Ah, AirBnb. Because apparently you kids are too good for hotel rooms now. God I hate you so much.
There are a number of advantages to staying in someone’s place. If you’re traveling with your annoying mother-in-law, at least she gets her own room in an apartment. In theory, having a kitchen will save you money versus eating out (but in reality you’ll just throw up your hands and go to Wendy’s because vacation). Somebody’s place will often be cheaper and quieter than a comparable hotel room, too.
Converting space into a short-term rental is also a fantastic way for the average Joe to make a few extra bucks. Some of us are quite willing to temporarily share our extra bedroom with a stranger in exchange for money. Others take it a step further and will rent out their whole place, temporarily relocating so nomads from Australia have a place to
smoke a literal shit-ton of weed eat their Vegemite. And then that stuff gets stuck in the couch cushions.
The Australians are the worst people on the planet. You can quote me on that.
I’m probably not willing to go that far, even though I could easily rent out my place by the night and crash in my parents’ basement. But I have been tossing around the idea of converting an unused garage into an AirBnb rental.
So I’ve got this garage, which is approximately 15 feet by 15 feet. It has power but it’s unheated. It’s located on the back of my property, and it’s currently being used to house yard tools and some other miscellaneous crap. I don’t park in the garage because there’s no automatic garage door opener and I’m too lazy to get out of my car and open the thing, especially in the winter. So I park on the street like a hobo.
I have two conversion options. The first is to turn it into a big bedroom without a bathroom, allowing people to come inside the house to empty their bladder. This obviously isn’t ideal, but it’s definitely the cheaper option. The more permanent solution is to put a bathroom inside the new unit.
The cost difference between the two options is massive. To convert my garage into a big room could be done as cheaply as $5,000, assuming I did a bunch of the work myself. I’ve been told $10,000 is a more realistic number, but let’s be conservative and say it would set me back $15,000 to do the cosmetic changes needed.
Compare that to putting in a bathroom. No garage I’ve ever been in has built-in plumbing, which means you have to create it. This involves removing some of the concrete floor in the garage and putting in pipes. Then you need hook up the plumbing to the main water line.
I’m relatively lucky; the water and sewer lines to my house run in from the back alley. They’re about 10 feet away from the garage. This makes connecting to them much easier than if they came in from the main street in the front of the property.
Still, this won’t be cheap. By the time it’s all said and done, I’d probably be looking at an initial investment of $40,000. And that’s assuming I could get permission from the local government in the first place. That’s hardly a slam dunk.
The good news is most of the costs would be borne up front. Additional utility costs would be $200 per month, maximum. Since short-term rentals are a labor-intensive business, we’re looking for a better return in exchange for our time.
My town does a brisk tourist business in the summer. Approximately half a million people visit annually, with the majority of those visits coming between the Victoria Day and Labor Day long weekends. Hotels have close to 100% occupancy during those months with the average room costing between $150 and $200.
Say I priced my rental on the low end of that range and got 80% occupancy during those 3.5 months. 110 days at 80% occupancy times $150 a night gives us revenue of $13,200 annually without doing any work at all during the winter months. If I could rent the place out a third of the time for the remaining 250 days a year and earn just $100 a night doing so, this would create an additional $8,250 in revenue.
All-in the unit would generate $21,450 in top line sales. I’m going to assume $5,000 a year in expenses, which I think is a little high, but whatevs. This leaves us with $16,450 in profit before taxes, a return on investment of 41.13%
Oh baby. I’m a little bit hard right now, guys.
Will I do it?
At this point, no. Both me and Vanessa have full-time jobs, and although cleaning up the unit wouldn’t be a terrible burden we’d still have to use some of our precious time to do so. I’m more interested in passive sources of income at this point.
But it’s a terrific idea for somebody who has a little more time on their hands. And the best part? You don’t even need $40,000 to get started. Tune in next week and I’ll show you how you can get your own AirBnb business up and going for a fraction of the cost.