Should I invest in a 2-4 unit or condo and Airbnb it?

Question

Hello, I’m new to BP and real estate investing. I just sold a place and should walk away with 100k to invest elsewhere.
My goal is cash flow, any recommendations on whether I should buy a small multiunit building or a condo/single-family home to Airbnb? Thanks! If so, I’m open to any markets currently thinking of Houston, Nashville or vegas

Karl McGarvey · Answer

If you want to go multi-unit I would diversify the use of each unit and then transition units between strategies as one becomes more successful than the other. Take advantage of having multiple units to allow the market to tell you what its needs are at the time (which also may change over time as the real estate world changes). We have a multi-unit in Galveston where the front house is rented out LTR for steady cash income and the back apartment is used to boost cashflow through STR/MTR. If STR were to ever slow down we can easily pivot that unit to LTR to match the needs of the market.

Michael Robbins · Answer

@Jeff W. if you have not already check with a lender on what you can afford with the $100k down payment.  I specialize in the Vegas/Henderson market.  I have not had success with fourplex and duplexes here but more so with individual condos, townhouses, and single-family detached.  Each individual rental property will have their own unique cashflow.  My suggestion is stick with a market that you are most familiar with vs going after the "market/area/location" with the greatest perceived cash flow.

Cade Olof · Answer

Hey @Jeff W.! It's cool to hear you're looking to invest in Real Estate!

@Karl McGarvey makes an absolute solid point. Your money is best invested in a multi unit deal where you can experiment with each unit individually and reap the benefits of the hot strategy at that time. A few strategies are as follows:

- Long term rental

- Short term rental: Airbnb, VRBO, Crashpad

- Mid term rental: Furnished Finder

Samuel Toma · Answer

@Michael Robbins what has seemed to be the main issues with the small multi family? I bought a condo in Vegas last year but am looking to get into the multi family space.

Evan Polaski · Answer

@Jeff W., do you enjoy customer service and would you like to work at the front desk of a hotel?  If so, self managing an Airbnb is for you.  I know you can hire a manager, but if you plan to self manage, you are taking a hospitality job.

Trade offs: Airbnb comes with risk.  You are signing 1 night leases, so cash flow can be lumpy.  Typically, you will want properties that have the easiest access to whatever the draw is.  Is it beach, downtown, entertainment district, stadiums, etc.  Basically, wherever hotels are going up, you want to be there.  other risks are jurisdictional.  Many governments seem to be blaming Airbnb as the reason property values are growing at unsustainable paces.  As such, you run the risk of owning a property for a use that becomes illegal.

You are responsible for utility bills, internet, Netflix, etc.  You also have to pay for paper towels, coffee, toilet paper, etc.  You have to furnish the place, which can be pretty expensive, provide and replace towels and sheets, etc.  Other risk being if something goes wrong and takes more than the 4 hours between guests to fix, you are often cancelling reservations. (I had a friend of a friend have their 1 month reservation cancelled last minute because of a major roof repair caused by a storm.  As the owner, that means both a cost to repair AND no rent).

Upside of airbnb, potentially more money, but with where property values are these days, it seems to be narrowing pretty quickly.  Likely less wear and tear on property, since these are visitors that are likely barely using property as a bedroom before leaving for the day.

Longterm rentals: unlikely to be outlawed anytime soon.  More stable income with long term leases.  No furnishing costs.  Easier to finance and insure. Dramatic undersupply currently, allowing for stronger rent growth options. If self managed, less work overall.  Cons: less potential money, but not always. More wear and tear. Eviction issues and overall tenant risk (although Airbnb certainly has that as well, as noted from the various news stories of people throwing ragers in Airbnbs causing 10s of thousands in damages).

Luka Milicevic · Answer

@Jeff W.

I know nothing about Houston or LV, but can comment on Nashville.

You're looking at an entry price of $500k for a 1 bedroom that is STR eligible. An actual SFH that's STR eligible will be closer to $1m. After your first year, if you manage it properly and collect solid reviews you should be booked solid.

Small multi-units: Duplexes come on quite often and you can get into a duplex with a 100k down. Won't be much cashflow there, but it's doable. It will be tough to get into anything larger than a duplex with 100k down, even in the surrounding areas....possible, but tough. This assumes you are using your entire 100k as a 20% down payment of course.

Should I invest in a 2-4 unit or condo and Airbnb it?

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