Should I develop property and convert into a AirBnB location?

[Samuel678]

Hey all, just want to gather some insight from the community here. I am a property owner in Sequim, WA (popular retirement and vacation community). The property is in a great commercial location with REALLY easy access. It would need to be entirely re-developed and some container units converted into liveable spaces. Overall, I think it "could" work, I am just unsure if it is a wise investment due to COVID and such. I would love to have some conversations with individuals that have done this and how they would advise!

Thanks much!!

[Ann72]

@Samuel678  It's a good wheeze, in general - but more info would be helpful.  It's in a commercial district or it's zoned for commercial use?  How would people use it - would they be vacationers, people traveling for work, people visiting family or friends, or people checking out the area for retirement planning?  During Covid, shared spaces have been less successful than stand-alone spaces.  Shipping containers cleverly converted can be popular.  But it's not clear if your whole plan is composed of converted containers or if that's only part of the plan...

[Samuel678]

We are in a commercial district, however, our property is zoned agriculture. The target audience would be vacationers/visitors.

Essentially I want to find out if the development costs would be worth the ROI. I'm still in the process of getting bids on the work.

[Helen3]

Only you can answer this question. Assuming STRs are allowed in this area.... do your research.

how much do similar places rent for in the area?

what will your costs be to set up and what are your ongoing costs ie mortgage, utilities , insurance, cleaners, co-host 

look into footfall - speak to the tourist board, look at sites like Airdna to get an idea of how many days a year it's likely to rent for

once you have done this you put together a budget to identify likely profit levels. 

[Ann72]

@Samuel678  Without all your numbers in front of me, I can't really answer.  My three places are mortgage free and were family vacation homes for some years before I started with Airbnb, so the formulas are completely different.  I will be running numbers like yours in the next year or two, when I add another property or build something new.  But I will say I'll probably do it, even with a seasonal location such as mine, because the STR more than covers all costs of maintaining and running the properties, and the properties, under an LLC, in turn provide me with good tax breaks.  For my purposes STR is far preferable to long term rental because you can charge so much more than LTR and because you can keep up on maintenance and wear and tear so much better.

[Anonymous]

@Samuel678  At this particular moment, I wouldn't advise anyone to (re-)develop a new property exclusively for the purpose of short-term/holiday rentals. Any space that's too locked in to that format is high-risk and really vulnerable to factors beyond your control - including Airbnb itself.

On the other hand, the great thing about working with shipping containers is that you have a lot of ways to maximize their modularity. I'd be looking into ways to develop the space so that you can affordably repurpose it on demand - seize the value of tourist accommodation when your area is having a boom season for it, and shift to another format outside of the Airbnb platform (e.g. group retreats, events, longer-term housing, work space)  when that's where the demand shifts.

[Lisa723]

@Samuel678 our two rentals are in Quilcene (Lake Leland). We have experienced skyrocketing demand in the last year, and correspondingly been able to increase our prices significantly, as everyone in Seattle and Portland seems to be looking for private, driveable getaways. When travel generally opens up, I expect this may ebb, but nevertheless pre-covid we never had difficulty keeping our places booked year-round. In the winter it was mostly weekends, though.

Just some perspective on local demand. I can't really advise on the investment question.

[Lisa723]

@Samuel678 One other comment: it's historically been easier for us to keep our smaller cabin booked than our larger house, especially in winter. We get a lot of young couples coming to the peninsula for romantic/outdoors-oriented getaways. I can imagine that the kind of establishment you're contemplating would be just right for that demographic.