Investment Info:
Single-family residence buy & hold investment in Big Sky.
Purchase price: $235,000
Cash invested: $15,000
The Big Sky Bungalow is my flagship Real Estate investment which I purchased in 2016 specifically for the short-term rental market in Big Sky, Montana. The Bungalow currently ranks as one of the top 3 Airbnbs in the competitive short-term rental market of Big Sky. This one bedroom, one bathroom condo sees over 250 days a year booked and generates approximately 4-5x the revenue it would on the long term rental market.
What made you interested in investing in this type of deal?
I was turned onto Airbnb in 2014 by a colleague of mine while on a familiarization tour of El Salvador with the Adventure Travel Trade Association. They suggested that I list my place on Airbnb as I was never home due to the fact that my job in the adventure travel industry had me traveling more days of the year than basing at home.
How did you find this deal and how did you negotiate it?
This deal was relatively complex. First of all, I didn't own the condo I was living in. Secondly, my best friend held the lease under his name and had lived in the unit for six years. We decided to approach the landlord asking if they would be willing to sell the property. They agreed and we began to get financing and paperwork for a partnership in place.
Then it all fell through as my buddy proposed to his girlfriend.
How did you finance this deal?
The lease was soon turned over to me after my friends engagement and I informed the owners of my intent to buy if they were willing to sell. They weren't really looking to sell their investment property and it took months for a reply.
Secondly, it was extremley hard to get financed. I worked seasonally in the travel industry which traditional mortgage lenders dislike. Eventually Prime Mortgage pushed a 30 year/fixed mortgage through at a 3.625% interest rate if I could put 25% down.
How did you add value to the deal?
I found a gem of a property that wasn't on the market and was able to convince the owners to sell to me. It has never ranked below 5th on Airbnb when searching Big Sky, there are now over 800 properties listed.
I was hungry for this deal, I worked extra hard to save the $60,000 cash I needed to purchase the property. Fortunately, my job allowed me to save every penny of my salary leading up to the deal of my first real estate purchase.
What was the outcome?
I knew Big Sky, Montana was at a tipping point in 2016. Sure enough, within a month of my purchase some of the larger developers in town released a Big Sky 2025 plan which included over $150 million in infastructure at the public ski resort and other private establishments in town pledged bringing the number up to $1billion in local infastrcuture investments. Overnight every listing under $300K was gone.
Lessons learned? Challenges?
The biggest challenge now is that I can't afford to live in my own home and I don't want to pay rent in Big Sky. The Big Sky Bungalow generates my primary income, and unfortunately I have been priced out of the market here! Thus I moved into my camper which has been challenging primarily due to the extreme elements associated with living in the Northern American Rockies.
There is also a housing shortage in town and I am sometimes portayed as the bad guy among peers for Airbnbing.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I worked with real estate agent Carrie Radtke at Big Sky Southeby's. Without her help I wouldn't have been able to purchase this property. It was her digging that found me the financing, her encouragement to not give up on the trying to purchase this property.
