AirBNB (etc) modeling

Hey Gang,

Do any of you know how, first or second hand, how you realistically look at rents and would do a DCF for a 5-10 year hold on a property. Would you look at occupancy based on AIRBNB asking rents for the same area, or there more a strategy involved? How hands free is this idea, or conversely how much management is required. What is the potential negatives of this type on investment?

 

It can be a good deal in the short-term, but it is extremely time consuming to keep a short-term rental SFD rented year-round. In LA for a 3-bedroom home in the Hollywood Hills (A+ location), you are lucky to achieve 65%+ occupancy on an annual basis. 5-10 years seems like an eternity in an Airbnb-type rental because it is in the grey area (or illegal) in most cities. Also, you really couldn't pull accurate rent or occupancy data from Airbnb listings, your best bet would be to pick the brain of a successful Airbnb host in your target market with a similar rental.

While I was in the rental business, we came across parties, guns under mattresses, insane guests, credit card/ID fraud, lots of drugs, blood, whole home being ransacked, etc. Airbnb did pay out for damages on the ransacked case though... I'd say don't even bother, lol.

 
Best Response

I used to run an AirBNB in NY (legally gray, but was changing apartments and was curious about the opportunity...). At 80% occupancy I grossed $4900 compared to rent of $2800 (large 1BR apartment with ugly kitchen in chelsea) Gross after fees, extended stay discounts, utilities, and cleaning was $4200. So no, AirBNB is not a direct proxy for rent comps. You can use a DCF, but should use marginal cost of funds. Cash outlay is broker fee (1 to 1.8 months) rent, deposit (1 month) and furnishing (at least one months rent, even if you use craigslist and Amazon). I worked about 12 hours/ month . Also, factor in any potential regulatory fines if you're in NY. 1k first time offense. 7.5k after.

PM me for details. I wouldn't do it again, but if you have capital and no job, it can be profitable. If you do it full time, get your RE broker license.

 

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