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Multifamily Returns - MTM Leasing vs. Airbnb ?

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JAWS

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Aug 25, 2012
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Chicago, IL
How do returns compare for a yearly lease vs. Airbnb business?

I have a 3 flat in Chicago and want to get the most "bang for my buck." I came across this...
Airbnb Rental Profit: $16,632
Airbnb 2-Bed Rental Data (June 2016 - May 2017)
Fulll-time 2-Bed Rentals: 556
Occupancy Rate: 63.5%
Average Daily Rate: $181

Rental Revenue:
90th Percentile: $55,337
75th Percentile: $38,541
Median: $28,393

Zillow Data (April 2017)
Zillow Annual Rent Cost 2 Bedroom: $21,909

And this: https://gizmodo.com/i-bought-an-apartment-just-to-rent-it-out-on-airbnb-1458666661 Has anyone done this?
 

The EL Maven

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I stayed at a house off airbnb who was using this model. She bought the house as a foreclosure dirt cheap and appears to be cashflowing extremely well. It really made me think that there's now another way to do real estate and that today's prices aren't so outrageous - potentially, it all depends.
There is one big caveat, and that is if you go that route, you forfeit an element of control. Should Airbnb get some bad press, it could affect you, if someone leaves you a terrible review and you get kicked off, etc.
 

WJK

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How do returns compare for a yearly lease vs. Airbnb business?

I have a 3 flat in Chicago and want to get the most "bang for my buck." I came across this...
Airbnb Rental Profit: $16,632
Airbnb 2-Bed Rental Data (June 2016 - May 2017)
Fulll-time 2-Bed Rentals: 556
Occupancy Rate: 63.5%
Average Daily Rate: $181

Rental Revenue:
90th Percentile: $55,337
75th Percentile: $38,541
Median: $28,393

Zillow Data (April 2017)
Zillow Annual Rent Cost 2 Bedroom: $21,909

And this: https://gizmodo.com/i-bought-an-apartment-just-to-rent-it-out-on-airbnb-1458666661 Has anyone done this?
I rent out sleeping rooms and RV Full Hook-up Spaces via Airbnb, other services and privately. Sometimes I have also rented out some of my units, with furnishing, on a short term basis. You have no idea how beds I've changed and bathroom/kitchen I've cleaned over the last couple of years. And then there's the laundry -- sheets, towels, etc -- and keeping up the property in general. Be ready to work hard. I know, I know -- you think that you're going to hire someone. Go for it. Been there -- done that. Have that ticket stub. When they don't show up, you get to do the work! Period. End of story. And Airbnb can pull the listing any day, so you'd better have a Plan B. The city can zone you out. Someone can totally trash your property. Stuff happens and you have to be ready for that possibility. That's the down side.

The up side is that you can hoard every dime that you make on renting those units, and use that money to pay off the principal on your mortgage nut -- major debt reduction. Those side income streams aren't my core business, so it's gravy money (I call "dribble money") that I use for investments and debt reduction. It can be a really good ride while you hang on tight to the profits...
 

JAWS

Contributor
Read Millionaire Fastlane
Aug 25, 2012
102
39
40
Chicago, IL
I stayed at a house off airbnb who was using this model. She bought the house as a foreclosure dirt cheap and appears to be cashflowing extremely well. It really made me think that there's now another way to do real estate and that today's prices aren't so outrageous - potentially, it all depends.
There is one big caveat, and that is if you go that route, you forfeit an element of control. Should Airbnb get some bad press, it could affect you, if someone leaves you a terrible review and you get kicked off, etc.
Agreed. This is a big risk. I don't control the distribution channel for potential guests. There are a few companies in Chicago that have done BnB and short-term corporate rentals for years before Airbnb. It seems like finding a direct channel for Bnb's or corporate travelers would decrease risk. Thank you!
 

BrandonS85

Silver Contributor
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Sep 8, 2015
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It's certainly legitimate as long as you're able to hit medians or above medians. We're looking at doing a 4-8 unit AirBnB development type deal, but in our case the data is pretty limited.

Try locating furnishings, rent a unit out for 3-6 months and see how it goes. As long as you're not critically short of cash it'd be a good project to test.
 

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