How to start a vacation rental or AirBnb management company

Go on craigslist and look at furnished apartments, condos, and homes for rent. Note the number of bedrooms, location, parking etc. Look at condos in great locations. Look at homes near beaches or conference centers. Places near campus in a college town. Those are good targets because they will rent for much more on AirBNB than they would as a monthly rental.

Go on Airbnb and compare the asking rents based on all of these factors.

Create an extremely detailed month to month pro forma (cashflow projection model). Property taxes are listed on public record. Estimate insurance. Estimate utilities. Estimate all the related expenses.

Now estimate the income. It all depends on your town and the location of the property. Note all of the events and raise the prices on those days. Note all the off times and price reasonably and assume lower occupancy.

Compare the rental returns vs the home values. Is it nearing a 10% annual return on overall value? Thats really good.

Could the property do better on Airbnb than on a monthly rental plan with a tenant? If so then thats good and you might be able to convince the owner to let you try it.

Now find a way to reach the people who own the homes that are ideal short term rentals. A lot of them are listing their rental themselves on craigslist so you’ll reach them when you call the number. Another option would be to find their information on the public tax records. Send them a hand written letter.

Show them the projected income. Let them know you are estimating based on research you’ve done. Convince them to let you give it a shot. Agree to share the profit 50/50. Be up front with them, let them know the risks, get the required insurance, and manage expectations. Make sure to check your local regulations around short term rentals.

Get very aggressive with the pricing strategy. Most people under price their short term rentals. Read and study ideal occupancy rates. Read and study ideal times to rent and raise prices. Study events in your town when demand will skyrocket. Learn and learn and learn about this space.

Outsource the cleaning to yourself to make more money.

Collect data. Data will be your biggest asset. Its what will allow you to predict income and sell new property owners on hiring you. Once you can reliably predict a 10% return (on total value) for an investor they will gladly buy properties and hire you to manage them.

Eventually you can expand and try to get people to let you manage their homes who will be traveling for long periods. Or people who want to spend a month abroad. Or people who simply want to stay the night with a friend and make money when there is a college football game in their town. Some of the property owners might pull the listing and just decide to own the income producing asset and let you manage it full time.

When you have data you can eventually predict the value of the properties. You can begin to find investors to buy properties with the sole purpose of having you manage them as short term rental properties.

The data will start to pile up and you will get more and more confident in the income projections. You will have a track record. Build a website and start to advertise your services to the general public. I like Bluehost for a cheap yet reliable hosting service and WordPress as the engine.

Now you will have the cash to put a down payment on a cheaper house or condo and own it yourself. Enjoy all the cashflows.

There are a ton of advantages to this from a tax perspective over a typical service business. You can depreciate your asset each year. Your asset will appreciate by 2-5% per year. When you sell it you can do a 1031 exchange and put off those taxes even longer.

Buy 1 property the first year. Then 2 or 3 the second. Then 5 a year for 2 more years. Whatever pace you are comfortable with here. Soon you’ll have your own portfolio and you’ll be on your way to real estate wealth.

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About Me

I started the Sweaty Startup in December of 2018 because I believe the Shark Tank and Tech Crunch culture is ruining the real spirit of low-risk entrepreneurship.