Here’s a fun fact: I’ve bought and sold over $2 million in real estate…all of that in flip houses.

I assist buyers and sellers in real estate all the time. Buying a house to me is like buying toilet paper for most other people.

But, I’ve never bought a house to KEEP as a vacation rental until now. And let me tell you, it was the first time I was shaking in my boots at closing.

If I’m accustomed to buying real estate— investment real estate no less– what had me shaking in my boots?

MATH.

$24,068.79

That was the amount of my down payment and closing costs. All cash. Yes, you can get into houses for 3.5% down, but here’s the fine print sooo many people ignore: The less you put down, the higher your mortgage payment. The higher the mortgage payment, the smaller the profit. It’s basic financing, so I chose to put 20% down plus closing costs. Before I ever had my first guest, I shelled out a lot of money.

But the spending didn’t stop.

$4,278.50

This is the amount I spent out of pocket to furnish the Airbnb. From mattresses to soap and everything in between, as an Airbnb host, I am responsible for furnishing the entire property. This is obviously different from being a landlord where I just supply the home, and they furnish everything themselves. If I opted to ever long term rent this house (my plan B if another crash happens), I could have avoided this cost.

If you’re purchasing a separate property for the purpose of Airbnb, you will have substantial extra out of pocket cost to furnish everything.

$28,347.29

This is the total amount of pocket. It’s a very healthy all-in investment. It’s not every day I drop that much cash on a house. With flips, I’m not so concerned about a cheaper mortgage payment because I don’t plan to own them long enough to care, so I’m able to put minimal to no money down (or pay cash). But like with Flip 5, I put 20% down to give me some breathing room on the monthly finances.

But here’s the math that sold me on shelling out over $28,000. If I chose to be a landlord on this property, I could reasonably expect to gross $900-$1,000 in monthly rent based on neighborhood comps. That’s a small profit margin but a lot of headache. I’ve said it before, I’m still not sold on the desire to be a landlord, so I keep rejecting that option.

But the other numbers are where the potential lies in this investment. If I rent the Airbnb just 40% of the month, I can reasonably expect to gross $1,000-$1350 (variance based on peak season). I think starting out and building a reputation as a host, this is a reasonable first year expectation. Not a huge profit, but still more than long term renting.

If I was able to rent the property 100% of a month, I could expect $2250-$4,000/month. I don’t expect a lot of months to have 100% occupancy, but if they did, I’d be grossing FOUR TIMES the long term rental amount. 

Keep in mind, these numbers are GROSS. I still have to pay state and local taxes, income taxes, utilities, and supplies each month. Real estate investing is a gamble. With house flips, I know the end result. By the time I pull the trigger on a flip, it doesn’t even feel like a gamble. This investment property feels very much like a gamble! I have finished staging the house, and it’ll be open for business this week! I’ll be doing a post with links to the listing, after pictures, and even some coupons!