Investor · Brooklyn, NY · Member since 2017 · 33 posts · 7 votes
Hi bigger pockets,
I am a new aspiring real estate investor looking to venture into the STR market. I've done some research via articles and podcasts (thank you bigger pockets) and feel all that's left Is to jump in.
I’ve been following this great blog post https://www.biggerpockets.com/blog/airbnb-arbitrage-convincing-rental-owners step by step.
I found a fully furnished condo. It’s in a great part of town, near a tram stop and close enough to the city, parks and even the beach.
It Rents for $2400/month and has $9000/pa HOA fees (=monthly $750).
When I looked at Airbnb I found that all the rentals of similar status had 90+% vacancy for the next 3 months. At least when I look at the availability option on Airbnb. So... I’m struggling to moving forward. I know that people are successful with Airbnb. I even see an apt of a friend who’s a successful operator and his has 95% availability as well.
Essentially I’m asking is:
1) how can I double check the local vacancy for this apt.
2) I’m currently banking on min $180-200/night. Is that a good enough figure? I will self manage.
There are very few deals that will cashflow positive in the Area I’m looking at. I thought this might be a good alternative and he’ll me start slow...
I think you’re looking in the wrong area. Look in the southern half of the US: there are tons of great deals that will cash flow a ton, and regulations seem to be much more favorable down south. Good luck!
@Yankel Raskin Don't limit yourself to vacationing people. I'm making a killing renting to refinery contractors. 2 of my houses have paid for themselves with the original tenants. One took 3 months, the other took 9. I'm not in a normal real estate market by any means. My town would probably be the equivalent of a gold mining or oil rush town from the 1800's. Riff Raff, whiskey, gambling, prostitutes, con artists, and other shady characters run gamut when the refinery is doing major work.
@Ken Latchers thanks for the advice. I was attracted to arbitrage because the cash flow can be really food. If all goes well Only need a few properties to get a stable business and then could save up to buy real estate myself. But i appreciate the warning
Hey @Yankel Raskin, it looks like you made up your mind even though most of us are warning against it. Here is what I see from a numbers perspective.
$3150 per month in rent and HOA. This doesn't include all the other operating expenses. Power, water, sewer, internet, etc all cost something. Consumables like detergent, toilet paper, paper towels, coffee (if you offer it) and on and on.
You are banking on a 90% plus occupancy to make it cash flow. Therein lies the rub. If you have one off month, you are in a hole. Also, it will take at least a year to build up some good reviews to get to that 90%. Are you prepared to absorb the costs for a year or so? What are the competitors charging? Frankly you would have to get that $200 a night to get even close to making this work, IMHO.
I hate to be the wet blanket here, but this looks less than stellar to me. If the regs change in your area, you are stuck in a lease that you will have to pay. I don't see how you will make enough to start real investing.
Anyways, just be careful moving forward. There is a lot that can go wrong in this kind of deal. Even if everything goes great, it is still going to be tight. My 2 cents.
Amid the other concerns being voiced here, I didn't see anywhere that the HOA was verified in allowing STR. It's always a good idea to double check... even when they are allowed that could switch quite fast, city/local ordinances too. If you were thinking of something with STR, and you aren't completely familiar with the business model, it may be worth it to purchase something that doesn't have an HOA (SFH, MFH) so that you have more direct control over the asset. This could be harder depending on the area, of course.
Perhaps try doing some version of STR with a purchased investment to get your feet wet, and you should at least have a few exit strategies, assuming you are doing enough analysis on the front end. Making sure things rent easy to long-term tenants and at least break-even during a downtime when travel might decrease to cover downside there. Of course purchasing also comes with the long-term wealth building aspects of loan pay-down, (hopefully) appreciation, and depreciation can make it a favorable deal if any inexperience in STR leads to numbers lower than expected. You could even house-hack and STR depending on the layout.
Stacking the options and exits as much in your favor and giving yourself flexibility can go very far. At the end of the day, you will make your decision and should follow what you think is best. Strive and hustle to make things work and try to limit your downsides as much as possible!
This is unlikely to work for a couple of reasons. First, you can't even list an AirBnB in New Orleans without a permit. Go here to see the zoning for the property address: http://property.nola.gov/ then download the short term rental handbook: https://nola.gov/short-term-re... and look up your zoning to see if it's even legal for that unit to get a permit. If it's in the CBD it likely is allowed, but otherwise it probably isn't unless it has a commercial designation. Then the condo association would also have to be on board. If the condo association won't allow it then you can really screw yourself.
New Orleans isn't a very easy town to start an AirBnB business anymore. I'd suggest Tampa.
Hey @Yankel Raskin, you are never going to get fully accurate occupancy rates. There are too many variables in play, some are tangible and some are intangible.
In the same location, you can find someone with a high price pulling 80% occupancy and someone with a dirt cheap price pulling 30%. It all comes down to quality of the stay, previous reviews etc.
All you can do is get an idea of what you can do in an area, then build your unit to be the best it can be. If all the best places have a hot tub, then you need to have one as well. If the best places have a great view, then you need to concentrate on somewhere that can provide that.
The first thing is finding the right location. Like all real estate deals, location, location, location plays a role in STR's as well. You can put in great linens, high quality bed and furnishings, but if it has a great view of the local dumpster fires, then you ain't gonna rate well. You can't upgrade location.
Once you find a place that has a great location, start pulling similar units calendars on AirBNB and VRBO/HomeAway and then you can extrapolate from there. Take the top performers and see what they are offering. What makes it a great stay. Often it is the customer service they get from the owners.
@Yankel Raskin You're never going to be able to find vacancy rates laid out for you in a nice neat spreadsheet. Whether you're trying to arbitrage or to buy, your neighbors are going to be the best indicator of what your vacancy rate will be. You could always try messaging them through Airbnb to ask some questions. They may not respond, or even tell you to get lost, but all you need is for one of them to talk to you!
Oh! I misunderstood. OK, then it's different but you still have the condo board. Also, a lot of what people are saying here is not entirely accurate regarding STR. The percentage of time an apartment is rented as an STR is totally irrelevant (no offense everyone). All that matters is what you make per month. I have a place, for example, that pulls in very significant profit and is only rented half the time. That's because in New Orleans near the French Quarter you make 80% of your money on the weekends and when the weekends rent, depending on the season, if you're left with a Monday/Tues/Wed in between they're unlikely to rent, even if you drop the prices significantly, which I do. Etc.
There are ways to research the AirBnB market where you're going. You can use data from AirDnA. But mainly you want to look at other listings nearby that are similar. The things that matter are the number of bedrooms of course. Number of bathrooms is a little important. Now when you're looking at similar properties you first have to eliminate all the people in the area who aren't serious about it. That's going to be a lot. It could even be half. What you're looking for are places that have bookings but are not completely booked for 3 months, because if they're completely booked they're not charging enough. Some people just set a price, say $100 a night, and leave it at that. So that's not great information. Find someone who is varying the software, see what it would cost to book two or three weekdays with them (you can do this is easily on the site by plugging in the dates you're considering renting) but then what are they charging the next month, and the month after that. Check what their weekend price is and what their weekday price. They should be mostly booked up for the next 30 days but only 50% booked in the second month and maybe 25% booked in the 3rd month out. Then you know they're renting and pricing things accurately. Find as many of those places as you can, create a spreadsheet with the information, and you'll have an idea of what an STR can bring in.
Owning is definitely the way to go but it's not impossible to find a landlord that is OK with you doing STRs on a rental. I have done that, but it's very hard to find. There are benefits for the landlord, depending on the building, for instance offering to pay more rent than normal. But it's a thing to be worked out.
Occupancy rates don't mean squat. Today, right now, I have 20 of my 23 STRs occupied. The other 3 have been reserved by repeat customers that will be here this weekend. So I have nothing available. There are several other individuals that do STRs. Sunday morning I saw one of them putting up a sign by the side of the road near the refinery. It said "Furnished Houses and a phone number".
My occupancy is 100%. Their occupancy is 0%. Does that mean the average occupancy is 50%?
@Yankel Raskin i’m sorry you have gotten so much bad advice and naysayers responding this far. There are data websites that will give you the occupancy rates and average nightly rates of booked reservations for all the other Airbnb properties in any area you are looking for. Check out AirDNA.co
Seeing the calendars of other Airbnb’s and how many Booking is a really in-accurate way of determining how many nights they end up getting booked. With lots of B&Bs, there are lots of bookings that come in last minute, and your friends apartment could actually still be 60 - 90% booked, but you would not know that by looking at the future availability calendar. In my market, 50% of all reservations are made within 6 days of check-in. Most of my calendars look empty, but I am usually around 70% occupied when you look back at the past bookings.
Please do check that the HOA allows STR. Most don't.
@Yankel Raskin, good on you for taking the first steps towards being a real estate investor. There are a multitude of ways to make money via real estate to pick a strategy that works for you and go deep. The very best way to learn and grow is to be open to making mistakes. The advice that you have been getting from this thread has highlighted some of the risks, some of the upside and some of the work that you need to do in order to get better. Nobody is born great at anything, it takes repetition and practice so go ahead and get started, you won’t regret it, even if you make costly mistakes. Good luck!
@Yankel Raskin pay for a subscription for AirDNA to analyze the address. You could just sign up for one month just to get the data. It will give you average income, vacancy, and average nightly rate based on the address and other STRs in the area. I think it’s around $50 a month for my area. Good luck. I just started one before Christmas. So far so good.