Have you been considering starting with a vacation rental? We were in the same situation when we had trouble finding a tenant for our rental property. We decided to turn our single-family rental into an Airbnb rental to maximize our monthly cash flow!
In this article, you will learn about how we came to the decision to start our Airbnb rental. There were many factors that went into this decision including, knowing the vacation rental rules in our area, running the numbers on the property, having an Airbnb business plan, funding the decoration of the Airbnb rental, and much more.
Check out this article to find out how we purchased our first rental property.
Why We Converted Our Rental Property To An Airbnb Rental
We had considered getting into the vacation rental business for about a year. The opportunity came knocking when we had troubles filling our single-family rental property with a tenant. As an investor, you need to be flexible and shift when you run into these types of problems.
It also fits within our investment strategy as we plan on scaling up a rental portfolio over the coming years. Turning our property into an Airbnb rental should increase our cash flow and help us purchase more properties.
We Live In Colorado With High Tourism
The Airbnb rental property is located in Arvada, Colorado. It’s a short drive to downtown Denver, to Golden, or to go play in the mountains. Living in an area with high tourism means that our vacation rental should create consistent income and have a high booking rate.
This particular property is near an awesome entertainment district called Old Town Arvada. There are numerous restaurants, bars, and shops in Old Town Arvada. Having a property near a highly desired entertainment district will be a factor when vacation rental guests choose to stay with us.
Our Vacation Rental Start-Up Costs Will Be Under $1000
Due to this being our first Airbnb rental, we decided to keep our start-up costs under $1000. We are able to do this by using some furniture and appliances that we have in the basement at our primary residence. Using what you already have is an awesome way to save money!
We do plan on upgrading some of the furniture and adding a few things down the road. But we’ve decided to get up and running minimally and to use the profits from the vacation rental to purchase the upgrades at a later date.
My wife has been shopping at thrift stores and garage sales to find decorations and kitchen items on a tight budget. It’s amazing how many awesome Airbnb decor items she has found for just a few bucks!
She has also been working hard on refinishing and painting some of the furniture that she’s found to fit into our Airbnb decor. I’m a lucky man to have a wife that’s such a badass!
We Live In The Same Area As Our Airbnb Rental
Our home is about a mile away from our vacation rental property. This will make it super convenient if we need to head over and drop something off to our Airbnb guests.
We will be managing and maintaining the property ourselves. At least at first! We hope to generate enough income to hire someone to clean the vacation rental and take care of the yard.
Maximizing Our Vacation Rental Profits
Using the vacation rental calculator at Bigger Pockets, we’ve found that this vacation rental property will likely generate $40,508 of yearly revenue. That’s pretty awesome considering that we were generating $28800 in revenue with this property as a full-time rental.
What will our actual profits look like?
After running the numbers, it looks like we will profit somewhere between $1500 – $2000 per month on this Airbnb rental property.
Those numbers are a somewhat rough estimate but we will be sure to provide some actual numbers after we’ve been up and running for a few months.
At $1500 a month in profit, this would be 50% more cash flow than we were receiving by offering this property as a full-term rental.
Understanding The Risks Of An Airbnb Rental
My wife and I fully understand the risks of operating a vacation rental. We’ve read the horror stories about guests partying and trashing Airbnb rental units. This problem can be mitigated by thoroughly vetting your guests.
We also have reserve funds for our vacation rental property that we can leverage if needed. Always keep at least 6 months of costs for your rental properties!
As mentioned earlier, we plan on managing the unit ourselves. My wife and I plan on utilizing the guest review system to place great guests in our Airbnb rental.
We will have vacation rental-specific insurance on the home. This will ensure that our property will be covered if something does go wrong.
At the end of the day, there any so many options when you own an investment property. You can learn more about other real estate investing strategies and how to find the best strategy.
Operating An Airbnb Rental Is Fun
I already know what you’re thinking, “Is this guy crazy?”. And yeah, I’m a little bit crazy but I really enjoy being a landlord! With that said, I only own and manage a single property at this point in time.
Don’t get me wrong, operating and managing a full-time rental or vacation rental can be super stressful. But you can avoid a ton of problems by building systems and working out the kinks. There’s always a solution to any problem that you will run into!
My wife has also worked in the hospitality business and she understands it well. We both enjoy staying at Airbnb’s so we like to think that we have what it takes to be great Airbnb hosts.
Julie is having a ton of fun with our Airbnb decor! As mentioned previously, she’s decorating the property on a super small budget and it looks amazing!
Options When Owning A Vacation Rental
We have a ton of options with this property. I’m hoping that it works out as a short-term rental and we can continue with it as an Airbnb rental. We will likely hire out some of the cleaning and yard work if it’s profitable enough.
Medium-term rentals are another fantastic option. With medium-term rentals, you have typically get tenants that will stay anywhere from 1 – 6 months. This requires less turnover and management since you have guests for long stays.
We could convert it back to a full-time rental if the vacation rental option doesn’t work out. There would still be a considerable amount of cash flow and less turnover.
Airbnb Host Tips For Getting Started
- Know the rules and regulations – Be sure to get all of the proper licensing and insurance to keep your vacation rental legal and insured.
- Always run the numbers – Run the numbers on the property as a vacation rental versus a full-time rental. In some areas, it might not make sense to turn your rental into an Airbnb.
- Look at comparable listings in your area – You will get a good idea of what type of decorations and amenities you will need to provide by looking at similar vacation rentals in your area.
- Create A List Of Everything That You Need To Get Started – Once you have this list, you will be able to create a budget to purchase everything that you need to furnish your Airbnb rental.
- Be A Great Communicator – You’ll need to be quick to answer questions that your guests have. This can help lead to awesome reviews and higher placement within the Airbnb search.
Wrapping Up Our First Airbnb Rental
Owning a vacation rental can be challenging but also highly rewarding. We are 2 -3 weeks away from launching our first Airbnb rental! It’s super exciting and we can’t wait to report back on the numbers and the amount of work involved in managing our vacation rental.
We thank you for taking the time to read this article! Stay tuned for more awesome articles that cover vacation rentals and real estate investing.
Hi, I’m Richard. I’m passionate about figuring out how to make my money work for me and getting outdoors into mother nature.