exact numbers I've run + details of the home, but I don't want to do it on this forum.  Is there interest in a google group forum for this (GRMBNB)?

In reply to ProDarwin :

Never done a Google group, but interested to hear more. 

I'm open to other options as well.  Just looking for a way to 'take this offline' as a group.  Private forum seems like the best option.

SVreX said:

In reply to ProDarwin :

Some speak in codes that you have to interpret. Like the gentleman who said he would bring a male friend (only 1 bed), or the girl who dropped a comment about how she liked to relax with a joint.  

Something about this made me think and come back to it.  You may need to be careful about how "selective" you are in your tenants.  Because "selective" may be re-interpreted by someone else as another word that begins with a 'D'.  Not renting to someone because they partake in certain chemicals I'm fairly sure you have a right to do by law.  Not renting to someone whose companionship happens to be of the same gender as they are might run afoul of laws in some areas.  Or if they somehow allude to some other "protected" aspect of their existence (or if it's identifiable by their profile photo).

Not 100% sure how this applies to the Air BnB space, but I know it's a very big deal in the regular landlord/ tenant space.  For example, when we advertised our rental home on Craigslist, the ad was flagged once for mentioning "No Section 8".  Apparently this was discriminatory.  I'm fairly certain it is not against the law to not rent to someone based on the source of his/her income, but I believe it did violate Craigslist's T&Cs.  

I can confirm that this is an issue that you will have to navigate carefully. We've hosted over 200 guests; over time you absolutely start to see trends in the types of bookings that become a headache.

In reply to volvoclearinghouse :

Yep. It’s something to be careful with. 

I didn’t say I wouldn’t rent to someone like this. It was just an example.  Owners who are  are renting a space in their home (especially with their children around, etc) may want to consider. 

(Although I do find it odd that the Federal Government still offers no Equal Employment Opportunity to gay people, but landlords DO have to offer protections). 

In reply to SVreX :

You raise a valid point about renting a room in your own home.  AFAIK many of the same tenant protection/ non-discrimination laws do not apply if you're simply renting out a room in the house you live in.  Again, not sure how this translates to AirBnB, but I know if I lived at my rental house and the rented portion was not separate from my living area (eg, renting a spare bedroom but we'd share kitchen/ bath) then I can pretty much be as picky as I want- gender, gender preference, etc.  

In reply to volvoclearinghouse :

I think you are right. 

My point with my original comment was not actual about the types of people who stay, it was about the codes they speak in. 

The guy who made that comment was dropping a hint, without being overt about his lifestyle, or opening an argument about gay lifestyles. I thought it was a classy approach. 

We were actually booked during the period he was asking about. I simply responded, “I’m sorry, we are booked” (which was true). But if I was a person who was concerned about that issue, I could have given the same response, and the conversation would have been over. 

No drama. Just a courteous “code” for “I am gay”, and “No thank you”.

I appreciated his approach.