I have a friend who is interested in buying an inexpensive property in a different state to list as STR on Airbnb, VRBO etc. He asked my advice and I started making a list of things I learned or would ask from my own remote hosting experience. Thought it might be valuable to share and definitely want the perspective of others who have done this. I can only speak to my experience as a US citizen in the contiguous USA, but we are such an international community I would love to hear from those who have purchased property abroad too. So chime in!
Things to consider:
1. My number one item in considering if I am purchasing a place remotely is: can I find reliable cleaning? Do you know someone in the area who is a good, deep, affordable, reliable cleaner if you can't do it yourself? Many services will do basic dusting and vacuuming, but won't do COVID protocol, fridges, ovens, laundry etc except for an extra fee. Find out how many people your cleaning crew needs for a reasonable turnover time and be aware of the quality of work. You need to inspect this BEFORE guests call you out in your early reviews. It may sound like putting the cart before the horse but this is super important to me.
2. Distance. Are you okay with not being able to be at your property easily and quickly if there is an emergency? I read an online metric that said any home over 3 hours away decreases the frequency of visits. We are a little controlling about our property, which is only 35 or so minutes from our primary home. We check on it frequently. Other hosts may not be as attached and be more comfortable with leaving the place alone for longer periods. If this is your first hosting experience, you may want to get your feet wet with a closer property out of the gate, and then "expand your empire" to others further afield.
3. Taxes. Buying in different state or countries can have serious tax implications/complications. Talk to an accountant before finalizing any purchases.
4. Landscaping. Will you need seasonal or year round outdoor maintenance? Leaf or snow removal? Grass cut? Are there ordinances where you are purchasing that require a certain type or level of maintenance? How much does it cost? Do you have that built into your budget?
5. Loans. If you need a mortgage to purchase, an investment loan has a higher interest rate than a primary residence mortgage loan. If you are more than 50 miles away, you can attempt to get a 2nd home loan but you may have to prove that you occupy the space yourself for a certain period each year (6Mos is standard in the US). Second home loans usually have a lower interest rate than investment but its still not as low as a regular old primary residence mortgage.
6. Weather. Is the weather in your STR location weather that you are used to and know how to deal with? Will snow/hurricane/temperature fluctuations impede your ability to rent? Do you have the proper people on site to prepare your home for these changes? Have you built this into your budget?
7. Size. Many hosts go for big properties which can fit a lot of guests. Certainly that can be profitable. Our own preference is for a modestly size place with a limited guest count as it makes cleaning and maintenance easier. Bigger places can also attract parties and if you aren't ready to clean up after those, chose wisely. Likewise a BIG kitchen will attract lots of amateur chef and cleaning after a messy one can be onerous.
8. Condition. You may be able to get a fixer cheap, but do you want to do the work to rehab it so its safe and attractive for guests? Do you know the right people locally to ensure work is done well if you can't be there to check it out? Do you have the budget for this? Even something simple like painting a remote property can be tricky if you aren't there to see colors in person.
9. Local laws and rules. Are there restrictions on STRs in the location you are looking? Do you need a license? How friendly is the community to this? The neighbors? Can you attend any city council meetings to ask questions about what you are thinking about doing? Do you know an attorney who understands the area?
10. Furnishings. Can you get furniture delivered to your location if you aren't there? Is it safe to leave Amazon packages on the porch? If you have big items that need to be set up or installed, do you have someone reliable who can let them in?
11. Experience in customer service/personality for human interaction. STR is different than landlording. It is all about emotional labor. Are you patient? Are you willing to listen to complaints you don't agree with? Can you spot when someone is being dishonest or difficult and still maintain positive but professional communication and boundaries with that person? Are you willing to let small things (a missing bath mat, unfair feedback) go? Are you willing to give up the control you might have if you are not able to be in the same space with guests? Are you willing and able to do this over and over again?
12. Personal use. Will you want to use this property yourself? How much is it worth to you to take it off the market during your own use time? How does that cut into your margins? How do you feel about strangers using your things and possibly not caring for your space as you would prefer?
And finally LOCATION location location. Will you be able to attract guests to the area with things to do? Is there a lot of competition from other STRs? What is the average nightly price in the market? How often do you expect to be booked in this area?
Wow, Laura, an excellent and thoughtful post!
I would add liability insurance considerations to this list. You have to protect against guest accidents, widespread damage, etc. and make sure the coverage takes into account fires, hurricanes, coverage when you are there, coverage when empty, flooding from toilet stoppages, loss of income coverage, etc. Also, make sure the policy covers short-term rentals explicitly. Talk to a good insurance agent familiar with short-term rental policies.
Would be great if AirBnB got into the liability insurance space to include this coverage for hosts as part of the fee we pay for each stay...
It becomes more complicated, when the potential host realizes how much he/she depends on the cleaning service. How stronger is the connection between the perfect maintenance of the property and the profit.
On the other side...guests prefer not to pay a cleaning fee. But when the property is perfectly maintained, they are happy and leave positive comments.
@Lisa723 YES. In one area we thought about getting a second cottage you had to get all the neighbors "within sight" of the place to sign off that they approved your decision to make it an STR in order to get your license. It was a small cute city with an unusual lack of Airbnbs. After reading that I understood why.
I would add, do you know the remote area well enough to tell guests where to go to get the most from their stay - restaurants, local features, museums, other attractions, walks if rural, other amenities, medical services for emergencies, etc etc. If you buy in an area you're not familiar with, you won't have this important basic knowledge and experience, the sharing of which is an important and responsible part of good hosting.
@Laura2592 As you well know running a successful STR without constant local supervision or help is tricky business, imagine trying to doing so from afar. The word 'inexpensive' also caught my attention; if it is so why? Bad location, run down, very small? Do your friend a favor, talk him out of it and preserve his sanity.
@Fred13 "cheap" is relative. As he is in a very high COL area, he was looking at market that was inexpensive compared to what he is used to. He doesn't know it well and was just attracted by the housing stock and prices. Local supervision is really important I 100% agree. We only have one neighbor that shares a property line with us so are thankful that they have become friends and very positive about our Airbnb. Doesn't hurt that they also work for the county and know the guy down the street well who is local law enforcement. Hence the temptation for loud parties among guests is squashed just that much more.
@Laura2592 What foremost called my attention was - absentee ownership of a property intended to be used as a rental to total strangers. Oh boy.
Now what would work and perhaps would be good advice for your friend is to find a local management company that would run his rental, that I have seen work quite well actually.
@Laura2592 Your list is great. The only thing I have to add is that any property should be financially viable without short term rentals, either by a long term rental or a market where the property can be sold and costs recouped because the regulatory environment can change at the drop of a hat, what was Airbnb friendly yesterday can turn into a total ban by tomorrow and that potential should be factored into any purchase decision.