Owner Occupied Vacation Rental Multi

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Owner Occupied Vacation Rental Multi

Michele FischerPro Member
Rental Property Investor · Seattle, WA · Member since 2013 · 2k+ posts · 1k+ votes

I have stayed in vacation rentals that are primary residences and they must couch surf when it is rented; that isn't what I'm talking about.

The recent podcast has my brain chugging about vacation rentals.

My husband and I have discussed opening a B&B in retirement, but decided it is too involved and maybe not playing to our strengths. I am open to living in a multi-family, but understand that there are downsides to that as well. I’ve been wondering if getting a triplex or quad, living in one unit and vacation renting out the other units would be a viable option.

One issue it could solve is wanting to downsize but what to do with family when they come to visit if we had significantly less square footage. It would more fit our strengths of tour guide types than full blown hospitality types.

This would be close to downtown Seattle, and I’m wondering if there is really enough of a market. There seem to be plenty of vacation rentals options up already in all price ranges. By the time you add the furnishings and extra touches, can you cover the incremental costs of a bigger property? This would be an appreciation focus rather than a cash flow process, but it would need to not be a losing proposition.

Thoughts?

Love how the podcasts get us considering different options, regardless of the outcome.

Podcast Guest on Show #79
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Residential Landlord · San Mateo, CA · Member since 2013 · 49 posts · 12 votes
12y

@Michele Fischer : I actually LOVE vacation rentals (VRs) and got started that way. I bought a home in Portland, OR and within 2 months of having it on the market had it rented out for 2 years! Now this house stays rented out 8 to 10 months in the future. In Feb I realized I did not have renters past Sept 1, so I got to work and it is now booked through November!

I bought the place in Feb 2012 and broke even through the end of 2012, but then lost money in 2013 because I under estimated expenses (newbie mistake) and was locked into a 12 month rental agreement under market rates (another newbie mistake). I really did not care though because of the monster appreciation. This year I will do very well indeed and actually have an accepted offer on our second property, which is a loft in the Pearl District.

Based on the cost in the Northeast I think the only way to cash flow is to do a VRBO because of the income you can bring in.

Make sure to connect with Matt Landau, he is the VRBO guru and can teach you what you want to know.

My rule of thumb (which worked for all 1 of my properties so far :)) is to use VRBO.com to determine the number of rentals available and how far out they are booked. For example, the majority of rentals in Portland in the Studio/Loft space were booked out for Feb and March and there were very few that would allow a 7 day stay, most required a month or more. As a result, I know there is unmet need especially since my 700 square foot loft which will sleep 4 comfortably and is decked out to the 9's with a roof deck will be AT LEAST $50 to $75 less per night than a Hotel w/ no Kitchen, etc.

On a final note, be really careful about zoning. In Portland, VR's are only allowed in commercially zoned places, which usually puts a premium on the property cost. I think I looked at 50 different condo's in Portland and found 2 that were zoned commercial AND had HOA that allowed less than a 30 day stay.

If you do decide to go this route, also be aware it is ALL about response time and the local knowledge of the owner to provide an experience to renter and not just another place to stay. The folks looking at vacation rentals can send out 10 to 20 inquiries in 10 minutes so the first one to respond and follow-up with meaningful information is the one who usually will get the booking.

Thanks and let us know if you have more ?'s, we are all here to help!

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  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    12y

    The vacation rentals are usually for those bargain hunters or those who would like a more authentic experience. I can see these people going to Hawaii to escape everything but I can't really see it happening in Seattle (City). Maybe more in the Snohomish where there is more of a draw to the outdoors/snow season.

    0Reply
  • Dana R.
    Investor · Bellingham, WA · Member since 2013 · 50 posts · 28 votes
    12y

    I’ve toyed with the same idea. However, given the booming Seattle real estate market, multifamilies close to downtown that would cash flow might be hard to come by.

    Just for fun, I did a search for multifamilies in decent neighborhoods around downtown Seattle. I set the maximum price to 1 million. The search results turned up one property—A 3,410 sq ft duplex, built in 1908. Price $795K. Property taxes $8460/year.

    With 20% down and a 30 year fixed mortgage at 4.25%, monthly payments would be $3,128. Add another $705 on top of that for just the property taxes.

    So, could the idea of a vacation rental/owner occupied multi work? Maybe, if the right property could be found.

    Is there a big enough demand for vacation rentals in Seattle? Dunno the answer to that one.

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    12y

    Maybe buy a rental in U-district and offer 9 month leases. When I was a student we typically ate the costs when everyone when home for the summer. Could be a both win deal.

    0Reply
  • Zach Schwarzmiller
    Investor · Snohomish, WA · Member since 2013 · 629 posts · 84 votes
    12y

    I have a friend who does it with a triplex. He started with 1 unit to air b&b and the other two market rate, which is $1,000 a month. His first month it was rented for 10 days $1,000 total, second month $1,300 for about 15 days and third month the entire month for $3,000. There is the risk in there but usually doing well - and to make the same amount over 10 days you have cheaper expenses (utilities). interesting idea, I am going to move out of the house I just bought soon and am toying with the idea of this as well.

    1Reply
  • Robert Bowles
    Lender · Portland, OR · Member since 2013 · 88 posts · 38 votes
    12y

    I am not sure about the Seattle market, but I have met a few people that rent units in Portland through Airbnb and VRBO and do really well. They all seem to be bringing in more than the unit would rent for if monthly. Two of the units are close to down town (1 a duplex the other 3 plex) and the others are ADU's around the city.

    My wife stayed in an Airbnb 4 plex in FL to take some classes where the owner rented all the units through Airbnb. After talking to him it planted the seed for us to buy a vacation rental on Mt Hood. Although a totally different thing we are hitting it out of the park (We have paid the mortgage until 2015 already).

    You might look at Airbnb to see if they have any meet ups. There is a group in Portland that meets occasionally and we have spoken to a lot of people here, if a group exists it might help you do the math.

    Good Luck.

    0Reply
  • Account Closed
    Rental Property Investor · Everett, WA · Member since 2013 · 389 posts · 222 votes
    12y

    @Michele Fischer

    That podcast got my wheels spinning too! I live in West Seattle and have found several folks in my zip code who rent their house by the week as vacation rentals. If I could rent my house out for a one week stretch each month, I could cover 75% of my mortgage. Couch surfing here I come! Haha, not really but some good food for thought.

    To address your question I think one of your best bets would be doing a nonconforming duplex in Ballard or Wallingford. These are quaint neighborhoods with lots of local flavor and appeal that have lots of MIL unitis or ADUs built into the basements. They are much more reasonable than true duplexes and can be found in very desirable neighborhoods. To your point, not much in ways of cash flow but some great equity paydown and appreciation opportunity.

    0Reply
  • Zach Schwarzmiller
    Investor · Snohomish, WA · Member since 2013 · 629 posts · 84 votes
    12y

    Side Note: I've couch surfed with 60+ different people throughout 20 countries or so, it's been amazing! I'd highly recommend it to anyone traveling and/or if your able to rent your place to a traveling party. I've met some really unique people that way.

    0Reply
  • Michele FischerPro Member
    OP
    Rental Property Investor · Seattle, WA · Member since 2013 · 2k+ posts · 1k+ votes
    12y

    @Lane Kawaoka , thanks for the input, appreciate it. Feel free to keep this thread going with vacation rental thoughts, learnings, and experiences in the future.

    I am getting to the point where I prefer vacation rentals over hotels when I travel. We have had great luck in WA DC and Denver. For me it's not about price or authenticity (although I like both) as much as space, flexibility to eat home cooked meals, and easier parking.

    It will be very interesting to see how this niche evolves and what role we'll play in it...

    Podcast Guest on Show #79
    0Reply
  • Account Closed
    Residential Landlord · San Mateo, CA · Member since 2013 · 49 posts · 12 votes
    12y

    @Michele Fischer : I actually LOVE vacation rentals (VRs) and got started that way. I bought a home in Portland, OR and within 2 months of having it on the market had it rented out for 2 years! Now this house stays rented out 8 to 10 months in the future. In Feb I realized I did not have renters past Sept 1, so I got to work and it is now booked through November!

    I bought the place in Feb 2012 and broke even through the end of 2012, but then lost money in 2013 because I under estimated expenses (newbie mistake) and was locked into a 12 month rental agreement under market rates (another newbie mistake). I really did not care though because of the monster appreciation. This year I will do very well indeed and actually have an accepted offer on our second property, which is a loft in the Pearl District.

    Based on the cost in the Northeast I think the only way to cash flow is to do a VRBO because of the income you can bring in.

    Make sure to connect with Matt Landau, he is the VRBO guru and can teach you what you want to know.

    My rule of thumb (which worked for all 1 of my properties so far :)) is to use VRBO.com to determine the number of rentals available and how far out they are booked. For example, the majority of rentals in Portland in the Studio/Loft space were booked out for Feb and March and there were very few that would allow a 7 day stay, most required a month or more. As a result, I know there is unmet need especially since my 700 square foot loft which will sleep 4 comfortably and is decked out to the 9's with a roof deck will be AT LEAST $50 to $75 less per night than a Hotel w/ no Kitchen, etc.

    On a final note, be really careful about zoning. In Portland, VR's are only allowed in commercially zoned places, which usually puts a premium on the property cost. I think I looked at 50 different condo's in Portland and found 2 that were zoned commercial AND had HOA that allowed less than a 30 day stay.

    If you do decide to go this route, also be aware it is ALL about response time and the local knowledge of the owner to provide an experience to renter and not just another place to stay. The folks looking at vacation rentals can send out 10 to 20 inquiries in 10 minutes so the first one to respond and follow-up with meaningful information is the one who usually will get the booking.

    Thanks and let us know if you have more ?'s, we are all here to help!

    2Reply
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