Mother-in-Law: Rent Out or AirBnB?
Realtor · Ogden, UT · Member since 2019 · 338 posts · 415 votes
Hey BP Nation,
My wife and I are set on the idea of making our current residence a rental and purchasing a long term home for ourselves with a mother-in-law that would help cover the mortgage.
I'm curious what everyone's opinions are regarding the pros and cons of making the mother-in-law a typical basement rental vs trying to Airbnb the space.
Currently basement rents in our area for 1-2 bedrooms range from $600-800/month or so. Vacancy shouldn't be an issue for the standard basement rental in our current market.
What are your thoughts? Airbnb or rent?
Would Airbnb provide considerably higher returns?
Is Airbnb worth the extra work? We're planning on managing/cleaning it ourself.
Thanks in advance!
Hi @Brad Jacobson, you really need to give us a bit more info. Where is the home located especially. If you have a house out in the middle of Iowa 60 miles from any town in a corn field, I am guessing that AirBNB might not be the best option.
If the house you are buying is waterfront in Tahoe, well, then doing an AirBNB rental could generate enough to pay the mortgage in total.
Location is everything.
Hi @Brad Jacobson, you really need to give us a bit more info. Where is the home located especially. If you have a house out in the middle of Iowa 60 miles from any town in a corn field, I am guessing that AirBNB might not be the best option.
If the house you are buying is waterfront in Tahoe, well, then doing an AirBNB rental could generate enough to pay the mortgage in total.
Location is everything.
@Michael Baum
The area were planning on buying in is about 30 North of the Salt Lake airport. The comps on Airbnb look like they're rented out about 50% with quite a bit of variability but the prices are tough to nail down due to quite a bit of variability also ($80-200/night).
Alrighty then! Now we gots ourselves an area! SLC seems to be a pretty decent area for AirBNB. Lot's of visitors for skiing as well as folks traveling to Temple Square.
https://www.sltrib.com/news/20... here is a recent article that showcases some stuggles in the general area. It's funny that it focuses on a gentleman who is trying to do arbitrage...
Check to make sure you can do the STR in the area where you are considering. From the gist of the article, my guess is that they are in a don't ask don't tell kind of mode. Fines are being levied against owners who receive complaints. There was a house bill passed in 2017 (https://le.utah.gov/~2017/bill...) that offers some help, but it doesn't make you immune.
My guess is that the great SLC area will start to implement fee's and licensing as well as possible banning all together. I did read the city of Sandy has implemented a limited number of STR's per neighborhood after lifting the ban on STR.
Everything is very much in flux in that area so it might be best to hedge your bets. If you get the place, be ready to convert over to LTR if the ban goes into effect. Sounds like there is a pretty severe shortage of rentals so you might do better with a good long term tenant in there.
I have a home with a separate living space in the salt lake valley that we tried Airbnb for a few months. I definitely was not a fan of the short term rental model. We sold the furniture and changed it to a long term rental.
You can always switch to long term easily but not vice-versa you may want to give it a shot. If you live in the home it May be a better experience than I had. The pro, I can see is that you can block out dates or still use the area in your home when it's not booked if you wanted to.
I will second what has already been said here. Sounds like you live in a good area for Airbnb returns, we do Airbnb in our walk-out basement and it covers our housing expenses which has been stellar. However, our city (Colorado Springs) is starting to implement restrictions on STRs, and many fear that it could become a city that bans them altogether. We are making our plan B so that if further restrictions are put into place, we could transition over to LTR pretty easily.
In our experience, setting up our property as a short term rental has been well worth it for the increased returns we have seen! I would say it is certainly worth starting out with short term and you can always switch if the city implements a ban, or if you simply don't like the amount of work involved.
I have a home with a separate living space in the salt lake valley that we tried Airbnb for a few months. I definitely was not a fan of the short term rental model. We sold the furniture and changed it to a long term rental.
You can always switch to long term easily but not vice-versa you may want to give it a shot. If you live in the home it May be a better experience than I had. The pro, I can see is that you can block out dates or still use the area in your home when it's not booked if you wanted to.
https://www.sltrib.com/news/20... here is a recent article that showcases some stuggles in the general area. It's funny that it focuses on a gentleman who is trying to do arbitrage...
Check to make sure you can do the STR in the area where you are considering. From the gist of the article, my guess is that they are in a don't ask don't tell kind of mode. Fines are being levied against owners who receive complaints. There was a house bill passed in 2017 (https://le.utah.gov/~2017/bill...) that offers some help, but it doesn't make you immune.
My guess is that the great SLC area will start to implement fee's and licensing as well as possible banning all together. I did read the city of Sandy has implemented a limited number of STR's per neighborhood after lifting the ban on STR.
Everything is very much in flux in that area so it might be best to hedge your bets. If you get the place, be ready to convert over to LTR if the ban goes into effect. Sounds like there is a pretty severe shortage of rentals so you might do better with a good long term tenant in there.
We had our second guest try to throw a massive party and then posted some elaborate made up story as a review. It upset me that I was very kind and even refunded 1/2 her money and she made up such things. Also the fact airbnb would not delete it. Other than that one experience it was not terrible. We still had 5 stars and super host status. I did like how quickly you get paid. I did not like people messaging all hours of the night for things like an oven mitt and coordinating cleanings and so forth.
We had our second guest try to throw a massive party and then posted some elaborate made up story as a review. It upset me that I was very kind and even refunded 1/2 her money and she made up such things. Also the fact airbnb would not delete it. Other than that one experience it was not terrible. We still had 5 stars and super host status. I did like how quickly you get paid. I did not like people messaging all hours of the night for things like an oven mitt and coordinating cleanings and so forth.
@Ken Latchers, I do agree that city governments shouldn't try to manipulate the owners with zoning, rent control etc., but I wasn't trying to agree with it. Just to inform. What I mean was a LTR with a shortage means you can usually get more in rent.
@Brad Jacobson We just started renting out our basement as an AirBNB this month. Our thinking was along the same lines that we could potentially make more money/month and not have long term tenants in place. We have had one booking so far and that booking was for the entire month of July. It's hard to say for sure whether it will be better or not though. This month, we will net about $1250 after all expenses, and we could rent it out long-term for around the same amount. Honestly though, we put a lot of money into providing all the furnishing and making it really nice. We weren't in a huge hurry to get it up and running, but we could have simply put a long term tenant in place a few months ago and started making money sooner as well as saved that initial investment of furnishing it. I think we will be able to make it more profitable per month, but I'm not entirely sure it will be enough per month to justify the furnishing expense. We will stick with it for awhile and see how it does with vacancy throughout the year.
Also, we went through Lehi city and paid the impact fees to register our basement as a legal apartment instead of just a mother-in-law. We were honest with what we intended to do with it and didn't have any pushback from the city.
Wow, thank you all so much for the great amount of feedback. It's nice to hear your first hand experiences.
@Michael Baum - thanks for the local feedback and the articles. The Utah market is red hot for starting homes/rentals but your comments have built my confidence in the STR market too.
@Amy Kendall and @Ryan Riches - glad to hear the STR has been profitable for you, even if you, Amy switched over. Since my wife and I are living well below our means at the moment I like the idea of taking a few months risk and seeing if we can be successful with Airbnb. If not the demand for a LTR should always be there, especially since we're looking to buy near where we live currently by the Weber State Davis Campus.
@Ken Latchers and @Cherie Orellana, good ideas with the security camera and overall caution with the STR. I'm going to implement that first thing before opening the area for rentals.
Thanks again everyone - my wife agrees that we'd like to try the STR and if it doesn't succeed the opportunity cost won't be too large. I look forward to following up in this thread hopefully later this year with a success story from one avenue or the other!
@Amy Kendall, id be interested to hear how renting out your basement has gone now that it's been over a year. Any complaints for going the STR route? Has it made more than a LTR? How often is it filled?
We are considering something similar in the area and would love to hear how it has worked for others.
@Masyn Grant Barney Our basement worked out great this last year! It was interesting because I noticed that a lot of the people ended up staying around 4-6 weeks because they were in between moving and having a furnished place was just what they needed. We haven't had a hard time finding new tenants after each turnover, and we have slowly been able to get more rent each month. We probably average about $1750/month, but this month we were able to get $2300, so it does vary but overall it is a lot more than if it was an unfurnished long-term rental. For example, I manage a similar 2 bed/1 bath basement close to me that chose not to furnish it and do a long term tenant, and it rents for $1250/month. I think there is a need for that type of housing in our market. So, I ended up advertising more for that purpose and we do make quite a bit more per month being flexible with when people move in and out and having it furnished. Of course, we do cover all the utilities with that, but it still works out to be a lot more profitable. In fact, I have one of my long term SFH that I am turning over and I am going to furnish it and see if I can sort of take the same model and increase my cash flow that way. I would 100% recommend it!