All Forum Posts by: Account Closed

Thanks Jason! Yes I agree that if you can do it for less, by all means to it. 

We outfitted our home for our use. I put stuff in there that I would expect to have in my home. I have stayed in quite a few vacation homes and none of them were as well equipped as ours. 

I guess in the big picture of things, we went overboard. I mean you can cook a turkey if you like, start a 6 hour stew in a crockpot, bake muffins etc etc. There is something in that kitchen that covers just about everything.

It was fun and I think worth it for us. We are at 67 days rented right now. I know that dosen't sound like too many but we are a single season rental with a bit of bumper time spring and fall. 

I have to say that I am jealous of folks with 3 and 4 season rentals doing 80k plus a year! That will be our next one.

Love what you are posting Jason! Thanks!

 Hehe yes about 15k all told. That include every piece of furniture, electronics, washer/dryer/dishwasher/oven, linens, spices, and on and on. 

It ain't cheap to outfit a 2400 sqft home starting from scratch! 

We think it's pretty nice and we have all 5 star ratings on VRBO/HomeAway/AirBNB. You guys be the judge!

Passive income is very possible in buy and hold real estate. I have tenants that I have not had contact with in over a year. I get electronic payment every month. Of course things do come up, but on average it is once a year per property. If I had a property manager, it would be mailbox money. 

You said you can sell it for millions. That is a little different than one million. Still even at a million that is a lot. How may properties does that $350K represent - like 200-300 rented properties? That is a lot of leases, a lot of guests and a lot of landlords to deal with. It is a job for either you or someone else. If you hire people, it cuts into revenue. 

The other issue is who will buy a business like this? If I wanted into the hotel industry, I can buy an entire hotel building for $1,275,000 or better yet, I can use leverage and buy a $5M hotel. I would actually own the building, which gives me tax benefit and an underlying physical asset. I don't see banks lending money to buy an AirBNB business that has no assets. Contracts can be considered assets, but in this case the bank will view it as a liability. I guess that leaves a cash buyer that wants a full time job.

Maybe I am wrong, that is why I asked for some examples of people who have done this. If you are grossing $350K with STR that are rented units and someone is willing to buy it for $1.3M, I would jump at that offer. I just see better ways to invest that kind of money.

Interesting topic. I am curious how many rented units are you managing? Are you doing all the guest interaction yourself? I will admit I am not an expert in this, so I am genuinely interested.

Rental Arbitrage or co-hosting  or having a property manager does not interest me. These to me are not longterm success strategies. I am trying to build wealth and cash flow in a simple way, not dealing with other people and their complexities and success. 

I look for lower cost  properties locally (reasonably good tourist area with affordable housing) with good cash-on-cash. I well exceed smokies, Hawaii, etc). 

I earn money paying off the mortgage, increasing the value of the property by theming and improving the property, building a clientele, getting high rates, etc.

I automate and use good process. 

I have a few sources of reasonably priced furnishings and my listing states that they are antique / vintage / pre-owned. I use this as a positive in my green policy.

I want to add that it really depends on the market in your area on how you furnish your home. Used furniture is always a good idea, but you really have to know your area.

For example, our home is in rural Idaho on the lake. I spent a lot of time buying stuff off Craigslist, Offer Up, Little Nickel and Let Go. I made sure each piece matched to some degree and was able to find mostly American made furniture at a very good price. 

The most expensive thing I bought was a 3 in 1 game table and chairs. it is a table, card table and has bumper pool in it. Oak and made in the USA for $350. I refinished the top and called it good. 

I will say don't scrimp on couches and chairs. A cheap couch will look like garbage in no time. I bought all USA made stuff used from various places as well as liberating my parents stuff when they bought new. All of it has very high quality fabric. It is easy to clean and very durable. All pieces are either La-Z Boy or Basset. 

I have found so many decorative pieces in all sorts of places. Garage sales, Goodwill and other thrift stores. So many interesting items it's hard to keep it cohesive.

Always new mattresses. Never used. 

Our home is homey and easy going. Not terribly fancy. Easy to keep clean. Great for families who want to spend time at the beach!

If your home is more upscale, then you need to plan for your type of guests. The nicer the accoutrements usually translate to a higher per night depending on location. 

Overall, I think we spent about $15,000 on fully fitting out our 2400 sqft 4 bedroom 3 bath home. That is all of it from furniture to dishes to toilet paper.

Thanks for posting this!

Awesome, insightful look into further creative ways to start Airbnb projects.

I am currently looking to do rent arbitrage in the LA market specifically starting around the Universal City area which is prime time for Airbnb.

The initial challenge is finding units that have the right rents to make it considerable.

The closer to Universal or Ventura Blvd, which is the Valley’s version of the Sunset strip, the higher the rents.

Would it be better to look further away from the main tourist areas to find cheaper rents while still being a reasonable distance away from Universal City, Hollywood, the beaches etc or stay within a 3 or so mile radius and be more competitive?

Should I consider further away, such as 10 miles or so, to look for cheaper rents?

I tried to explain using the attorney example. I understand you can run it from anywhere, but what if you unplugged for six months? A business would run without you for 6 months. Airbnb requires hosts paying daily attention to the business, which is why it is a job.

In order for a business like this to sell for millions, it would require millions in net income. That would require hundreds or maybe thousands of units. You would be managing contracts with hundreds of landlords and booking thousands of reservations. I guess this is possible, but when I hear about people doing AirBNB arbitrage by renting units, it is self managing a hand full of units. 

Do you have some links to stories of people selling a business like this for millions, without owning any of the units? I am genuinely curious about this. It seems strange someone would want to buy a real estate business that has no physical assets. 

We furnish our STRs from estate auctions.  They are held most Saturday mornings. I take my truck, a 16' flatbed trailer and an appliance dolly.  We buy all the furniture we need, the 4 major appliances, plus other odds and ends.  What we don't buy at an auction, we buy at Wal Mart.

I have bought new appliances from Lowes and Home Despot, they seem to break after the warrantee expires.  Refrigerators and washing machines that are 20 years old keep on plugging away.

@Account Closed I think this is a great business assuming you are running it above board:

1. The owner needs to know the intended use and have it written into the contract. This is to avoid issues with the owner. If the lease doesn't say it, then the owner has the power and if you are not telling the owner, that is just inviting problems.

2. Have short term renter insurance that also covers damage to the property with the owner co-named as a payee. This protects you and the owner from liability.

3. Include options in your lease for extension. This is common in commercial real estate and it protects you in two ways. You can specify term, so 1 year lease with up to 3 year options. Secondly, you can specify maximum rent increases over that term. This protects your business in case the owner gets greedy and jacks rent or decides to kick you out and run their own STR.

4. Follow local legal and zoning laws. It is not a business if you are breaking the law. Have a clause in your lease that it terminates if local zoning laws restrict use as a short term rental. No business succeeds long term breaking the law.

As far as tax treatment, it is really no different than any other business income. Bonus, with the new tax cut and jobs act, you are now eligible for the 20% pass through deduction.

I would consider this a business, however not one that has real value. You are not going to be able to sell the business to anyone. It is like a single proprietor law firm. If you are the only attorney, there is not really a business to sell. You can sell your process or customer list, but that is about it.

Of course you can make money and that is why it is a business. It is just really a job long term is the point. That is why it is smart you are investing in apartments, so you can build a long term passive income source. Something that does have value and that can be sold.

As an owner, I prohibit short term rental in my properties. I just view it as too much risk. I am sure it would be fine if I found the right person, but there is just too many hacks in the STR business. I don't want to be left holding the bag for their mismanagement mistakes.

I sorted out a way to use MINT.COM for bookkeeping by adding a product called minttoreport.  If you create categories and tags in Mint, you can then import details into minttoreport and generate financials with their template reports.  Super simple and FREE if you deal with Mint's ads.  I also use turnoverbnb for my cleaning crew.  I'm not sure of ALL the channels they sync with but I use it for ABB and VRBO and provides an app for my cleaners so they can follow their own schedule.  I sorted out a "hack" for this tool as well, enter the # of towel sets you want to leave each guest in the notes section.  Saves my cleaners time and saves me $.  Oh, did I mention this tool is free as well unless you use their recommended cleaners?