Vacation Rentals in Urban Markets?

Question

Bloomberg is currently working on a piece regarding investors/investor groups buying rental properties to rent out through Airbnb.

Do any of you have experience buying vacation rental properties in urban markets for this purpose? And would anyone like to be put in contact with Bloomberg?

Ravi P. · Answer

I've had experience hosting with Airbnb, I think anyone that wants to expand into multiple Airbnbs (more than 5 spread out across more than once neighborhood) should just invest into multifamily housing, there is a tipping point when it's just not worth running all those liabilities instead of just putting it all under one umbrella like a hotel or multifamily vacation rental. it would be like trying to assemble a bunch of Uber cars under one hat, at some point just start a rental agency or livery service. you can only piggy back on the Airbnb messaging/marketing interface for so long before the liability you're taking on makes it financially unfeasible

but I haven't really done out the numbers so I could be wrong

Dexter Crawford · Answer

@Monika Haebich, I currently own a home in the an urban market (middle class western suburb of Chicago) and I'm looking to expand. http://www.homeaway.com/3733046

So far this property has booked 238 nights at an average nightly rate of $147.

I'd love to be a part of Bloomberg's research/interview/article.

Dexter Crawford · Answer

@Monika Haebich. Thank you. I do self manage. However, I literally JUST got out of a meeting. I may have found a partner to spearhead this expansion project.

The success I've experienced has is a result making a consistent effort to do good business. With my tenants/guests, I don't promise perfection. I promise fairness.  This business model has worked for me.

I look forward to following your post.

Karen Margrave · Answer

@Monika Haebich This isn't the same article, but it's much the same content.

Airbnb and its effect on housing in Los Angeles

Karen Margrave · Answer

@Monika Haebich That should be interesting, I hope you'll keep us posted when the article comes out. I don't own any VR properties, but I am very intrigued by the niche, and in fact am the one that got this Forum on BP going. We are developers in the coastal area of Orange County building spec new construction. Because there are many Vacation Rental properties here, we design our projects with Vacation Rental Investors in mind. VR rental properties are one of the most promising ways of getting cash flowing properties in the high valued areas, along with strong appreciation, and high demand locations.

I was reading an article yesterday where it was addressing the hardship it is putting on residential tenants as many units are being taken off the market for long term tenants and used as Short Term Vacation Rentals, etc. I hadn't really given that aspect much thought.

Thomas Morris · Answer

I have purchased and rehabbed a historic property in urban Bowling Green KY. I have been renting on airbnb for 2 months now. We have 8 total units, but not all are on line yet. So far we have lots of interest on weekends, but not so much during the week. Not yet cash flow positive, but since all units are not ready, still too early to say whether it will be successful or not. Taxes are a major hassle and airbnb does not collect them, so I need to bundle them in with the fees. Hotels do not, so their fees look better than they actually are.

I'd be glad to speak to someone from Bloomberg

Russell Brazil · Answer

I have a friend/client here who has 2 condos here in the DC metro area that he rents out using AirBnB and VRBO.  His returns on them are phenomenal, but they create a financing problem for him.  When he continues to apply for more loans, lenders do not see AirBnB as a valid form of rental income.  They want to see a fully leased property so that the debt of the property does not count against your debt to income ratio.

Jacqueline Carrington · Answer

We own a condo in New Haven not far from downtown New Haven and Yale University. It is our primary residence (for now), but we rent out our 2nd bed/bath on Airbnb. We love it and have been hosts since 2011.

Although we are not a super large urban market like LA, SF or NYC, we do very well and get many requests each month.

Monika Haebich · Answer

Ravi Parmar, that's a good point as well. Would you say the same for homeowners selecting to get yearly guarantees from property managers through outright rentals? That would definitely mitigate homeowner risk and save on time (as the management company would be doing all the work).

Nick Patterson · Answer

I would say condo associations are the biggest wild card.

Nobody living in a condo wants a new neighbor everyday.

Something has to give...

Vacation Rentals in Urban Markets?

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