ADVICE ON STARTING OUT - AIRBNB GOOD IDEA?

Question

Hi BP!

This is my first time ever posting on here. I dont want to make this too long so I will get right to it. Currently I live in Miami Fl, as a lot of you know the market here in south Florida in very pricey and I'm having trouble finding properties that make sense in terms of cash flow to start off. Some background on me, I am 25 years old, currently have a job in the mortgage loan servicing industry, I make a "decent" yearly income of about 47k a year (excluding year end bonuses ranging from 2-4k), I have some debt which I am currently working on towards paying down. My ultimate goal is to buy some properties and hold for rental income.

Here's where my question begins:

I was recently listening to the latest podcast episode of BP (#229 Early retirement through short-term rental properties) and it kinda of struck a cord with me. The idea dawned on me that I could possibly rent a condo or apartment in a nice area of Miami (close to the areas where the tourist come for like the beach, downtown, bayside, brickell, wyndwood) and actually rent it out on Airbnb in hopes of making enough money to pay the lease and then some as Zeona mentions she did in the past. Now, I'm not an unrealistic person and I know that not all formulas work the same for everyone, but I figure why not at least ask on BP to see if anyone has done this in the past and can offer some advice?

SO, The idea in short terms is, lease a nice apartment or condo in a central location close to the hot spots of Miami, put the place on Airbnb and POSSIBLY be able to pay for the lease as well as some cash flow. Any suggestions? advice? anything would be greatly appreciated.

Mindy Jensen · Answer

@Edgar Hernandez , you would definitely have to get approval from your landlord if you are renting a property with this intention. Be prepared for the fact that most landlords will not support this plan, and it is most likely a violation of your lease to sublet without landlord approval.

That said, you can certainly ask.

Zeona did this without her landlord's approval, and said she lived in fear of getting caught, never answered her phone from unknown numbers, etc. She finally did get caught, as was asked to move out.

She did this in the beginning of AirBnB - landlords have now caught onto it and many expressly prohibit the use of their units for short term rentals.

I'm not saying you can't do this, just that it's going to be difficult, and you should be upfront with potential landlords. Good luck!

Diego Perez · Answer

@Edgar Hernandez I also would like to do this in my house in Miami. I am planning on making a small apartment and rent it to tourist.

here is an interesting article:

Miami Beach increased its fine against residents who host short-term rentals in areas not zoned for them — which is all single-family homes and some multi-family buildings — to $20,000 last March. Now, renters have been fined a combined $5 million. Miami Beach Mayor Philip Levine and all six city commissioners have opposed reaching any kind of agreement with Airbnb.

In Miami, Mayor Tomás Regalado is proposing an ordinance that would make short-term rentals largely illegal and create a set of strict regulations for renters in legal areas. The ordinance will come before city commissioners Thursday.

http://www.miamiherald.com/news/business/article13...

I guess we just have to keep informed because each city could make their own laws at any time in regards to short term rentals.

Best of luck!

James Wise · Answer

I think Airbnb would work awesome in such a tourist driven area like Miami.

Kj Rustom · Answer

@Edgar Hernandez - like you said, podcast #229 with Zeona has struck a cord with folks who have been thinking along the lines of STR / Airbnb but wanted to see it executed as a valid concept.

@Mindy Jensen - Are you familiar with any flippers who take the ugly house in a great location, rehab it for the purposes of eventually selling it as turnkey rentals for investors? In my simple mind, the process can be:

1) Build instant equity via Rehab

2) Airbnb it for a 1-2 years to establish above average rental cash flow track record

3) Recoup significant part of your rehab cost via rentals

4) Sell at marginal premium to investors looking for Turnkey rentals given it's proven higher cash flow

Repeat process via 1031

Over time, with 3-4 properties always in various stages of the process, I should be able to book decent cash flow as well as flipping profits - without becoming a Airbnb maven with significant landlord responsibilities.

Creative financing, lease-options, rent-to-own, etc can further reduce upfront costs to get started while securing full control of the unit?

Where am I being overly optimistic and naive? :)

Edgar Hernandez · Answer

I want to thank everyone who has given the attention to this post. Really means a lot that you all spread your knowledge and help guide us "to be" investors in the right direction. I think i'm going to try as some of you mentioned, to be upfront when asking about the  AIRBNB idea and perhaps offer some % of the cashflow to where we all benefit. I see I need to do some more research so that's where I will start. If this works out cool! if not I will look for another avenue to get in the game.

This really helped me open up on BP I will def be tracking my progress on here as it comes. I hope to hear from you all in my future newbie questions!  Thanks again !  @Mindy Jensen @Denis Moreira @Elyse M. @Andrew Johnson @James Carlson

James Carlson · Answer

Hey @Edgar Hernandez It's a great idea ... if you can pull it off. This is exactly what I did years ago here in Denver. I leased a handful of small apartments in the heart of Denver, jumped in a U-Haul, loaded up my van (and my credit card), furnished them all and then posted them on Airbnb. The hustle taught me a lot of lessons I still rely on today.

But, as @Mindy Jensen  and @Elyse M.  and other have already said, the likelihood of your landlord signing off is low. So then you're facing two problems -- an ethical one and a logistical one.

Ethically, it's not right to make bank on the back of another's investment. (Some of my landlords didn't know what I was doing, and I lived with constant anxiety and more than a little shame about it. Yes, this is a do-as-I-say-not-as-I-do.) Logistically, as others have said, people now know about Airbnb and other short-term rental platforms. I specifically prohibit it in my leases and check the platforms often.

Let me say this, though. If a tenant came to me and proposed doing what I did, I'd be open to it if the deal was right. What about offering a landlord a cut of the extra money?

And of course, there is the matter of the work. I've scrubbed enough toilets and picked up more hair off the bathroom floor than I ever care to again. It's a lot of work, so even if you find the right situation to do it above board, be ready to hustle.

Denis Moreira · Answer

Edgar,

I am in the same boat. Foreign investors & speculators have driven up prices in Miami/Ft. Lauderdale & anything on the MLS is nowhere near meeting the 1% rule. Personally, I don't want to get into flipping or rehabbing. So that same podcast  #229 opened up my eyes to get creative.

Currently, I am in the market to buy SFH with in-laws in a nice neighborhood. My plan is to lease the in-laws to a long term tenant and then airbnb either the entire home or room(s).  A friend of mine is doing airbnb on a home he just bought - in west park (not the best neighborhood) and even he's having success with it.

Props to you for getting into the investing mindset at a young age (25).

Best of luck

Denis

ADVICE ON STARTING OUT - AIRBNB GOOD IDEA?

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