Seattle AirBnb - owner occ to cash flow

[Liam Naughton]

Investment Info:

Condo buy & hold investment.

Purchase price: $395,000
Cash invested: $40,000

Contributors:
James Dainard

I purchased this right as the Short-Term-Rental market had a big reset.
AirBnb cancelled all of their bookings due to the pandemic and the previous owners decided to get rid of this unit.
I took it down on an owner-occupied loan then converted it into an STR once I hit that 1yr mark.

This investment is entirely passive thanks to my manager, at this point I'm racing to 20% equity to get PMI taken off and increase the cashflow.

What made you interested in investing in this type of deal?

My father owns a unit in the same building and used his unit as an STR for a while. I saw the returns he was getting and knew that the building was a good investment.
I also wanted the experience of living downtown for my first purchase.

How did you find this deal and how did you negotiate it?

The deal was on the NWMLS and I paid list price for it.
I knew that it was listed slightly under market value. At the time, it was the cheapest option in the neighborhood. The previous owners had also spent $15-$20k on upgrades to the kitchen and bathroom that wasn't reflected in the price.
After I went mutual there were 2 backup offers within 4 hours.

How did you finance this deal?

Conventional financing 10% down.
I couldn't do 5% due to the HOA and % of rentals in the building.

How did you add value to the deal?

I took out some of the fixtures installed by the previous owner and added in a projector to help draw people in for the AirBnb. With how AirBnb is changing its platform it's imperative to have something that stands out and makes your property unique.

What was the outcome?

I still own the unit and it cashflows for me. :)
There are some winter months that don't break even (considering doing a MTR to offset the slow months) but the summers make more than enough to make up for it and my manager keeps the occupancy high enough for me to not make a fuss about it.

Lessons learned? Challenges?

Check your HOA's, make sure you're comfortable with the people that are in charge of the decision making/negotiating on behalf of the association.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Mike Guild with Caliber Home Loans did my loan and I couldn't have done this deal without him.
Thanks to him and James Dainard with Heaton Dainard Real Estate for making this deal possible!

[Liam Naughton]

Quote from @Michael Smythies:

Hi Liam, 

This was a great read for me. As someone interested in looking at AirBnb opportunities within the Seattle limits, this was very helpful. What was the building you bought your unit in? Would love to hear more about this deal. 

 @Michael Smythies This one is in Belltown Court. The building has two sides, 1st Ave and 2nd Ave. Happy to chat more if you've got questions! Highly recommend the building as it's HOA is extremely AirBnb friendly. The majority of the units in the building are now STR's. Also the president of the HOA manages about 30+ units including mine.