Needing Advice on a Property | Which Route is Best

Joey Saah · 2017-01-06T08:48:13-08:00

Hello, I have a property on the Eastern shore of Maryland in a resort town. The house is a 5 bedroom, 4 full baths, large deck, hot tub, pool and a 1,200 sf heated garage with water. I have it rented out now to a family but it still doesn't cover the mortgage unfortunately. I am also in the process of trying to either get a loan modification or a refinance, however, my debt to income is too high for a refinance and I am being told for a modification the house must be in foreclosure or considered a hardship. I would like to rent out each room separately or possibly add a small kitchen to one side of the house and make it a duplex. I have a large room that could be converted into a kitchen / living room which if I split the house in half with a wall or doors, would give me a large duplex with 3 bedrooms 2 baths, kitchen, dining room and living room on one side and the other would be the exact same thing minus one bedroom. I've also toyed around with the idea of turning the large room into a studio apartment considering it already has a separate entrance and that is the room I was planning on adding the second kitchen to anyway. My last idea is to use AirBnB as I've seen a lot of positive feedback on here and other places. I also have a friend that uses it with here house only a few miles from mine. The problem is that I would like to stay in Florida and running AirBnB seems like a full time job although the return seems to be great and the prices are quite high for other places in my area. The thought of being able to rent out 4 or 5 rooms everyday plus have a complete studio apartment to rent as well, or live in, seems pretty exciting. Any Feedback would be greatly appreciated. Thanks!Joey

Joseph Weisenbloom

Investor · Austin, TX · Member since 2013 · 443 posts · 174 votes

9y

@Joey Saah Let me ask you this. Would adding the second unit cover the cost of your mortgage? If it does than I think its a viable option to get you out of your predicament.

Here's the problem. You property may not be zoned for multifamily. This will make it difficult to pull the permits to have the second unit added. You will have to do some research into your local zoning laws to see if they will allow it.

If you can get the second unit built and rented you could hire a property manager to handle it allowing you to live out of state.

0 Reply

Sean Walton

Wholetailer & Architect · San Francisco, CA · Member since 2015 · 544 posts · 298 votes

9y

@Joey Saah you may want to consider selling it and if you are underwater sell as a short sale. Even if these improvements pay your mortgage there are a lot of other expenses. Insurance, maintenance, taxes, capital expenses (new roof), vacancy, utilities & furnishings (if airbnb).

There are companies that manage airbnbs but not sure if there are any in your area. You could install wifi smart locks and get a good relationship with a cleaner to handle turnover. If you develop systems as other have on this site it is probably possible to manage most things remotely and pay your friend to handle things you can't remotely.

1 Reply

James Carlson

Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes

9y

Hey @Joey Saah. I'm certainly a big fan of Airbnb and short-term rentals. But it largely depends on the demand in your area. If you're in a resort town, it sounds like it could work. If you can get the people, you should bring in significant money. Some factors to consider:

Local regulations
This is a biggie. Many cities and towns are cracking down on Airbnb. Many of the cities that allow it, like Denver, allow it only in someone's primary residence. Is that true for your area? If so, Airbnb may be out.

Market demand
Do a simple search on Airbnb.com for listings similar to yours in your area. Look at their reviews? When were they posted? Are they getting a lot of reviews? And even if they are, are teh reviews spread out over multiple years or are they concentrated? (You want to get a sense of how often they're being booked.) In my experience, not every guest leaves a review. Many don't. So you can't totally rely on the reviews to tell you anything. You could also try a pay service like Mashvisor or Airdna.co (no 'm'). They have data on occupancy rates for certain areas.

Level of work you can put in
To do an Airbnb right, you either need to hire a property management company that specializes in STRs or you need to do it yourself. Sounds like you won't be there, so you need to look up Airbnb property management companies and see if you can find one that works in your area.

Happy to answer any other questions. I love talking about this stuff. Good luck!

1 Reply

Nicole Jones

Fresno, CA · Member since 2015 · 145 posts · 59 votes

9y

Hi @Joey Saah

I will piggyback on what James has said. I'm a huge fan of Airbnb and have found (surprisingly) that even in areas that you may think be not be so desireable, with the right set up and good photos and just overall quality of the listing you can do good with an Airbnb anywhere! Every town has it's own type of tourist. You just need to find what this is and in what season. I agree to look into AirDNA, although I will say that my unit did above and beyond what AirDNA had predicted.

Because you will not be living there it does sound like a scary option. I am currently looking for someone to take over all of the cleaning/maintaining. I have a lock box for keys so that's not an issue (yet). Basically having two key people to have in case of emergencies is all you need. The first, hire to turnover. do key hand off if you trust them to be a socially calibrated individual for hospitality and a second (family member, friend) to be the just in case key person if that first person jumps ship.

IT IS scary. I'm moving to another town and I myself like the control of knowing when and how things are done. I can totally relate to this. But the profits of doing it and relinquishing some of that control over not at least trying it and being in your position seems like an easier choice? Maybe it's a good choice to at least try for a test run! Good Luck!

2 Reply

James Carlson

Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes

9y

@Nicole Jones . That's interesting that you say your place performed better than Airdna predicted. I think as with so many rules and tools, they're not hard and fast. Similarly, I tell students in my Airbnb class to never use Airbnb's smart pricing for the same reason. I always got way more than what they recommended. Technology's great. But it's still no match for knowing your market and your own space's desirability.

I hear you about the control. I wouldn't even let my own wife clean our Airbnb rentals because I was so particular about them. That was dumb of me. While I advocate maintaining high standards, you've got to trust others and relinquish control at some point if you want to expand. Sounds like you understand that well. I wish you luck in your move. Cheers!

1 Reply

Nicole Jones

Fresno, CA · Member since 2015 · 145 posts · 59 votes

9y

@James Carlson Yes! You are spot on with smart pricing. I left a lot of money on the table the first month from trusting smart pricing as a tool. Once I received my first few 5 star reviews and I gained some confidence that my listing was not only desirable but sufficient and enjoyable during the stay I moved away from smart pricing and have almost doubled the nightly rate with no hiccups. Good luck in all you do as well!

1 Reply

Maxwell Lee

Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes

9y

We just recently started airbnbing one of our properties in Jax and I've been completely SHOCKED by the demand. We crushed it with airbnb for awhile in DC (until the condo association sent a cease and desist) but that's DC. Jax is not a tourist destination. On top of that, I had considered airbnb for my own private residence in a very popular neighborhood in Jax and the demand seemed very weak based on the pricing and number of reviews. I figured traditional rentals would always be the way to go.

Well, it took a fix and flip that wasn't selling at the price we want (and had gotten broken into once) for us to look into STR to get us through the slow winter months and add a layer of protection to a vacant home. So we decided to explore airbnb in this neighborhood and suddenly realized there were 30 units listed in this half sq mile area. And many had been reviewed more than once a week. Right there under my nose, in a neighborhood we work and invest in regularly, I had no idea STRs could be such a viable option. This was a last resort and currently is a trial run, but may be something I consider for future as the returns will likely beat out traditional rentals.

And thanks to @James Carlson and @Nicole Jones for further insight into this avenue.

3 Reply

Needing Advice on a Property | Which Route is Best

Needing Advice on a Property | Which Route is Best

Most Popular Reply

7 Replies