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Airbnbs are TOO EXPENSIVE to Operate - How Much Ours Costs Us
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- Опубликовано: 17 фев 2021
- Here is exactly how much it costs us to operate an Airbnb and if we made any money!
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Yes, it does cost more money to operate an Airbnb than it does a traditional rental property. So, does it cost so much that you don't have any room for profit?
I'll break down all the monthly expenses we account for for our properties and show you the exact amount of expenses for one of our properties for the past three months and then reveal how much revenue we brought in to see if we were able to make a profit and cash flow.
When operating an Airbnb, you need to account for the following:
- Mortgage (Principal, Interest, Taxes, Insurance and PMI)
- Utility bills (Water, Gas, Electric)
- Wifi - are you providing internet for guests
- TV service or streaming services
- HOA (Home Owners Association)
- Pest
- Landscaping
- Maintenance and Repairs
- Garbage
- Automation tools such as Smartbnb, YourPorter and Pricelabs
- Cleaning service
- Welcome gifts
- Additional furnishing costs
- Misc. Expenses
Once you account for all these expenses, you will subtract the total from the revenue you bring in and that will be your monthly cash flow (profit or loss).
If you pick the right location for a short term vacation rental (Airbnb or VRBO) you can bring in a significant amount of revenue. One or two properties in some cases can set you financially free!
The one property mentioned in this video is a mountain house/Cabin in Gatlinburg, TN. In November, we did a revenue of over $14k and our expenses were just over $4, which gave us a PROFIT of nearly $10k!
In December we had a profit of over $13k and in January it was much slower and cheaper nightly rates (this is the slowest month of the year for this area) and we only netted just over $1k in cash flow.
It can certainly be up and down and somewhat seasonal depending on the location, so when doing your research, it is critical that you understand what the forecasted average daily rate and occupancy numbers will realistically be.
Yes, it can be quite expensive operating Airbnbs, but the potential profit and cash flow is so substantial compared to an ordinary rental property, it makes it all worth it!
Investing in real estate is the fast path to financial freedom in my opinion. It beats trying to invest and beat the stock market, especially when most professional struggle to beat the returns of the S&P 500.
Of course, you could always invest in Bitcoin! It's going to the moon right? Maybe... I'm not quite sure - but if your excuse for investing in Bitcoin or any other cryptocurrency is for a hedge against inflation, I would much rather invest in real estate as it is a tangible asset and truly a hedge against inflation and always will be. Plus you don't have to worry about the volatility we are seeing in the crypto market.
I encourage you all to make sure you understand what your investing goals are and align your actual investments to reflect those goals. Don't just follow the trends - that's how you can end up losing a lot of money. Do your homework and invest in things that you believe in and understand the business!
What questions do you all have?
Who does your pest control? I am paying twice what you are
@@rpleven2 in the Gatlinburg area All About Bugs
Hey man, I’m making about 18k a month right now from stocks and I’m financially free and my outgoings are only 2k a month. Now I have no idea what to do with my life haha, I quit my job recently
@@Qwertyisgajidbd well first of all congrats to you! What do you enjoy doing? Travel? Any hobbies you want to pick up?
@@melefante6 thanks dude, we’ll travel aint gonna happen till covid is over and I do have some hobbies.
Thank you for all the information. You should have so many more subscribers!
Thanks for the kind words!
Appreciate the transparency and inspiration!
Thanks!! :)
How did u know to purchase this mountain property? We’re there other Airbnb’s close by and u thought it would also do well?
What happens if the property does not bring enough to cover costs? Do u budget for that? Thank u!!!
We have studied this market for a while now and also have another Airbnb in the sane town. The tourist numbers are very strong. It’s the town closest to the entry to the Great Smoky Mountain National park which is the most visited US national park in the USA. So we figured the tourism would be strong fir the very foreseeable future! :)
We base our projections on a very conservative “most likely” occupancy and avg nightly rate. Our low forecast still must exceed a 12% cash on cash return, so it ensures our break even point is so low compared to what we’re expecting, even in a ‘worst case’ scenario we are still net positive cash flow
I do detailed cost analysis and provide my spreadsheets in my patreon account if you had interest in really digging into the numbers and how we select properties, manage them, etc :)
What do you recommend in regards to down payment what if we can manage 20% down payment so shall we go with 20% to save money on mortgage insurance?
If you’re booked less in January, are any of your expenses also less expensive?
Yes it is lower in slower months. Cleaning is less, less in utilities also
Hey Mike, for your gifts, bulk toilet paper etc are you physically driving to each property to restock? Also are you buying in bulk at Costco or a genuine bulk distributor? Lastly. I’m slight torn, I’m 24 and will buy my first property by end of 2021, I’ve been looking at apartment complexes but with your Airbnb data it looks set. What questions should I ask myself on choosing between the two?
I think it really comes down to the CoC return and what your goals are. Since we live near two of the properties, yes we usually restock ourselves. When we are not in town our cleaners will restock some items and invoice us. We have also shipped items to our cleaners residence with their permission and paid them extra to restock for us. Usually we buy at Costco or Amazon
Found you on tik tok! I am wanting to purchase a vacation property and was curious what reserves you had in place before buying.
Reserves as in money reserves or reservations as to actually going through with the investment? :)
@@melefante6 money reserves. Thanks for the reply.
@@chrisg2417 personally we like to have about 3 months living expenses for ourselves. And for each additional investment we like to have about 2-3 months cash worth of monthly expenses as reserves for each property, but usually no more.
Thanks so much for the inspiration. This is something I’ve always wanted to do but have been scared of it due to the unknown. You’ve taken that out of the equation and we are now placing offers on properties in the gatlinburg area...what a task in this hot market. Would you mind giving me a lead on your cleaner/maintenance company?
There are several good cleaning companies in the area. Most recently we have used mountain pine clean and have been pleased
@@melefante6 awesome, thanks for the info
What about taxes? Do you set aside money for taxes
Yes great point. We do have reserves for each property we own and part of which we can use to pay for income taxes when filing in the spring
FINANCIAL FREEDOM!!! 😎🤩💪💪 💰 💴
:)
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:)