The property isn’t an investment, it’s our home
OG2: My wife and I have just passed the 1 year mark of being an AirBnB host. As with most ventures, it’s had its ups and downs, but on the whole has been a positive for us.
You can see our place here. It’s a small oceanfront family home built in 1979 in Nags Head, NC. The Outer Banks or OBX. Over the past 8 years, we have been buying out other family members’ shares, with that consolidation concluding last September. Thus, we turned to renting the home in order to defray expenses, as we no longer had others to split the carrying costs.
It’s never been a rental and we quickly learned what we were willing to put up with, paying guests would not. We had window units for AC and the heat was rarely put to the test. The lovely wood paneling complimented the dated bathrooms. I reached out to a couple of the ‘big box’ rental companies and they wouldn’t even entertain the idea of us as clients due to these items and more. On top of that, since the structure itself is 1% of the property value, it had not been insured for decades. That was one nice benefit to having no mortgage. We knew we needed insurance to at least cover us from a liability perspective.
When I finally found an insurer, we had to have the home’s electrical system inspected, as well as the integrity of the structure itself. Needless to say, the inspectors came up with a laundry list of issues. We ended up having the electrical updated throughout the house, along with a brand new central HVAC system. It’s never been this quiet inside the house, absent 3 window A/C units at full blast during the summer. The interior was painted and the bathrooms updated. It hasn’t looked this good since 1979!
Given that we couldn’t find a large agency to rent our home, we turned to AirBnB. We have been guests through AirBnB about a dozen times and it’s always been a positive experience. Hosting, however, provides an entirely different perspective. One of our first challenges was determining how we would manage the property, as we live 3+ hours away. After some searching, my wife came upon someone who was specializing in managing AirBnB/VRBO beach rentals.
Managing AirBnB as a Side Hustle or FT gig
Pauline with Xpert homes has been great. Honestly, I’m shocked that I don’t hear more about this type of management company in the FI space as a full time job or a side hustle. She has her business down cold. As a lifelong local and her husband owning a commercial building company, she has all the contractors a homeowner could ever need. She’s attentive to details, responsive to guests and us as owners. With enough homes under management, she can keep a small contingent of maids FT employed. The best part? The big box companies take 15-20% of a rental home’s revenue, Pauline’s cost comes out to only 2%.
AirBnB – As a potential host, you should understand a few things up front
1.The company is JUST a B2B site. Don’t expect much assistance from there helpline. It would seem that the helpline is outsourced to folks looking for extra income. They all follow a script and when you hit the end of that script, they’re done. We had all sorts of questions at the start. Like, why can’t we find our house on the site? Why aren’t we Super Hosts when we’ve met all of the criteria? Both of which, use some secret algorithm that they won’t tell you about. In the case of finding the house, we ended up getting a domain, nagshead12.com, and simply redirecting to our spot on AirBnB. This was helpful when we initially marketed the home on Facebook and Craigslist.
2. The $1M guarantee in case of damages. Forget about that. It’s not real. Even if it is, you won’t be able to get it. In my frustrations with the platform or getting information, I stumbled upon AirBnB Hell. You can read all the warnings as both a guest and host on their site. It is illuminating.
*An aside, if you are a guest, never ever ever ever purchase or use AirBnB gift cards.
3. They will fight like heck for the guest. We had someone demand a 40% discount because of the beach renourishment project. They claimed they couldn’t get on the beach. Pauline went over to talk to them in an attempt to smooth ruffled feathers and found them…. on the beach. Plus they had 2 too many people. They were one of a couple of guests that have been dishonest. More on that next.
4. AirBnB is NOT well suited for rental markets like the OBX. Most homes rent for a week minimum, like Saturday to Saturday or Sunday to Sunday.
[We did finally figure this out and have it noted all over our site. We do a Friday to Friday as a benefit to both our guests and management company, as they don’t have to compete with the traffic and resources when thousands of other homes are turning over on the weekends]
Also, there are no refunds from the big box companies. That’s what travel insurance is for. But the AirBnB site is extremely hard to mimic that type of schedule AND guests can cancel for a full refund just two weeks out. If there’s a storm, AirBnB jumps in an cancels without consultation. Furthermore, when you have openings, AirBnb will send you emails saying you should drop your price because average of other rentals is lower than yours. Well, that also doesn’t play when they are comparing our Oceanfront home with those that are not.
People – While 90% of our guests have been great, don’t forget about human nature.
The one truly bad guest we had just trashed our house. You name it, they left it in both toilets. Sand everywhere and something burnt on the bottom of the oven. And I’m not kidding you, it was like they melted red popsicles and through the juice EVERYWHERE. It was on comforters, sheets, couches, tables, countertops and floor. Here’s something obvious, but make sure you take pictures and videos if this ever happens to your property. Unfortunately, it being turn over day, the maids were busy cleaning before Pauling could get there to document. In the end, we only recovered $120 of the deposit for the damages.
We’ve had a couple of guests lie about the number of people in their party. For the most part, this isn’t a huge deal, but you have to remember that it’s a 900 sqft home. It’s only designed to handle but so many people at a time.
Then there are the crucial ratings/reviews you receive. Getting at 5 star rating is crucial to how your appear in their search algorithm. Yet, no matter how are you try, people are picky to the point of ridiculous. Here are some of the comments we’ve had:
- Bed is too soft (personal item)
- Need a coffee machine (there’s a Keurig)
- Need a toaster (bought one)
- The house is old (yep, can’t change that)
If you want to get an idea of what we have found upon a guest’s departure, look at the details of our house rules. Every item in there is because someone has done it. The initial draft of the list was due to a lifetime of watching what guests have done to the rental home next door. I’ve never been in that home, nor would I ever want to based on what I’ve seen. The owner is only in it for the money and has over 70 other homes in the area. We’ve personally saved that home from burning down 3 times in the last 5 years, as the guests allowed the fire from the grill get out of control and were not attending the the spreading disaster.
What about the Money??
Our annual carrying costs on the home are $15k and we put in $25k in upgrades and repairs last year. After a year of hosting, we have broken even. I’m estimating that annually, we’re looking at $20k for everything going forward. Thus, we stand to make a profit from here on out, baring any major disaster.
What about Us?
We were so focused on recouping our money and renting as much as possible, we didn’t make time for ourselves at our own home. We were used to being there about 60 days a year for the past 2+ decades. During the summer, we would be there every other weekend. Renting out the entire spring and summer left us with an expected issue. We, my wife and I, were almost depressed about not being able to go on a whim and decompress by the ocean. We realized that next year we need to carve out time for ourselves to enjoy our home at least once a month. Additionally, we would normally board up the house January – March. We have always opened during the boys’ school spring break and spent the week there. We’re going to work on going throughout the winter. It’s actually a great time to go, as no one is around.
The Key for Us
Although I’ve highlighted some of the hardships, it really is more of a mental/emotional struggle for us than something more real. The property isn’t an investment, it’s our home. And we still haven’t pivoted mentally to see it as a rental property that is now making us money, while also providing a free oceanfront place to go. Like I said, 90% of the guests have been great.
Free cable TV?
One unplanned benefit has been the use of the cable credentials. Cable TV (and internet) are considered must have amenities. The nice benefit there is that back home, through the Amazon FireTV or Apple TV, we can use those credentials to watch certain channels for ‘free’.
As an aside, TripAdvisor has basically the same service. You can even import your AirBnB calendar. We figured it was just another marketing arm to find more guests. After a year, we only had one inquiry via that portal. My advice, skip TripAdvisor.
Are you an AirBnB host? What has your experience been like?