Building an ideal Airbnb

[Pete28]

For a while I have been considering an addition to move the Airbnb guest out from under us (literally). Anyone built the ideal unit from scratch ?

- shower or bath

- separate bed or open plan

- full kitchen or minimal (code will limit us here)

- carpet, wood, laminate (I think we know the answer here)

- the above is not an actual plan 🙂

I will also be studying the Airbnb plus units for my mood boards. Pastels ! Plastic plants ! 

The he other problem is cost - $100kish is a long term investment in Airbnb with an ROI of about $25k a year. Seattle has fairly clear rules on Airbnb (2 units per host), but Airbnb itself seems to keep changing focus.

[Henley0]

I think the important question you need to ask yourself is.. if Airbnb in your area became less profitable for any reason maybe due to government regulations, change in Airbnb policies, etc, would this unit you've built specifically for Airbnb be profitable through traditional rentals?

My personal opinion is that $25K ROI for a $100K investment is really bad.

For me, I didn't build an ideal unit from scratch, but I've built a small bathroom in one of my garages and attached it to the "office" room in my basement (no closet and fairly small). The entire bathroom (including materials) was under $5,000 because my contractors did a pretty bad job when it came to attention to small details. They also used really cheap materials but the bathroom works. This became my airbnb unit and I haven't received any complaints about it. Right now, it's getting booked for about $85/night which is a huge increase from the $850 per month I was receiving from a traditional rental.

[Pete28]

We already have the minimal viable Airbnb - it's underneath us on the lower level which with kids is a little limiting 😞 It cost about $3k mostly drywall and furniture. Could spend less and update, but it will always suffer noise from above and lack natural light.

A 25% return is way better than rental income at typically 5%. Also very tax efficient since it shared expenses with main house etc. Not sure how you can make more than 25% on anything related to real estate ?

Airbnb is legal in Seattle, so I don't see that as an issue.

[Henley0]

Question is, long term, can those regulations change? It's legal and profitable now, but like someone mentioned below, is it a good real estate investment without Airbnb? That's important to consider

[Pete28]

Seattle council spent 2+ years torturing itself over how to regulate Airbnb and came out with 2 units per host.

In any event, it would exceed any existing limitations that I am aware of if they stopped people renting out a part of their primary residence with the owner resident. 

As as a traditional rental, maybe 10-12% return. Still not bad. Plus attached to the primary means lots of shared expenses to deduct...

[Branka-and-Silvia0]

laminate flooring (less scratches then wood, easy to install / replace / cheaper , easier to clean then carpet and doesn't keep odours like carpet)

smaller kitchen = less cleaning / less cooking odours / less cooking fans 🙂

 bedroom unit is more expensive then studio so I would say separate

shower or bath is the same but keep in mind that cleaning the glass shower door it is time consuming (depends how hard the water is)

washable latex wall paint is the best advice I can give you 🙂

[Kelly149]

I think you must think about it as a true real estate investment- will it sell?

if abb becomes banned entirely, do you have another use for it?

abb is not a guaranteed long term plan. 

But if it works for now & could sell later, then ok

[Pete28]

Attached to house, so mother in law etc. Seattle seems to have ratified Airbnb - 2 units max, business license, 7% hotel tax state wide.

[Kelly149]

@Pete0I would ask a few realtors you trust for their thoughts. Would a m-i-l suite be an asset? would you have any comps? to what extent will it change your property taxes? does the HOA (or city or both) have any input? would your current ABB guests be impacted by construction?

my listing is a detached structure: it was existing (kind of) and heavily rehabbed. It has separate entrance, separate parking, separate utilities, kitchenette (this is very adequate for my weekenders), shower only, outdoor space, semi-private bedroom, extra twin beds in living room. (make sure you have some lockable "owner only" space/storage.) We have concrete floors, wood walls, ikea, flea market, handme down furniture with trendy accents. It has a very distinct personality. We built the space for ourselves and could happily never rent it again if that's what we decided. We recouped the construction costs after about 15 months of rent.

If you have 100 to spend, and add value to your overall home, and then recoup thru rental some of your investment then that's a good plan. Unless that 100 could have been returning more elsewhere. ??

I would build the small space to the view of could you ever see yourself transferring over there and make more renting the "big house"

And I'd for sure make sure I was diversified to multiple platforms if I was counting on a space being full-time rented. Seattle may not ever kick you out, but ABB might....

[Inna22]

I agree with @Kelly149. This place has to have independent value outside of Airbnb. You will be working for four years just to recoup your expenses. If you can sell it at amy time for 10 k or if it adds 100k to the value of your house- it is a great idea. Otherwise too high risk of an investment into the unknown (future direction of Airbnb)

[Pete28]

Yeah - as a MIL rental not using STR (lots of students and medical workers etc around) would max at maybe $1k, so would be 8 yr payoff. STR is going 2-3 times that.

The problem with building on an existing lot is that the investment is not liquid until you sell everything. My impression is that an income generating unit is highly desired in Seattle, but I doubt it would produce a multiple on the build cost.

Given age of kids, we are probably staying atleast another 10yrs for schools, and reliable retirement income will also become important. No easy answers..l

[Kathy33]

Pete we live in the same town. I built out Airbnb for 11,000 . Have it fixed so it would be hard to damage. If you wanted to talk about it give me a call (Dan Kathy’s husband)  Happy hosting

[Pete28]

That is quite amazing for $11k ! Did you build it yourself ? I don't think a contractor do the framing for that 🙂

Our current unit is on the lower level of the house, and it has annoyances for both the guest and us. 

Strangley for for an addition to the main house the permit process is straightforward as long as you stay within you overall sq ft limits on the lot.

The $100k number is the current contractor consensus based on outline plans from an architect I work with, nothing is cheap in Seattle...

[Lizzie]

Interesting discussion @Pete28 (I love architecture tv programs). 

If you were to go ahead, have you played around with the type of materials you would like to be it from? I suppose this has quite an impact on the cost of the build, as well.