Over the last couple of years, I seem to run across an ever-increasing number of Buyers and Investors and identify themselves as an “AirBnB” Investor. These are investors that buy properties with the goal of either creating a little income via a side hustle or full-on investors looking to specialize in these types of potentially lucrative properties. If you’ve never thought about investing in real estate and the thought of owning a rental property has you intrigued, then this may be the right avenue for you.
What Is an “AirBnB” Rental?
“AirBnB” has become synonymous with properties offering short-term furnished rentals, some of which can be found on sites like HomeAway, VRBO and AirBnB just to name a few. If you’ve been through the site before, you’ll notice that you can find a place to stay in just about every major city and it can range from an entire house to staying on someone’s couch. I don’t know about you but the prospect of staying on a stranger’s couch stopped sounding fun after the age of 21 but I digress. More often than not, the rentals on the site consist of either a room in a home where someone is living to the entire property. These are most common in vacation destinations however they have become popular in urban areas.
An Extra Room
If you’re just looking to pull in some extra money, renting out an extra room in your house could be the way to go. If you’re looking for a new home and you would like for this to be a possibility to help defray the cost of ownership, consider finding one that has a separate room and full bathroom on a floor separate from your own. That way, if the person is a snorer, there’s less likely a chance that you’d hear them. An ideal situation would be a place where they could come and go as they please, out a separate entrance, and a door that you can lock to separate you from them for safety. This is an option in many older split-level homes that have a full bath and bedroom in the basement.
The Whole Place
Renting the entire home short-term, not just a portion, is a popular option. The key here is to check the neighborhood covenants and restrictions to see if there are rental restrictions that would prevent rentals. Most condo and townhome associations allow only a limited number of rentals and often times, they will specify either a minimum term or how often a unit can be rented in the course of a year. Unfortunately, there’s no magic formula to finding a complex that’s more lenient over another so you will need to read the condo or neighborhood covenants very carefully. Ideally, hire an attorney to review the documents before purchasing to ensure that you’re not in for any roadblocks. Additionally, you will need to request information from the association’s management company to find out if there is a rental cap in place and if there is a waiting list for those seeking to rent.
Once you’ve found a property, the next step is to furnish it with the basic accommodations that your tenants expect such as bedding, furniture, tv’s, wifi, dishware, etc. Having purchased an entire household of items at once before, I can attest that you should expect to spend around $5,000-$10,000 depending on the size of the property. Furthermore, resist the urge to cheap out here as the tenants have the option to rate their experience in your property. A review that reads “the bed was lumpy and they had no curtains on the windows” can hinder future tenant prospects.
Side note: I rented a place in the NC Mountains, were the beds were nothing more than furniture legs screwed into box springs, paint cans were used as tables and the owner neglected to install blinds on any of the windows – including the bathroom (and yes, this home was in a subdivision).
If you’re planning to spend some time at the property (i.e. it’s a vacation home or a place that you keep when traveling for work), it’s well-advised to create an “owners closet.” This is where you would keep the items that you will use on a routine basis when you visit that is also locked when the unit is being rented. Extra clothes, linens, books, pillows only for you as well as toiletries are common owners closet items.
Once you have your place setup, one of the final steps is to find a cleaning service who can turn the unit after each visit. Ideally, you would want someone who is familiar with the property and will report to you when things are broken. You may decide to do this yourself but often not it’s left to someone with the time to handle such matters for a nominal fee.
Is it Worth It?
It depends. Buying a place to function as a short-term rental is an expensive endeavor. Like all leases, when the money is coming in, things are great but vacancies can eat your alive. Unlike a traditional rental property, these shorter-term rentals are setup with the utilities in the owner’s name, which adds to the overall operating costs. Furthermore, some cities, like Nashville, and neighborhoods are moving to limit or ban the number of short-term style rental properties; which could up-end your business plan.