Airbnb vs. Annual lease terms

[Ande Andrea]

Hey guys,

New to Bigger Pockets but been into RE investing since 2015; researched it long before that. I have a house I am buying on a lease option in Portland OR (suburb area; great area);  I have it at about a 35 month term, and will be paying for it mainly in cash upon the end of my contract, if all goes well financially. But during this term I was planning on testing out how I like Airbnbing some of the rooms out; since I will only be in the house part time and it will be a way to make some decent money on the property before I officially own. 
My lease option contracts simply states I can't have people in the home for longer than 2 weeks so that should be no problem. The upstairs of the house is completely finished at about 2800 sq ft.; 4 bd/2 bth; I was only planning on airbnbing out 1 bedroom for now to see how I like it.

I was planning a day rate of $120 or around there for the room; a great deal; or maybe more since they will have the upper part of the home to themselves. If I can have it airbnbed at least 15-17 days per month that will take care of rent I need to cover for being part time in Denver. Anyhow, my main question is this...

I plan on finishing building out the basement home section and that will end up having 3-4 more bedrooms plus a fitness center and theater room. So In total the home will have 7 bedroom and 4 baths; with 2 decks and 2 separate entrances.

Instead of doing an annual lease on the basement rental i was planning on just airbnbing out 3-4 of the bedrooms total for a higher income for me. What are peoples thoughts on this? I would have a minimum stay of 4 days for guests and max stay of 13 days. ; I would also hire a house sitter and house cleaner when I am away. 

Thoughts on this strategy?

[Neal Collins]

@Ande Andrea I can speak to this as it is right up my alley.

1. What part of Portland is this place in? $120/night for a room in a suburb is not going to translate into the occupancy that you project. We rent out an entire one bedroom apartment in close in Portland for the same amount and I know plenty of others that do as well. Summer months are better than winter months so we get higher than that, but generally speaking I would get more realistic about your rental rate.

2. You will need the owner of the property's consent to do short term rentals. They will need to sign a form from the city. Also, before you start work on the basement you may want to consider closing on the property first. Basement conversions can be quite expensive and you may not want to be exposed for those costs when you technically don't hold title.

3. If you plan on renting out more than 2 bedrooms on Airbnb then you go from a Type A Permit to a Type B Permit, which then requires a conditional land use review from the city. Maybe others that have gone through this can speak more to it but if it is with the City of Portland then expect that to be a pain and to cost a lot with the gamble that they don't approve it.

4. If you decide to ignore the correct permitting then be ready to be fined anywhere from $1,000 - $5,000 / day for a violation. Trust me, there are trolls out there looking for violations and the city will fine you. Been there done that don't want to do it again.