Are you thinking about turning your personal home or new investment property into an Airbnb or Short Term Rental business?
Maybe you should just sell it. But before you decide to a For Sale By Owner or hire a Realtor like me, let’s explore some deciding factors.
I first got introduced to Airbnb through our cleaning business, Honest Maids, which was launched in Arizona by my wife and some of her friends. After a few years of helping hosts (many of them out of town or Realtors) we decided to focus heavily on this industry.
Afterall it was the cleanings that determine the overall viability of the rental. We created, hands down, one of the most popular cleaning companies in AZ almost a decade ago. Then came hosting, real estate investing, and my AZ and Texas real estate license. Now living here in El Paso, the market is different, slightly, but the overall process remains the same.
Here are some things to consider when deciding if running an Airbnb business is right for you:
- Property condition – can you ensure a reduced risk of hazard, broken items, faulty or glitchy items during a guest visit? The last thing you and your guest want is to be dealing with electrical going out, windows that don’t open, bugs, doors that are difficult to open, etc.
- Property location – even if you have the best intentions, highest attention to detail, super responsive – your rental needs to be in a block, a community, a zip code, area, city that can sustain the demand you need and that it delivers the right experiences for your guests.
- Your availability – Can you be available at a moment’s notice? If your guests tell you that they can’t check-in, or electricity is out – would you be able to go within minutes to take of it? I know you may think having a handyman will solve this, but unless they are your full time employees there is a chance that you will have to wait for them to become available to you. This may lead to cancellation and refund requests, worst yet – bad public reviews.
- Cash available to invest – renting a property as a Short Term Rental business, such as Airbnb or VRBO isn’t the same as renting it LTR to a family for a year at a time. This is a BUSINESS that needs your initial investment to set it up, insure it, furnish it and pay the support team you need from cleaners, handymen, hvac techs, and more. On average a good set up per room may cost you about $3,000 – $5,000 unless you trade time and haggling to save some cash. But never sacrifice quality and aesthetics to save a penny because that will cost you way more than what you are saving.
- Aesthetics and Presentation – can your property show well in pictures? Are you good with sales and customer service?
- What about your stress tolerance? There may be many times where a less than appreciative guest will turn a small hiccup into a huge discount for themselves, a bad complain where you know what’s said ins’t accurate, or worst yet there may be months where you don’t get enough bookings to cover your expenses.
- Cashflow needed? How much return do you need each month? One of the nice things about Airbnb is that it can turn a 3×2 home into a $1,000 per month profit business compared to the average $100-$200 max you get with long term tenants. Especially assuming you don’t get any broken appliances, etc.
- Can you build a good team? If you can’t make yourself available, you need to make sure that the support you have is actually ready and has your back immediately. You shouldn’t have to negotiate each situation with them, be haggled for everything or forced to wait days for someone to go and repair things. If your cleaner’s don’t know the intricacies of running an Airbnb you can be in a lot of trouble.
- Are you wanting to be a ‘Host’ for years to come? This is a long haul game, you shouldn’t really open an Airbnb with LLC and all just to shut it down in a few years, as a business it can provide you with the life you desire but not without effort and sacrifices. THIS IS A BUSINESS not a passive way to take advantage of an asset.
- If you want a semi turn-key Airbnb, you can also consider hiring a ‘Co-Host’ to help manage your unit, deal with bookings, and more. They can be an extension of yourself and is often what makes or breaks a rental. For example, when hosts turn to me to take over the rentals and fix their business, I employ my experiences and knowledge in marketing, SEO, sales, marketing, hospitality, etc. etc. and Hosts only take care of things like paying bills, ordering stuff, and overseeing efforts. The more hands-off you want to be the more you should expect to pay but it should also be worth having.
When you do things right, take care of your guests and clients you see months like this…
While others in your same market and target see this:
Or this…
I hope this provides some of sort guidance and please don’t hesitate to reach out to me if you have any questions or thoughts about launching your Airbnb business or if you need any help managing your existing one.
Here’s to your success!
My cell: 915-910-0908