Am I looking at this property right as an AirBNB?

Question

Hello BP,

I am looking at getting into AirBNB investing, but first I wanted to see if this deal that I have in Chattanooga makes sense as an AirBNB.  The problem I have is that I am not sure of the data I found.  The unit will be rented for 70% of the time, and the rates I am eye-bowing for the Chattanooga market.  Here is the deal:

This property has a 3 bedroom and 1 bath house that is currently rented and a second house that sits in the back that is a 2 bedroom and 1 bath, which is the house in back.  The market rate is between $2,300 to $2,700 gross a month for both under a year lease.  .  But I don’t think that is the best use for this property.  I believe AirBNB is the best use for this property because of the close proximity to Downtown.  Look at these numbers with the property being rented 70% of the time(even though the data site says that the average is 77% of the time), and the average stay is 2 days.  I am assuming the 2 bedroom house average rent would be $55 and the 3 bedroom would be $150 a night.  The monthly income could be $4,337.00 a month.  Would a purchase price of $235,000.00 make sense for both of these houses when you will have some interior work that will be needed?

Bruce Woodruff · Answer

It looks good. Are you getting your numbers from actually going on AIR's site? Or are you using AirDna or other service where the computer is figuring out the occupancy and prices?

Joshua Janus · Answer

I would reach out to a local airbnb manager and see their perspective on the potential output of this property. They could also send you airdna data like this: https://docs.google.com/docume...

Michael Baum · Answer

Hey @John Britt, have you checked to make sure the house is in the "Overlay"? I just did a quick look and there are quite a few restrictions. Here is some info from a local attorney

https://www.tnvirtuallaw.com/b...

Also the average days booked is just an estimate. You can't rely on AirDNA's number (if that is what you are using) 100%.

I did a quick rundown on all rentals listed on VRBO for the downtown core and the occupancy rate is closer to 40% depending on the property. AirBNB is worse actually, closer to 30% and most are very low price around $50-60 a night and those were hotel rooms.

TLDR: Make sure the place you have chosen is in the right area with R3/R4 zoning.

EDIT - Here is the latest actual ordinance that covers STR's - https://chattanooga.gov/city-c...

The attorney link has links to each revision of the ordinance.

Robert Olinger · Answer

I think there are several things in this model that should be questioned. One is the two day average stay (I used to have about 4 days, and now it is more like 7 day average stay). I would model a minimum of 3.5-4 day average.

The average rate for the two-bedroom looks fairly low at $55--once you account for the cost of turnovers, and managing the STR--it may not be the best situation... I suspect you can get a higher rate if you make the space nice.

That being said, it looks like a no brainer, even if you need to invest significantly into the property.

Am I looking at this property right as an AirBNB?

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