Any AirBNB Moguls Out There?

Question

I've been fairly successful with duplex/triplex/quad acquisitions and rents over the past 2 1/2 years. I've ended up with a little over 25 doors and am happy with returns. My son recently picked up a SFR in the Bevo area and has it up on AirBNB. So far (even in the winter time which I figured would be really slow) he has pulled in about double the returns he had been seeing with his rental properties. Of course this caught my attention...

So... I'm looking at SFRs to do the same thing, but I would sure like to talk with someone who is already in the business just to make sure I'm accounting for everything as I start looking to expand into AirBNB. For instance, I have seen where Chesterfield, and Ellisville (in West County) have basically outlawed AirBNB. I have seen where other townships closer in to the city have done the same. I have also seen that AirBNB properties in the city are going to be charged a special tax, how would you track something like that and insure that those payments are made when they are due?

Some of the other questions I have are:

* Are there property managers for AirBNB properties or do "Moguls" manage the properties themselves?

* What are your thoughts on a multi-family vs single family as an AirBNB property? (Small multi-family ... like a duplex)

* As I'm evaluating properties I'm insuring that they would cash flow even if the city were to outlaw AirBNB so I think I'm being fairly conservative there, but what are some of your experiences with things like that happening?

I've done quite a bit of research (and listened to a ton of podcasts) on AirBNB properties, but like every new venture I would sure like to hear first hand about experiences others have had (especially in the City) with AirBNB properties.

Account Closed · Answer

Mackal Smith One of the biggest challenges for newer hosts is getting the accounting down. Regardless if you have 3 doors or 100 doors having a systematic process in place not only will make running properties easier, but will allow you to scale much quicker. I manage 45 of my own units, 150+ for clients. I over see all of them but my day to day interaction for each property is not as involved as far as responding to inquiries and checking behind cleaners. I utilize area managers (which in your case would be your son) but utilize a property management software to have an overview of the entire operation. I also do my best to be as hands on as possible. It’s a full time job and then some but very similar to my experience working in hotels. When looking at properties I look at data from companies like Airdna, but also do my due diligence by going over listings in the area on multiple platforms, I walk the neighborhood, and in some cases I’ll book Properties to see what the competitive set brings to the table. Take your time run your numbers and remember “if it doesn’t make dollars, it doesn’t make sense.” Understand what you want your return to be and run conservative numbers. I also do a doomsday scenario (legislation changes, if I don’t generate the return expected, can I do LTR, corporate rentals, etc). Depending on markets I prefer multifamily, it doubles your property revenue and simplifies operations. I hope this helps and if you have any other questions feel free to reach out. Happy Hosting

Account Closed · Answer

For different areas I take different approaches, cleaning companies are good for accountability but typically come at a higher price. I think finding a good cleaner or 2 and developing a relationship would be best for you. Pay them fairly and you will have longevity and loyalty. Try posting ads on Craigslist and care.com, also you can message current hosts or attend an Airbnb Meetup for your area and get recommendations.

Mackal Smith · Answer

Thanks Account Closed,I just got Buildium set up to use for the 2 duplexes my son is managing for me (including direct deposit into my business account etc). I'm assuming it will probably work for my AirBNB units also. Do you have a dedicated cleaning crew or do you outsource? Any problems with scheduling them between check-in/check-outs?Thanks so much for you input!

Mackal Smith · Answer

Thanks Chris,Great info. Where are your units located? Are they local to you? (I forgot to mention mine would be in St Louis and even more narrowly they will be in the South City area of St Louis) in the post. I'm about an hour outside the city and I work full-time so I have 2 different property management companies for my current portfolio. That said, I just brought my son onboard to manage two of my duplexes and I'm thinking about using him to manage the AirBNBs for me. You mentioned 20 to 50% of gross for management companies, would that include the cleaning service, or is there a separate charge for those? I'm trying to figure out how to give my son fair compensation while still keeping costs down.Do you adjust your rates downward for slow periods or is your area touristy enough to leave them as-is year around?

Chris Armstrong · Answer

@Mackal Smith I am no mogul per say but I do have three units all airbnbs and I would be happy to share my experience with you. I can say that if you have an area that has a high tourism demand then the margins you can make are far better than a traditional rental. For example I was listening to a BP podcast and the guest was saying that each month in his 10 unit complex he will net 3K in profit. Well I can do the same thing with one door and my monthly average of net profits per door is $2750 ish. So I was pretty happy with those results. That being said there is a lot more that goes into it than collecting the money lol. The turn over of the units can be quite intensive, especially if you have multiple checkouts followed by multiple check ins the same day. So having good robust systems in place ahead of time would be a good place to start. There are companies that manage rentals for you, but they come at a high cost, 20-50% gross income. So at least for me in the short term I will manage all mine until I am tired of it and the units are paid off. As far as the taxes incurred by guests, airbnb platform has done a wonderful job of doing the collection and remission for you based on your county. VRBO does not do that but they do provide you with a percentage to hold back from gross earnings. Its a slippery slope with legislation, but if I can ride this wave for as long as I can I can put away some serious cash, so that if/when things change I will be well prepared to change my strategy into accumulating long term rentals or something like that. Hope this helps