How To Get Started With Airbnb Investing (From Someone Who Found Success!)
Investing in short-term real estate is an excellent choice for the income-producing asset portion of your portfolio. It can provide consistent streams of income, diversification, appreciation, tax benefits, and flexibility. And because short-term real estate investing has become increasingly popular over the past decade, there are tons of resources available to make managing these properties easy.
Third-party platforms - such as Airbnb - advertise your property, connect you with renters and handle the booking and payment processes. Professional property management teams can help you handle day-to-day concerns. Concierge services can provide your guests with a personalized experience while housekeeping companies who specialize in short-term rentals can clean between guests.
It can still feel daunting diving into something new, so we wanted to give you tips for owning and running an Airbnb from someone who has found great success.
Terri’s Experience With Owning Airbnb Rentals
A long-time client of mine, Terri Weiss, shares how she got involved with real estate investing, how she finds properties to invest in and provides specific advice for Airbnb investors.
Terri’s Start to Real Estate Investing
Terri has been a real estate investor for over 27 years. Her first investment was a commercial property in 1995. Her law firm needed an office space to work out of and she thought it made the most sense to pay herself rent, rather than a landlord.
Why Short-Term Rentals?
Terri wanted her portfolio to be diverse - with a combination of income and growth assets, especially assets with appreciation potential. She also wanted high returns and realized most fixed assets wouldn’t produce the type of returns she was after.
Terri’s realtor recommended that she use her retirement account to help fund her short-term rentals, which allowed her to invest without depleting her personal cash.
A lot of the units she purchased were in rough condition - however - they came at a cheaper price. She aimed for a 10% return but ended up receiving about 14.6%.
Finding, Fixing, And Managing Properties
Terri knew the local housing market in Hilton Head, South Carolina very well and could easily spot good opportunities. She personally searched for new properties to rent out and once she found a property, contracted with her realtor to write up the offers.
She set specific parameters for her South Carolina properties - all specifications that make them attractive to tourists. They needed to be within walking distance of the ocean and a short bike ride, which she provides, to town. She also ensured the properties didn’t have outstanding liens on them, especially if they were from a tradesperson.
When it came to property renovations, Terri was savvy and spent a lot of time sourcing certain furnishings. She was able to renovate her units with quality furnishing at bargain prices. After researching the price of certain items, she took advantage of Facebook Marketplace and local auctions to acquire pieces for below sticker price.
Terri also built a team of tradespeople to help her with her renovations and furnishings - upholstery cleaners, carpet cleaners, etc. She advises investors to not fall in love with any particular pieces of furniture or put anything of personal value in the homes - tenants may trash them eventually.
Terri uses a team of property managers that also manage 20 other properties in the area. She looked for a property manager that was local and who had positive reviews regarding managing Airbnb properties. She also networked and asked around for personal experiences - both negative and positive - to find the perfect fit.
Getting Started With Airbnb Investing
Adding short-term rentals to your real estate investment portfolio can be exciting and lucrative.
If owning an Airbnb solely for cash-flowing properties - and not for personal or familial gain - is your goal, then utilizing a self-directed IRA (SD-IRA) is a great solution.
You can open a self-directed IRA with a knowledgeable custodian and fund the account using personal funds or funds from your IRA, 401(k), Defined Benefit Plan, or Cash Balance Plan. Keep in mind, there are certain rules that need to be followed. For example, you and any disqualified persons cannot stay on the property or actively manage or work on it.
In order to find the right property, you’ll want to perform market research on desirable areas that attract tourists. Try to think outside the box when it comes to a property - such as a cottage or a cabin. Recent trends show people are more and more interested in unique, urban places - you’re not limited to beach houses.
Local real estate agents who specialize in short-term rentals can be extremely valuable during this process. You’ll also want to check out what existing short-term rentals in the area are charging and determine your potential return on investment. Remember to check into local regulations and prohibitions regarding short-term rentals and ensure you’ll be able to list the property on Airbnb.
Once you find a property, the purchasing process with your SD-IRA is very similar to the conventional purchase of a property. Remember to account for other expenses such as closing fees, appraisals, property taxes, inspection, insurance, etc.
There are unique costs associated with Airbnb rental investments such as providing furnishings, decorations, amenities, supplies, and utilities. You will also need to ensure you have proper insurance. These costs will be higher upfront compared to a long-term rental property - but if it gets booked often, the nightly right will most likely produce a higher return than long-term tenants.
Invest in Airbnbs With Chicago Trust Administration Services
At Chicago Trust Administration Services, we love helping our clients invest in income-producing assets because we know how vital they are to a healthy portfolio. We take care of the paperwork and make the process simple, fast, and compliant.
When you find yourself with the perfect property or opportunity in front of you, we’ll use our expertise to help you make the deal happen. To see how we can help, we invite you to schedule a complimentary meeting with us by calling 312-869-9394 or emailing steve@ctasira.com.
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*The content and opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
**CTAS professionals are not financial advisors and cannot provide advice or recommendations regarding specific investment decisions.