New Purchase

theguzman

I recently purchased a second hand home in a estate in a rural Irish village. I'm being deliberately vague here on location so I'm sorry for that. I have strong family connections to the area and spent time there in my early days.

Anyway the house is in very good condition and needs some minor repairs and a makeover since it has no furniture included. The house itself was bought at a good price, an absolute bargain compared to Dublin City prices.

I'm now deciding what to do with the house, I could rent it out long term, due to the location involved it has strong potential for airbnb, it is not in any rent pressure zone. Hotels nearby by comparison are very expensive and simple figures would see a couple spending €300 - €350 per day for accommodation and food alone from May to Sept, hotel prices level off a little after that but are still incredibly overpriced from my own experience as a tourist both here and abroad.

It has been suggested to me to do airbnb, by "pub experts" because I'll never have any problem trying to evict tenants since Tourists go home. I am not a greedy type and I wouldn't be aiming to gouge the market, especially since I bought the house at a fair price.

However problem tenants seem to be a growing problem due to high rents also I presume, one man in the same village who I'm friends with has long term tenants in his place for years and still charges €100 per week because they pay on time always and don't wreck the place. They moved in around 2009 and the rent actually reduced to €500 and then €400 as the recession worsened, he is a cash landlord (retired and lives abroad during winter) and both parties are happy with this arrangement, but something I'd be slow to emulate really myself.

If I was to rent at less than asking prices nearby my yield would be 5 to 6% after taxes. Wheras if I went on airbnb I could pull in a maximum of 8-9% again at below average costs. This would still be at about 38% to 40% cost of hotel rooms nearby. Similar Airbnbs nearby are heavily booked out in the lower cost price market I was thinking of.

I'm not pushed really on the whole thing, others suggested renting it on the sly cheaply at like €400 - €500 per month Cash only but it's not a route I'm willing to take, because I'm only going down the legal and proper route on this.

People may ask why I was prompted to buy it? I am saving money since I was 12 years old and I have never seen such a pathetic return for my savings as there is at the moment, after DIRT you get nothing and actually cash in the bank in devaluing at an incredible rate and property is increasing, that's really why, the figures involved are not huge. This is also my first property I have ever owned since it was a combination of renting in my early days and now where I live is my partners place. We also like the idea of airbnb, since we could block off a week or a weekend etc. for our own use or if we wanted to let other family and friends use the house etc.

I'm wondering if anyone here has been through similar situations before or what would they do if they were in a position similar to me.

dennyk

Just keep in mind that AirBnB is not guaranteed income; you may have slow weeks or even slow months during some parts of the year during which you'll take in no rent. Depends a lot on exactly where the property is and how much demand there is for holiday accommodations there. Also, even during busy months, it might be difficult to ensure 100% occupancy due to the odd short gap between guests unless you enforce a very strict rental schedule (e.g. only rent on a weekly basis, Saturday to Saturday), and that might turn enough customers away that you'd end up with vacant weeks anyway, if you don't time it just right to match the demand fluctuations in your area. Have you accounted for all that in your valuations, or are you basing those on 100% occupancy? Can you afford to continue paying the mortgage if you've no business for a month or two in the winter?

You'd also need to pay someone to manage the property; meeting guests to provide keys (quite possibly at odd hours), inspecting and cleaning between rentals, addressing any requests or concerns from guests during their stay (some people think AirBnBs are the same as hotels and don't think anything of ringing their host at 3AM to demand some extra towels or whatnot), addressing complaints from the neighbours about problem tenants or wild parties, etc., unless you live close by and have enough free time to do it all yourself. You'll really need to have the place fully furnished and nicely decorated as well, as opposed to just the basics, and you'll have to supply linens and toiletries and a fully kitted-out kitchen and such, as guests will expect all that to be provided. You'd also be responsible for the utility bills yourself, so that will add to your costs as well (especially if your guests are from hot climes or aren't used to a boiler or can't figure out your storage heaters or whatever and end up cranking up the heat way too much).

There's also a risk of being legislated out of business, of course, but should that happen you could always consider switching to long-term rents anyway.

The only advice I have is charge the absolute maximum amount you you can be it daily rate for Airbnb it monthly rent if you go long term. This giving cheap rent stuff if for fools.

theguzman

Very good advice here lads and thanks for that, the only good thing is that I bought the property without a mortgage and my main motivating factor was low practically non-existent interest rates paid nowadays on my savings. I was lucky with the the price and I still have plenty left over for furnishing etc.

I have family in the area that will manage the property if I decide to go for Airbnb, a nephew who can cut the grass etc.

Not having a mortgage is a great relief and really I need for the house to generate like €1,000 per annum and I'm I'd be generating more value than the banks were giving me in interest, but as others have said I'll be seeking to maximise the return as much as is feasible.

People have told me to furnish it as cheaply as possible, and to go to Ikea in Ballymun and transport it west with a van after, I was there maybe once or twice but have no experience of any of there stuff? I understand Ikea to be quiet cheap as most of it flatpack and I could assemble stuff myself no bother.

A few people I'm friends with have told me that tenants apparently wreck stuff and they have had a few bad experiences so I should furnish cheaply according to them. One man told me if I'm renting to rent only to foreign tenants and another told me absolutely no dogs should go in. Thats again if I went long term rental instead of Airbnb.

looksee

I'd be a bit concerned about the family that will manage it - unless one individual is prepared to take total charge and responsibility, and is paid for it, you can't really expect a good outcome from a vague group of people doing the admin and cleaning etc. And in many ways having family doing it is worse than employing someone - you can't fire family. And how will you deal with it if they start using the place to accommodate friends or - as in one case I know of - one family member thought nothing of 'borrowing' kit from the house when his own packed up.

theguzman

A very fair point, and of course I'd be paying them to take care of it. I'll set out ground rules myself. I took care of their properties before so there is a definite understanding amongst us. But I totally understand where your coming from.