Our first venture into short-term rentals (AirBnB)…

This property was our first venture into the short-term rental (AirBnB) world. We were looking for a property in Beech Mountain, NC. We targeted this area due to the affordability factor and the fact that it is an untapped year-round tourist destination. Skiing and snowboarding activities in the winter along with the Land of Oz, and outdoor activities in the summer make it a great tourist destination spot. Plus the city is very AirBnB friendly!

This adorable tree house already came furnished so it required a minimum amount of up-front cash to get started. At first we tried to find a vacation rental management company that could manage short-term rentals. The hope was they would take over the management of the the whole operation. We found that the full-service companies wanted to charge 25%-30% off the commission. This would hardly be breaking even for us at the end of the month if we went this route.

We found a hybrid company. They charged 10% off commissions plus some processing fees and we actually listed with them for about a month. The company handled all the marketing and upfront guest communications, however they left all the back-end operations to the hosts. This included the cleaning, maintenance, and local guest communications. There was still quite a bit of things we had to manage. (Hence the 10% commission structure).

Our marketing and listings looked great. It was pretty easy to get started with them and we thought they would be great. Unfortunately, after a month we only got one booking. We were also still handling all the on the guest communications, coordinate our cleaners, and maintenance. After studying other vacation rentals in the area we realized that this short-term rentals property manager had our home way over priced. Especially for a brand new listing that has zero reviews and no track record. Of course no one wants to book it.

We realized quickly that we could literally copy exactly what this company was doing and just manage the listing ourselves. We implemented a property management software to help automate our process. The software could handle the guest communications, coordinating of cleaning and maintenance. We also installed a smart lock to allow easy guest check-in. After getting some pro photos done and stocking the home we could finally launch our vacation rental business.

After we took over the full management we had to drastically raise the nightly rate because we were becoming over-occupied! Our occupancy rates hit 90% and above. This became a whole different issue we hadn’t even thought about when we started. We realized we needed to raise the price. Doing this brought the occupation levels to a more manageable level and actually increased our revenue in the process. We were also able to provide one-on-one personal guest communications since we were self-managing. We could also ensure a certain level of cleaning and maintenance since we had a handle on all operations.

We managed to hit AirBnB SuperHost status in the first quarter. Since then we have been able to maintain SuperHost status since we started. Recently our little Tree House won an award on Booking.com for the Traveller Review Awards 2020 for outstanding guest reviews. We are very proud of how far we have come and look forward to many more successful years to come!

The Numbers Breakdown

For those of you number geeks (like me)…Here is a break down of the acquisition costs:

• Purchase price – $139,900
• Cash down plus closing costs- $6000
• Additional furniture and decor- $800
• Start-up expenses for Lockly door lock, toiletries, coffee, tea, cleaning supplies, linens, towels, etc – $2000
• Immediate maintenance or repairs – $1000 (new flooring in bathrooms and bear proof trash containers)

Our monthly expenses look something like this:

• Utilities (gas, electricity, sewage, water) – $300 average per month
• Cable and internet – $100 per month
• Property management software, marketing, website, etc – $50 per month
• Cleaning fees – depends on guest stays averages $110 per stay
• Maintenance and repairs – $75ish per month

Our average stats for the first year in business are as follows:

• Average 70% to 90% occupancy year-round
• Average gross rental income – $3500 per month
• Total gross rental income for the first year. We started in April 2019 so this is only from April 2019 to December 2019. (April only had one reservation since we went with a management company for that month) – $31382.39
• We will be updating for year 2 so keep checking in with us.

Update as of 4/18/2020

In March this year, the Coronavirus Pandemic started creeping through the United States. On the first onslaught we started getting an initial wave of cancellations for our Tree House AirBnB in Beech Mountain. We were seeing multiple cancellations a day and our normal 70%+ occupancy numbers drastically diminished. We managed to shift our marketing strategies and get all of our months booked out rather quickly.

The initial shock wore off. We were finally able to bounce back in time to avoid taking a huge loss. After a few days rolled by we started getting comfortable until we were notified that Watauga County had officially shut down short-term rentals in Beech Mountain.

Their decision was understandable. The county wanted to reduce travelers to the area in order to slow the spread of Coronavirus. The hospitals in the county only have a limited number of beds. They were ill equipped to handle the number of potential sick travelers that were flocking into the area.

We had to unfortunately cancel guest stays that were shorter then 30 days in order to comply. Once again we were back to the drawing board to rally our marketing strategies once more. We shifted gears once more and started targeting month-to-month renters. Luckily, we managed to find a tenant who agreed to stay on for 3 months with an option to extend. So far we are staying afloat. We will update in a couple of months to see what comes of this new environment.

Update as of 3/26/21

Our long term tenant was fantastic and he ended up staying on for a full 6 months which kept us at a comfortable break-even point for our venture when many other short-term rental homes in the area were hemorrhaging costs due to the lack of travelers and the county enforcing strict rules for incoming vacationers. Even tough the travel restrictions had finally lifted, we finally made a hard decision to go ahead and sell the Tree House.

We were already looking to do a bigger AirBnB/short-term rental project so the timing couldn’t be any better. Plus the Beech Mountain housing market was on fire and we wanted to take advantage of this opportunity. We were able to go ahead and list this home and sell it as a turn-key AirBnB investment property for $181,750.

This property met the requirements for a 1031 tax exchange and since we were planning to roll our gains into another investment property this process just made sense. These profits made it entirely possible to purchase our beach house, Alohalani at Surfside Beach, SC and we are currently working on getting this project up and running soon!

Final Numbers Summary

$ 139,900 Purchase Price · $ 181,750 ARV
$ 14,793 Cash Needed · $ 1,471/mo Cash Flow · 19.4% Cap Rate · 119.3% COC

Reach out for a more detailed analysis report for this property at tehane@gallimorerealestate.com