Buying a Dream Home Using Airbnb to Offset the Mortgage

Investing Goal: Afford a Beautiful Personal Residence
One of the primary goals I wanted to achieve through real estate investing was to afford a personal residence with some extra-special natural surroundings.  As I honed in on this wish, I identified the coastal area north of Seattle as my target area.  It boasts spectacular views of the Puget Sound stretching out against a background of the Olympic Mountains.

After reaching the milestone of owning 50 rental units, I felt it was time to buy a personal residence. For the last several years while building my portfolio, I had been renting inexpensively and living very simply to put maximum money toward rental acquisitions and renovations. I gave due consideration to the idea of buying a simple home with a relatively low mortgage payment, and let my investments churn and grow for a few more years before buying a "dream home". The prices for buying a view home with a transcendental view were higher than any investment property I had bought, and seemed potentially cost-prohibitive.

Vision of Having a View Home
Nonetheless, I couldn't shake the vision from my mind of having a gorgeous view which would provide an inspirational background for my daily activities.  I envisioned having a "home office" located in the fresh air on the deck, hearing the waves crash against the beach, and looking up to watch birds against the sky while thinking over how to approach a problem.

I developed the habit of looking regularly at all view home listings up and down the coastal area of Shoreline, Edmonds, Mukilteo, and Everett.  After continuing this for well over a year (and making offers on 3 other homes which I didn't get), a listing caught my attention which was very unique and had all the signs of being "the one".

"The One"
This property is located in Edmonds about 150 ft from the beach and has a gorgeous panoramic view of the Puget Sound and the Olympic Mountains.  And the key factor that really excited me is that it has a guest house.  I thought, if I can rent this out on Airbnb or VRBO and really maximize the rental income , I can offset my mortgage to such a degree that I can live in this "dream home" for the same monthly cost as I would spend on a simple suburban home.

Another interesting factor about the property is that the couple selling the property was getting a divorce and relocating, so they hadn't taken the time to maximize the listability of the property.  The surrounding landscaping was overgrown onto the property, and the guest house had been stripped of appliances and was setup as an art studio (cool, but not as good for income-producing as a rent-ready guest home).  These factors didn't bother me, because I knew with my contractor's help I could solve these issues in a couple week's time. I was thankful for a few drawbacks that might give other buyers pause so I could get it!

Buying the Property and Starting the Airbnb Pipeline
I immediately looked at the home with my agent and placed an offer, with an extra 10 days "financial feasibility" period to give me time to get a pre-approval letter from my lender.  After a couple back-and-forths on price, we went into contract!  As I'm sure many other investors have experienced, it isn't easy getting a loan as an investor with more than 10 properties, and many of them being recently purchased (not appearing on multiple years' tax returns).  Nonetheless, I felt confident that *this* was the house.  I spent a huge amount of time and effort with my mortgage company over the next 60 days, and finally closed the deal last month.

I listed the guest house on Airbnb within a couple weeks of purchasing, and I am quickly approaching my 10th guest - so far so good!  My calculation is that I'll cover over half of the mortgage with the Airbnb income, with room to grow. One day perhaps I'll cover the entire mortgage expense with guest house income.

Conclusion
Consider buying your "dream home" with a separate rentable guest house.  Rent it nightly with Airbnb or VRBO instead of to a tenant on an annual lease, to maximize the income.  Running the numbers you may find that you can live in your ideal home and spend the same amount monthly as you would have in a modest home.  This approach embodies the idea of "find a way to afford it" instead of "I can't afford it" and it can work!

Bonus
If you're planning to visit the Pacific NW, consider booking my Airbnb and we can make time to have tea/coffee on the deck and talk real estate :).
https://www.airbnb.com/rooms/8306152