Can You Still Buy an Airbnb in 2024?
Introduction
Can you still buy an Airbnb in 2024? This is a question that many potential investors are asking themselves. With emails promising lucrative returns and beautiful properties, it's tempting to believe that buying an Airbnb is a surefire way to make money. However, it's important to analyze the numbers and evaluate the market potential before making any decisions.
Key Takeaways:
Analyzing the numbers is crucial before buying an Airbnb property.
Finding a profitable market and acting quickly on deals is important.
The listed property in Sierraville, Tennessee has potential due to high visitor numbers.
The property's potential revenue and cash on cash return may not be as high as advertised.
Using multiple data sources and conducting thorough research is necessary to verify the numbers.
Analyzing the Numbers and Market Potential
Finding a Profitable Market
Finding a profitable market is crucial when it comes to investing in short-term rentals. While there are countless blogs and articles discussing the best markets, sometimes deals are simply emailed to you and you need to act quickly. One such deal is located in Sierraville Tennessee, nestled in the Smokey Mountains. This area is home to the most visited national park, with a staggering 14.1 million visitors in 2023. It's clear that there is a high demand for vacation rentals in this area.
The Listing in Sierraville Tennessee
The listing in Sierraville Tennessee is a large four-bedroom, four-bath house spanning 3,200 square feet. While the house itself is spacious, the decor leaves much to be desired. However, aesthetics aside, the real question is whether the numbers provided by the seller make sense. According to the email, this property could generate $178,000 in revenue and offer a 16% cash on cash return, which is twice as good as the S&P 500.
Evaluating the Revenue and Cash on Cash Return
To evaluate the feasibility of these numbers, it's important to consider the financing options and expenses associated with the property. Assuming a purchase price of $1.1 million and a 10% down payment, along with closing costs, furnishing, and miscellaneous rehab expenses, the initial investment is significant. Additionally, there are monthly expenses such as mortgage payments, maintenance, utilities, and insurance to consider.
Using a Short-Term Rental Purchase Calculator
Using a short-term rental purchase calculator, it becomes clear that the numbers provided by the seller may not be entirely accurate. While the projected revenue of $178,000 per year seems promising, other data sources suggest a more conservative estimate of $131,000. It's important to take into account different factors such as occupancy rates and market trends when evaluating when evaluating the potential revenue of an Airbnb property.
Comparing Different Data Sources
In addition to revenue, it's also important to consider the cash on cash return. The seller claims a 16% cash on cash return, which is certainly optimistic. However, when factoring in all the expenses associated with the property, including holding costs, legal fees, interest rate, home insurance, property taxes, maintenance, CapEx, electricity, water, and more.
Analyzing the Revenue Potential: Using the Revenue Calculator
In a recent video, real estate investor and marketer Josh Baldavino explores the possibility of purchasing an Airbnb property in 2024. To determine the feasibility of such an investment, Baldavino utilizes a revenue calculator to analyze the potential revenue and occupancy rates. By adjusting the number of bedrooms and bathrooms, he discovers that adding an extra bedroom could generate an additional $30,000 per year in projected revenue. However, he also emphasizes the importance of considering the cost of renovations and furnishing the property.
Assessing the Numbers: The Impact of Additional Bedrooms
Using the revenue calculator, Josh Baldovino initially finds that the projected revenue for a five-bedroom property is $131,000. However, by reducing the property to a four-bedroom and four-bathroom configuration, the projected revenue increases to $145,000. This suggests that adding an extra bedroom could potentially generate an additional $30,000 per year. Baldovino notes that if the cost of renovating and adding a bedroom is less than $30,000, it may be worth considering.
Exploring the Mortgage Payment: Analyzing Air DNA's Numbers
Josh Baldovino then delves into the mortgage payment and examines the numbers provided by Air DNA. Initially, the projections indicate a 20% cash-on-cash return with a 40-year mortgage. However, upon closer inspection, Baldovino realizes that extending the mortgage term by 10 years only reduces the monthly payment by $400, which is not as significant as he anticipated. Moving on to Air DNA's numbers, he adjusts the average daily rate and occupancy rate to see how they affect the projected revenue. Unfortunately, even with a 60% occupancy rate and an average daily rate of $538, the numbers do not look promising.
Considering Furnishing Costs: The Importance of a Network
Josh Baldovino also highlights the importance of considering the cost of furnishing the property. He provides a furnishing calculator based on the price per square foot, which can help estimate the expenses involved. Additionally, he emphasizes the need for a network of contacts who can provide valuable insights and advice. To illustrate this point, Josh Baldovino reaches out to a friend who manages short-term rentals and asks for feedback on his underwriting calculations.
Conclusion
In conclusion, the blog post analyzes the possibility of buying an Airbnb in 2024 and whether the advertised numbers are realistic. The author examines a specific listing in Sierraville, Tennessee, a popular tourist destination, and uses a short-term rental purchase calculator to determine the potential revenue and cash on cash return. While the initial numbers seem promising, further research from different data sources reveals a significant difference in projected revenue. Therefore, it is crucial to conduct thorough analysis and consider multiple factors before making a decision to buy an Airbnb property.
If you're considering buying an Airbnb in 2024, it's crucial to use a revenue calculator to determine the potential income. Adding an extra bedroom can significantly increase your projected revenue, but it's important to consider the cost of renovations. Additionally, having a network of experienced individuals to provide feedback and advice can help you make informed decisions. As a real estate investor and marketer, I hope this insight into my underwriting process helps you in your journey of buying an Airbnb in 2024.
