Somerville Airbnb investment

[Alicia Palleschi]

Here’s the deal: 

$1.1M multi family - 4 units. Each unit is 2 bed 1 bath. Somerville MA

Assumptions: we can rent each apartment for $220/night at 60% occupancy per month (about 23 days).

AFTER mortgage, taxes, insurance, cleaning fees, utilities and furnishing the 4 units, we believe our net operating income will be $75k the first year, and $150k each year after that (furnishing the 1st year) and assuming no structural issues or renos.

Some caveats; 1. the home is a historical site and might need some work. 2. We would be emptying all of our cash accounts for the down payment. 

Does anyone own any Airbnb properties in Somerville/Cambridge area and can give my assumptions a reality check? As a first time investor, I would be forever grateful! Thanks!

[Adam Sankowski]

Hey @Alicia Palleschi I'm actually just about to bring an Airbnb unit in Somerville online.  Just finishing our rebab and it actually passed the official Somerville Airbnb inspection... with a few things to fix of course ha. So, I hate to rain on this deal but Somerville just passed some really strict Airbnb regs and you won't be able to legally rent any of those units under it.  These are the regs that have always been on the books: https://www.somervillema.gov/sites/default/files/short-term-rental-guidelines.pdf

Basically it has to be owner occupied and you can rent a few bedrooms (3 rooms tops) in the unit that you live in and there are strict square footage requirements around that. Renting a full unit out as an Airbnb in Somerville is forbidden. Also, 3 Family homes and up have much stricter regs than 2 families for example.  From how the regs read you might have to install a sprinkler system in the entire building just if you want to rent a bedroom out in your unit if its a 3 family and up.  Even with our two family in order to rent a bedroom in our house they are making us install emergency exit signs and lighting!   Now, everyone breaks these rules anyways but then this just passed a few months ago:  https://www.somervillema.gov/sites/default/files/short-term-rental-airbnb-ordinance-passed.pdf

So everyone rents them illegally anyways because even though there was were always strict regs, there were never really any actual enforcement mechanisms.  WIth this though Somerville passed a $300 per incident fine, which they never had before.  It doesn't go into effect until Jan 2020 so they are giving operators notice but the way its phrased it seems like they will be pulling data from Airbnb -just like they do with NYC and San Fran -enforcing from the Airbnb platform rather than just relying on neighbors complaining.  I get that sense because one of the requirements they passed is that only one Airbnb host can manage one property in Somerville.  The cleaners that we are using own and manage a few units in Somerville and these new regs have them super spooked and scrambling to figure out if they can make them legal somehow... 

Anyways, my point is that you could find yourself setting this up illegally and rocking it for a little bit but then Somerville really coming down on you and that quickly not being an option anymore.  The only way that we are officially getting our Airbnb sanctioned is that even though its our entire 3rd floor its "part of our unit" and the square footage is under the percentage allowed.  

The one catch is if you read through all of the regs there is a Bed and Breakfast operator license you can apply for and if it is a historic building (I think you mentioned that it might be?) it might qualify as an historic B&B but that looks like quite the process to work through there to get that.  I wouldn't do this deal if it relies on short term rentals because Somerville will not allow it.  

But... also, 1.1m for a 4 family is a CRAZY low price right?  Sounds like its close to rent ready too?  Is this off market?  Is it a legal 4?  At that price I feel like you could condo out two of those, depending on the size, and almost cover the purchase price and then have 2 condos left to rent as almost paid off buy and holds? Just a thought. 

Hope this helps. Feel free to PM me as well as I'm actively working through the Somerville Airbnb inspection process and might have new info soon too.