Newbie Introduction-Airbnb house hack???

Question

Hello Everyone!

My name is Michael Kelley, from Bardstown, KY (about 45 minutes south of Louisville). I am new to the real estate investing world (currently no deals have been made), but I have been reading, listening to podcasts, and trying to learn from others around me. Right now my interests are in BRRRR to build net worth, with the hopes of rolling over, via a 1031, into multifamily down the road. I also like the idea of flipping a few homes alongside brrrring for some additional short term cash, and the two seem to to be fairly similar as brrrring is practically flipping a house to rent.

The primary thing holding me back from investing is that I do not have my own place yet. I really want a place of my own, but do not want the major liability, therefore, I am looking to house hack my way into my first home. Right now I am looking at a vacant lot just outside of downtown Bardstown, it is not the most ideal location, but compared to other homes with similar distances from town I can still expect decent bookings to offset, and possibly cover, my mortgage.

The catch is that I want to have two separate spaces, one for myself and one for the Airbnb; this is both a personal preference and "entire place" rentals tend to do better than shared spaces. However, I am afraid having two separate kitchens and living spaces will be hard to sell whenever I decide to move on to bigger and better. The current zoning does not allow for a duplex, so it could only be sold as a single family home or a short term rental investment property. Another option would be to build a small single family with a detached apartment garage to be used for the Airbnb, but I am afraid that will cost more than what the surrounding homes are worth.

I was hoping to get some feedback from the Bigger Pockets community. I feel as if I am going into analysis paralysis and I am torn on what to do. Should I go for it, or try another route? Any help is greatly appreciated!

Maurice D. · Answer

Seems like an interesting idea, but here's my recommendation being in a similar situation.  I recently purchased my house hack/Airbnb/ADU property.

Given this is your first investment, I would suggest looking for a regular duplex, fourplex etc that needs some rehab.  the complexity of building up from scratch, zoning and current atmosphere from some cities regarding Airbnb would be a little risky in my view for your first venture.  I don't doubt you could pull it off, but getting your house situation fixed with a duplex frees up your time to start looking for deal #2.

In my case, I'm a bit busy with my rehab and in retrospect could have gone into a turn key or close to it, just to set up home base.

I'd love to build one day from a empty lot, but my house hack is not the time/place for me.

Richard Sherman · Answer

@Michael Kelley Short answer:  DO NOT build, probably doesn't make any sense to do that (I have a  post on this and why I didnt build 12 units on land I already own at a 32 unit apartment complex.)  DO, look for and buy a 4 unit property if you can (or maybe 3 units) and you can rent/airbnb the other units or a mix of both.  a 4 unit property will get the same loan as a normal house, not building will save you a LOT of headache and cost and you are 100% right...anything weird (like a nonduplex- duplex) will HURT you when it goes to be sold!

Account Closed · Answer

Hey Michael It’s nice to see someone else from Bardstown on here! I know exactly what you’re talking about as far as there not being inventory to do a multi family Airbnb downtown. I would definitely avoid buying a duplex because they are out of the desirable areas for Airbnb. There is a Tri-plex on Third street for sale, but they want way too much for it.

Brandon L. · Answer

Hello!  @Michael Kelley

Welcome to BP, and congratulations on making the decision to invest in your future via real estate.

I have written a few blog posts that may help you get started here on BP, and with your investing. Please click on the links, give them a read, and share your thoughts in the comments.

First is a post that I feel will help not get overwhelmed with the amount of info that is here on BP:

https://www.biggerpockets.com/blogs/5868/52761-the-simple-guide-to-getting-started-on-bp

The second is a post that will help get you focused with your real estate investing goals:

https://www.biggerpockets.com/blogs/5868/52743-im-new-to-bp-any-advice-would-be-appriciated

The last one is a post that will help you choose an “investor friendly” real estate agent. There are many agents out there, but it’s important to choose the right one.

https://www.biggerpockets.com/blogs/5868/52724-im-new-to-investing-how-do-i-find-an-investor-friendly-agent

I love answering questions if you have any! Good Luck :)

Richard Sherman · Answer

@Michael Kelley It was just a write up of my decision process for this property.  Link at the bottom.   You want to look at some past comps about multi family and make sure you can not buy for cheaper than you can build.  What is a good idea now could be a BAD idea later (i.e. what if AirBNB is restricted by ordinance where you are and you can no longer rent that way.)  Flexibility is your friend and do NOT build anything that has to be explained to a future buyer...and two kitchens is 100% that kind of thing.

https://www.biggerpockets.com/forums/311/topics/634484-why-i-am-not-building-12-additional-units-on-land-i-already-own

Richard Sherman · Answer

I 100% agree with @Maurice D.  GO FOR THE LARGEST you can as far as units and thank me later  :)  4 plexes are my favorite...still own the first two we bought doing BRRRRR back before it was a thing

George Blower · Answer

@Michael Kelley

Welcome to Bigger Pockets.

Michael Kelley · Answer

@Richard Sherman

I understand some of the reasons not to build (do you have a link to your article? I am not the best navigator of this site yet). Unfortunately there are not any duplexes for sale in my area (that I am aware of), and none exist in a suitable location for Airbnb. If I found a duplex I could of course do a long term rental, but the returns would be less than that of a short term rental. If I can build a small single family with a detached garage apartment, given my all in cost would be supported by surrounding comps, should I still consider it? Making sure the cost is below comps would allow me to back out if the Airbnb did not produce any revenue.

Michael Kelley · Answer

Also, what would be my best route for financing construction? I have thought about writing a cash offer on the lot subject to city approval on the building, then financing the construction with a loan (I plan to get pre-approved before making the offer). I wondered if I would be able to do a FHA to save my cash to buy other deals, or if I would have to go conventional since it will be new construction.

Newbie Introduction-Airbnb house hack???

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