GOOD / BAD idea AIRBNB or short-term rent your FLIP WHILE on MLS?

Question

Have you ever AIRBNB'ed, VRBO, Craigslisted, or rented a STAGED FLIP property while on MLS?

(Have you ever found a new, willing to maintain staged cleanliness, short term tenant in exchange for a rent discount?) It seems like it could be a win-win but it could also be a disaster.

Issue: I'm about to get the deed to a 3/1 property I won on auction.com via a live event in Philadelphia. FLIP property will be ready for MLS sale within 7 days of deed ownership. It's very cold here in Pennsylvania / New Jersey, so maintaining heat, water, etc., to the property + property taxes $400/mo + my private money interest will burn roughly $1300/mo total. I plan to stage the property with a full set of basic furniture with help from a professional stager. I'm also going to marginally overimprove (new granite countertop) to speed sale.

12 month rent would be roughly $1500/mo plus utilities (net $1800-2000 to tenant). Property will be for sale on the market for $130k. Hotels are $80-120/day in the area, which is 10 minutes from a lot of jobs.

I'm a newer real estate agent specializing in investors (foreclosures) and flips. Generally I don't show occupied properties because coordinating schedules with a tenant is a hassle. This property only needs cosmetics such as paint/carpets/appliances. I'm concerned if I don't have it occupied, I'll be paying a lot of expenses with no income like heat, snow shoveling, etc. The tenant's security deposit can be used to make anything 'like new' again for the closing walkthrough. His/her lease will include an optional termination on sale clause.

I expect to hold the property no longer than 6 months.

J-Ryan Stewart · Answer

If you do it right, it should be very few headaches for a lot of gain! I don't think people really understand the income potential for a professionally managed Short-Term Rental. Spending $30 at Target & Goodwill for some silverware/pots & pans seems like a fair trade if you promote it properly and make $150+ per night! Properly managed, you should book 80% for each month. That's a lot of money.

Concerns about selling the property selling with reservations pending are nothing. You can set limits on how far out people can book. Most folks book STR two weeks prior to their trip anyway. So set it at two weeks, 10 days, whatever. No closing is faster then that anyway.

Concerns about showing the property are nothing. You can show the property from 11:00 - 3:00 every day, after the turnover cleanings. Limit your guest stays to two days, or even one if you like.

Concerns about damage to the property are almost nothing. This is a reviews-based business to begin with, so people don't  tend to damage your place. Secondly, you can set up your deposits and house rules to cover potential issues.

It sounds like a lot of comments are coming from the right place, trying to protect you, but it also sounds like none of these folks professionally manage STR's as part of their portfolio. If you really know what you're doing, you can make excellent profit while you work out the details of your sale.

Natalie Schanne · Answer

@Martin Goetzinger - Currently signed to make $1200/mo rent from one investment with potential for $1800/mo total while I wait for a buyer. This is almost the 2% rule for my all-in for this asset. Finding the right people who understand maintaining staging is key.

Marcia Maynard · Answer

@J-Ryan Stewart makes some good points. You could have it professionally managed while waiting for the perfect buyer. The risk-benefit might be in your favor if you pick the right outfit to manage it for you. We have an Airbnb in our portfolio, but we host it and manage it ourselves. We set our availability calendar for 3 months in advance. If there was a way to set yours for one-month at time (without needing to do it manually) then it may be feasible for you. Getting to 80% occupancy really depends on the location, type of dwelling, time of year, and skills/reputation of the host/management company.

Mindy Jensen · Answer

@Natalie Schanne , Marcia suggested putting it up for rent for a very short period of time. If you don't even want to try to sell it before March, post it on the short term rental sites and block out the dates after March or April.

I think you will be shooting yourself in the foot to try to have it listed during the short term rental period. Murphy's Law rules real estate, and the only showing requests you'll get will be when it's rented to someone over the weekend.

Is there any chance you'd want to keep it as a short term rental for the long haul?

Ryan Kunzmann · Answer

Would you be able to find someone who would stage the property but also let you use their staging as a short term rental? I wouldn't think so, you would probably need to do monthly furniture rental. With an AirBnB/VRBO you would also need to fully furnish the property, kitchen utensils, pots, pans, bathroom and bedroom linens, all the small things.

Seems like you could be adding a lot of headaches for a little gain. I would rather just focus on pushing through the renovations and getting it on the market ASAP.

Levi T. · Answer

We keep them in place, and time the exit. For example, we put 3 units on the market this summer. All had tenants in them, so we gave them notice we where selling, and if it went under contract their lease would terminate in 30 days. Tenants complied with our needs and let us show the properties without little issue. Just keep it in normal business hours. If a tenant refuses a showing, we have another clause that fines them $125 per refusal. One unit we took off the market after we did not get the high price we where hoping for, once again we just informed the tenant we decided to not sell it and would continue to rent to them for many years to come.

Levi T. · Answer

It's an interesting idea, best you can do is try it and see if it works. Frankly I think I would just opt for a long term rental, but keep it month to month or 6 month, lots of LL's do long term rentals on month-to-month bases. When your ready, boot'm. Our lease has a termination clause written into them just for this. If we put our property on the market, we have the right to terminate the lease agreement. Sometime we want some quick cash for another deal, so we pick a unit we think we can move fast, pull the trigger and done!

Marcia Maynard · Answer

You wouldn't want to put it on a short-term rental site, unless you have a very short window open on your calendar.  Even then, what if the property sells and you have guests booked next month? Also, hosting requires a different mentality and skill set than landlording and flipping. If you host, you're in the hospitality business and there are different risks involved.

However, you could house your family and friends there over the holidays! If it sells, just rehouse them elsewhere. :-)

Natalie Schanne · Answer

@Martin Goetzinger @J-Ryan Stewart

@Marcia Maynard @Mindy Jensen @Ryan Kunzmann @Levi T.

Do you think a homeowner would be interested in contracting with a company that provides free staging (worth 2k), maintenance, insurance and a % of profits while the property is vacant and "for sale" in exchange for rights to airbnb / short term rent the property? (Obviously subject to local laws).

To close the loop, I ended up buying the 3/1 property for ~95k in Nov 30 after winning it at an auction.com live event in Philadelphia in late October. I put in 2 craigslist-found month-to-month renters / roommates by Dec 11th ($600/mo each = 1200/mo with 1200 of sec deposits). I painted their rooms first before they moved in and furnished it. While they were there I recarpeted the place with free installation / bed moving by Home Depot. By Jan 1st I had 5 short term roommates paying $2400 total per month, with $3000 in security deposits. Around January 15th, I decided to sell it and was under contract at my target ARV asking price of $145k. On Feb 15th, one guy finished his local job and moved out, bringing monthly rent to $2200/month. Rehab/repairs consisted of all new floors, tile over basement concrete floor, all new stainless appliances, washer and dryer, full paint job, removing drop ceiling and replacing with drywall, shed demolition, fancy kitchen faucet, granite countertop and backsplash installation (kept cabinets), new bathroom vanity, new gfci and grounded outlets by licensed electrician. Around February 20th, I sold the property at my asking price and moved the 4 guys remaining to my next property I bought the week before. The current property I paid 200k for and now am getting rental revenue of $4900/mo for (700/mo x 7 rooms, up to 900/mo with short term airbnb and $775/mo for long term airbnb). I am still rehabbing / repairing it with the rental revenue and it will be very nice for the area.

My goal is to buy more properties and/or help other people make significant rental revenue on their properties while vacant or being rehabbed (but livable).

GOOD / BAD idea AIRBNB or short-term rent your FLIP WHILE on MLS?

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