All Forum Posts by: Eric Kirkham

Hey Everybody,

The biggest mistake I made on a short term rental hosted on Air Bnb was pricing the property too cheap. My partner on the deal handled all the posts on Air Bnb while I managed the client's arrival, departure and any issues that came up along with any maintenance concerns. The home was in superb shape with all new appliances, paint, carpet, hardwood floors and furniture. The home was located in the middle of all the big tech firms here in Utah just south of Salt Lake City. The property was a 4 bed 3 bath home with a fenced backyard, 2 car garage on a quiet street. It really was a nice home and well decorated. When the home was posted on Air Bnb my partner used the suggested nightly price of $50 per night as this was the going rate for the other nightly rentals in the area. The problem was that we were renting an entire furnished home and the surrounding nightly rentals were for a single room in a home. At the $50 a night price we got difficult visitors that were hard on the home, very demanding, complained a lot at all hours of the night and left the home filthy dirty and ultimately left poor reviews. Bookings for the property slowed down and my partner lowered the price to $35 a night! At $35 per night our property was completely overlooked and bookings stopped completely. Not knowing about the nightly price and trying to figure out what was going on I pulled up the Air Bnb listing and was blown away at how cheap we were offering the property. I asked my partner why we were listed so cheap and she told me that was the price Air Bnb suggested when she created the listing so she went with it. A hotel 2 minutes away was over $220 a night! We raised the price to $175 per night and bookings started to pick up but we had already received several 3 and 4 star reviews so people were reluctant to book with us. The few clients we got at $175 per night were wonderful! They left great reviews and told us we should raise the price because $175 was too cheap and they almost did not book at that price because they thought something was seriously wrong with the property at that price. We kept the home on Air Bnb for a few more months and played with the nightly price but the damage was done. After 4 months we decided to sell the home. I have checked Air Bnb a few times since for that same area and home. The average rate is $250-$350 per night and the properties are full of bookings. Lesson learned.  

Investment Info:

Single-family residence fix & flip investment in Taylorsville.

Purchase price: $350,000
Cash invested: $65,000
Sale price: $470,000

Purchased this property off market. The home needed a decent amount of work as it had fallen into disrepair for about 10 years. All the major components were updated and I added plumbing for a basement mother in-law apartment. The total rehab cost $65k and the home sold for $470K on a seller financing note at 5.5% over 30 years.

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

The ability to add value in a very hot market. Homes with a mother in-law basement apartment were fetching a serious premium in this area. The ability to add so much value in a short time was exciting and this was the ugliest home on the street so it felt great to bring the home back up in line with the surrounding homes.

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

I found this deal through a friend. The Seller wanted to move out of state ASAP and did not want to make any repairs or remove all the cats and dogs from the home for showing. I showed the Seller comparable homes in the area and asked him what he wanted to get out of the home after agent commissions were paid. He gave me a price and I told him I would buy the home tomorrow for cash. He was thrilled to not fix the home or disrupt his pets for showings.

How did you finance this deal?

Cash purchase.

How did you add value to the deal?

New items: Roof, Funrace, AC unit, Paint, Floors, Carpet. Added plumbing and electrical connections for a basement apartment. Upgraded the lights in the home from wall outlets to overhead lighting. Repaired the sprinkler system and revived the dying mature trees on the property.

What was the outcome?

Added a significant amount of value to the home and neighborhood. I Seller financed the deal to a Buyer that is now house hacking the basement.

Lessons learned? Challenges?

Don't always take the highest dollar amount offer on a home. The first Buyer on this home had many many issues and I finally cancelled the contract. The second Buyer had a slightly lower offer but he closed the deal no problem.

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

I was the agent on the purchase and sale of the property.