I don’t know about you, but my social channels are filled with Airbnb gurus claiming that making money has never been easier. Their model basically goes like this… buy or rent a house (already in perfect condition) stick it on Airbnb with a couple nice pieces of furniture and some trendy photos and voila! Easy 10k in gross profit every month. Oh yeah there is always the catch as well, just buy the guru’s course and you can do it just like them.
I mean seriously if it was as easy as they make it sound, I don’t know why anyone would bother doing anything else.
Newsflash – it’s NOT that easy.
From competition, managing the cleaning schedules, communicating with the guests, turnovers, repairs, upkeep, setting proper expectations, marketing and maintaining. It is by far not easy or passive income. You are officially in the customer service business. Mind you if not taken to that level of seriousness you will surely underperform potentially having difficulty covering your operating expenses; ultimately, leading you to mid-term or long-term tenants in the end. But wait what about a property management company? They can handle all those day to day stuff and I’ll just pay them a percentage and voila we’re back to passive easy investing baby!
Ok, actually there is potential here with a couple property management options. Let’s classify two separate management entities into two categories, big and small. The big management company is your nationwide hosts where they have hundreds, thousands maybe more vacation properties they manage. A big operation with a fee of anywhere between 8%-15% of the gross depending on the company. Not to bad right? If you are pulling in 10k gross a month that’s a management fee of $1,500 on the high end, plus cleaning fees, mortgage, taxes, insurance, utilities, and supplies. So, you’re thinking I don’t do anything and potentially net a sizeable amount that dwarfs the return from long term renting. Too good to be true?
Truth is that big management company is going to treat your property like any other. Their formula is maximum number of units not profit. There is nothing wrong with their formula it just so happens it works plenty well for them, not as much for you. Small things will slip through the cracks, followed by bigger things and you will find yourself going to the property way more than you’d like to manage their managing. Eventually, breaking the contract with them to go with the local small management company. The small management company will likely charge 20%-30% of the gross profit. A potentially 2x more expensive fee of $3,000 on your $10,000 gross; but, they will service the property with higher care and value. If they are a great management company they will work diligently to produce great results to reward the owner and themselves. If you live near the property trust me you will find yourself checking on the property far more than a long-term rental and most likely will still find things that you feel could have been managed better because well it’s your investment.
At the end of the day people are making money hosting on Airbnb, but it is work. It is work to stand out in the sea of competition, it is work to set up, clean, maintain, manage and have high performance. Not every home is cut out to be on this platform, a lot will straight up just not make a good performing Airbnb. But if you have that desired location, maybe a unique property that stands out and you thoroughly treat it like a business, not a passive investment, you will likely have success.
We hope this gives you some perspective to the world of Airbnb and what it entails. We currently run one short term rental and treat it very much like our own because we know that is what it takes. We have had great success thus far and locally we would love to take a look at how we can help serve you in your short-term rental journey.
To your success,
Lake CDA Property Management