Vacation Rental & Airdna Numbers | What Am I Missing?

Question

I never thought I'd be looking to do a vacation rental, but I think I've found a good deal. The house is in an area I often travel to get out of the big city and reset so it's a win-win for my sanity. It's a super small micro-market. Kicker is this is about 3-4hrs from Los Angeles where I work and live.

Downloaded this spreadsheet from LEARNAIRBNB.COM

This is what I've come up with for a 1.Worst, 2. Likely & 3. Best/Airdna Date.

Going to see the house tomorrow and am prequalified for a 5% down loan on a $260K sales price would put my mortgage at a $1,700 range.

Occupancy tax in the town/county is 12%.

1. WORST: 12 day rental per month, $11,205 startup:

2. LIKELY: 16 day rental per month, $8,525 startup:

3. BEST: 25 nights per month, $11,205 startup:

(Airdna numbers is 25.5 at 84% occupancy per month with no signs of slowing/average night is $270, but mine would be a brand new interior/this model has only $5,000 in furnishing the entire house vs. the prior model that is $7,500 to furnish)

I know, I KNOW, 25 nights is a pipe dream, but that's what Airdna is giving me so it was even beyond my best scenarios so put it down for S's & gigs. Counting the nights by hand on Airbnb for properties of the like I think it's more realistic to say 16 - 20/nights a week. Summer is almost 28-30/nights or 97% occupancy.

I've found a local maid service and I'd self manage from a far via Nest cameras and remote locks. I'd probably make some trips up Sundays to check weekend people out and make sure the property's initial stays went flawlessly as possible.

I tried to do it with the BP calculator but it doesn't seem equipped:LIKELY BP:

Michael Glaser · Answer

@Jon Crosby,

- Paid for the premium data so it seems to be pretty accurate with me going through to the checkout at Airbnb & VRBO's with surrounding Airbnb's in my 3-4BR criteria.

- My numbers include housekeeping, vacancy, 12% occupancy tax, 3% Airbnb tax, etc.

- Properties don't have much of an appreciation upside which means they don't have a depreciation downside IMO. The property sold for $5,000 less in 2011. I'm not looking to sell this for the next 15-25yrs. Thus, it doesn't really matter if I can personally more than cover the mortgage on my own. The county is beyond rural and I doubt they get restrictive if they haven't already. There's also the chance I refinance as my numbers reflect about $30K in BRRR cash.

- Guest's experiences are paramount. I couldn't agree more. I'll be up there to check the first month's guests in as much as possible. I think spending $30K on renovating/updating and putting brand new furnishing/appliances/TV's/work office will put this above and beyond the other vacation rentals in the small market.

Don Konipol · Answer

@Michael Glaser

Your knowledge of the area gives you greater insight than most investors considering a property purchase.  If you’d like some more analysis material for “comfort” then book a couple of competing STRs and engage the owners/PMs in casual conversation about the occupancy and rates.

The only thing I’d be worried about is your plan to obtain a loan by stating that this will be your primary residence, when you know it will not be.  Yeah, no action would probably ever be taken against you in this regard, and yeah you can claim after 4 months you “changed your mind”, but by posting your intent on this forum, a trail of evidence has been created to support a charge of mortgage fraud.

Chai Xiong · Answer

I'm only eyeing the BP calculator but make sure to include utilities and insurance is abit higher, regular home insurance won't cover your rental.

Dave Meyer · Answer

Hey Michael

Hard to comment on your numbers cause your spreadsheets don't account for any repairs, maintenance, CapEx, etc. Your numbers on mortgage differ between the BP calc and the spreadsheet, so if you share some of the numbers here I'd be happy to comment more.

However, I did want to warn you about about self-managing a STR from a few hours away. Just having a cleaning person on-site is not sufficient in my experience. You need someone close in case of emergency. If there is a water leak, a fire, a very angry guest, who can fix that? The cleaning people are not likely going to sit at the house for 3 hours waiting for a plumber to get your water heater fixed when a valve breaks. There are so many things that come up with STRs -- far more than traditional rentals.  I'd recommend you look into hiring a property manager. I own a STR, I live only 1.5 hours away, but I would not sleep at night without knowing I have someone contractually obligated to be at the house within an hour in case of emergency. Just two weeks ago I had a guest lock themself in a bathroom (how???? I have absolutely no idea!), but what would you do in that situation if you don't have a PM?

You also said you've manage the place with Nest Cams? If you're talking about in the interior of the house that is not legal, at least where my STR is.

Michael Glaser · Answer

This would be after the first year of ownership as this will be my primary residence. Probably going to take me at least 4-6 months to rehab, couple more months cultivate AIRBNB furniture. I’ll get to enjoy it for a few months before, get the kinks out & before I bring it online late 2020.

Worst case is I have a kicka$$ vacation home.

Another possible revenue stream is the amount of car commercials that are filmed in the area with limited accommodations. I have a long lost of production companies that would like to base out of the property for a few days to a few weeks.

Nathan Gesner · Answer

Question: how are you qualifying for a 5% downpayment on a rental? It's my understanding that you can qualify for a 10% down if it's considered a second home (per lender definition) but require 20% or more if it's a rental.

i just bought a second home through my local lender that knows me well. They gave me a great rate but I still had to put 20% down even though I'm only renting it out four months of the year.

Michael Glaser · Answer

@Paul Sandhu not sure how much you read of my posts, but this will be my primary residence. I’m exploring the options of making this a STR while I’m away for work after my term of primary ownership is over(1-2yrs). I currently live in LA but RARELY work there. So if I’m going to live somewhere when I travel I might as well have a primary residence where I want to live/vacation/work from. A lot of my jobs can be from international, NorCal or SoCal or basically anywhere. This property is a happy medium of a location I want to be, STR potential as an exit strategy or possibly a future vacation home at worst.

@Ken Latchers see above.

Maybe I should’ve subject-lined this as “EXIT STRATEGY FOR RURAL HOME | AIRBNB POSSIBILITIES”

Ken Latchers · Answer

The longer I am here, the more I grasp the Hades solution. Although it doesn't have to be short LTRs.

low cost properties. furnished rentals. areas with high demand for LTRs.

lot less work, potentially much higher profit than STRSs

Paul Sandhu · Answer

It's my suggestion that you stick with LTRs.  There are many more problems with STRs that would make them difficult to remotely manage.

Dead bodies, break ins, escaped rattlesnakes, walking in to find an intruder in your STR, etc.

Michael Glaser · Answer

@Don Konipol as told @Nathan G. in a previous post this would be a rental 12 months after purchase which are within the loan guidelines. It'll take me a while to get my house up to date. I don't currently have a primary residence as I travel a great deal for work. I appreciate your mortgage fraud warming but this will be my primary residence for at least 12 months and probably longer.

Vacation Rental & Airdna Numbers | What Am I Missing?

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