I have embarked on a new adventure and I must say, I am quite excited about it. I have just converted one of my Indy rental properties into a full-time vacation rental. This is something I have been wanting to do for a while now and I finally got the opportunity to do it when one of my rentals became vacant this past December. It’s bringing new life back in me and more importantly, giving me new stuff to write about on this blog. There is only so much you can write about buy and hold rentals. Most of which I have already written about in my older articles. Now you will be able to read all about how to transition a traditional rental converted to a vacation rental and see all the real numbers involved.
For those of you who do not know me, I have been on a journey to financial freedom for the past 3 years or so. I have built my real estate empire into 7 rental properties (5 in Indianapolis, 1 in KC and 1 in Austin ), 1 owner financed performing note, and 1 hard money loan that I currently have lent out. It has been a wild ride to get to this point and the biggest impact of all was when my wife and I decided to leave Austin, TX to come to Indianapolis. We made this life altering move for the sole purpose of being able to achieve financial freedom faster. The real estate market is extremely good for investing in Indianapolis and the cost of living is far cheaper than where we came from. It has been one of the best decisions I have made to date.
For those of you who have been thinking about getting into the vacation rental/airbnb game, you are in the right place. I will try to document everything I go through, the good, the bad and the ugly as well as how much money I make from it during this experiment. It should prove to be some interesting content for sure. This is…
My AirBnB Experiment in Indianapolis – How I converted a rental property into a vacation rental
Why am I doing this:
Ever since I moved to Indianapolis, I have secretly always wanted to be a vacation rental/airbnb host. It just seems like a cool side hustle and a potentially great way to boost our income. I currently own two properties here in Indy that in theory should be a good VR (vacation rental) based on location alone. Both of these properties are about a mile from downtown and even less to the hip Fountain Square area. So with that being said, one of them became vacant a few months ago after sitting idle for 3 weeks with zero interest because of the holidays (no one moves during the holidays it seems). My wife and I decided it would now be the perfect opportunity to convert this rental property into a vacation rental. For those who are wondering, they are properties #7 and #8 on my monthly net worth posts.
But what really pushed me over the edge to try the airbnb thing was an article that came out last month by AirBnb themselves. In this article they showed data indicating that Indianapolis (of all places) is the #1 trending American city for vacation rentals for 2018. Indy saw a 256% increase in bookings in 2017 and the numbers do not seem to be slowing down. This is a huge freaking deal in my opinion!! Based on that knowledge and what I already know about this city, it’s a no brainer to at least try to get this going. Here is the official airbnb article by the way if you want to check it out.
Unfortunately I don’t have a way to accurately predict how much money I will be able to make from this endeavor. It’s a risk I am willing to take though and I have been known to take risks. I honestly do not think you can achieve success without taking risks. But that makes for another post.
Original numbers from when it was a traditional rental property:
Here are the numbers from my rental property before I converted it into an AirBnb.
Purchase Price: $65,000 (Purchased in late 2016, bought in cash from a wholesaler)
Fix up costs to make rent ready: $20k
All in: $85,000
Rent Price: $950 per month
Yearly income minus Property management fees = $10,260
I successfully had this property rented out for a whole year with no issues. Based on those numbers alone though, the returns were not great in my opinion. As a matter of fact, out of all the rental properties I have, this one had the smallest returns/COC in my portfolio. The reason for that was because of the location of the property. I knew that purchasing a property this close to downtown would limit my returns at first but increase the appreciation potential. It was a calculated decision I made because the neighborhood its in is super hot and I want to own as many properties as I can here. Long story short, this property is perfect for an AirBNB.
My wife and I also just happen to live in the same neighborhood of our new airbnb which only makes it so much better and easier to do this.
Potential numbers for converting to a vacation rental at 50% occupancy:
Here is my initial guesstimate on what this property might make as an airbnb at just 50% occupancy per month and an average of $120 per night.
$120 per night/15 nights booked per month = $1,800
Minus Airbnb fees at 3-5% = $54 – $90
Minus utilities/internet = $100 to $350
Minus restocking supplies = $20 to $50 per month (total guess here)
Possible monthly profit at 50% occupancy = $1,340 – $1,596
Possible yearly income minus fees = $16,080 – $19,140
With those rough numbers at just 50%, that could provide an increase of $400 to $650 more per month. Obviously this could be much higher if the property were to be booked at a higher rate which is what I am hoping for. I like the potential it has but the caveat is that it will require a LOT more work to be an airbnb host. I am not considering this a passive investment by any means. My wife and I will both be actively managing and cleaning the home during turnovers and booking reservations. It has yet to be determined how much actual time we will spend on the house but in time, I will let you know.
The fun part will be my future posts where I reveal actual numbers.
How much is it costing me to convert my empty rental property into a fully furnished vacation rental?
As of 4 days ago, the house has been fully furnished and is 100% ready to be a vacation rental. As a matter of fact, I published the listing 4 days ago and as of right now, my new airbnb is active and booking reservations. Keep reading for more info on how that is going so far.
To fully furnish and fix up the house to vacation rental standards we have spent exactly $9,722. That is more than I originally wanted to spend and the reason we ended up spending so much is because we kind of went above and beyond with what we really NEEDED to do. For example, we spent $2500 getting the whole exterior of the house painted. We didn’t have to do this but the curb appeal in the picture alone we thought would make a huge difference when travelers are selecting a home to stay in. Anyhow, here is a summary of our total costs:
House size: 1800 sq ft (ish), 3 Bedrooms/1 Office/1 Bathroom/1 Laundry Room/Living Room/Dining Room)
Furniture: $3,141 – Purchased all from Ikea. THANK YOU IKEA!! The house was completely empty and we had no furniture to provide from our own house because we threw out all the junk when we moved to Indy already. Ikea is by far the cheapest place to find furniture other than scrounging for free items on craigslist or something like that.
Supplies: $2,335 – This pretty much includes all supplies/cleaning/house filler stuff/linens/alarm system/kitchen ware/etc. This stuff added up real quick. It was all fairly necessary stuff to provide a fully functional home that includes all the normal amenities.
Appliances: $1,297 – The big one here was the washer/dryer we purchased. We thought having this in our vacation rental would be an added bonus and possibly help in the long run with booking reservations. I could have went used here but I could not find a reliable source to purchase a used washer/dryer. Didn’t want to risk it so we just bought a brand new one. We also needed a microwave and toaster.
Art: $246 – Cant have a cozy home without some art on the wall now can we? We tried to go cheap here and ended up buying nice poster type art and bought the frames separately. With all the rooms in this house, it added up fast.
Repairs: $2703 – Most of this was painting the exterior of the house but we also put in a new mailbox and some other minor stuff that I did myself.
Total amount spent on fully furnishing, repairing and converting an empty rental house to a vacation rental = $9,722
As you can see, it’s not cheap doing this. Overall, even with spending this much money I am still anticipating making some nice returns. Only time will tell.
My property is now officially listed and published, here are the results:
It took me about a month to get the house from a vacant traditional rental to publishing on airbnb and VRBO. Most of the time was spent on waiting on Ikea to ship all the furniture and then me having to build it all. It was a LOT of furniture and it took me days to build it all. I am now an expert though on building Ikea furniture. If all goes to hell, at least I can say I came out on top because of this new skill I have acquired. 😉
Active days listing has been published: 4 days
Number of nights booked already: 23 nights
We already have 23 nights booked starting from this weekend up until August with our first guest staying this weekend. Considering its only been 4 days, I am pleasantly surprised at the amount of bookings coming in already. Part if not all of this is because I listed the property at a lower rate then I originally wanted. The reason for this is to attract as many bookings and ratings as I can get to get me started since I am a newbie with zero reviews. Once I get a handful of good reviews, I will start increasing the price to my desired price point.
I am not claiming to be an expert in anything and will definitely be learning as I go during my new airbnb experiment. But rest assured, I will document it all and whether I fail or succeed, I want you know all about it. Worst case you can learn from my mistakes.
Stay tuned for future updates on my airbnb experiment in Indianapolis and please ask as many questions as you have or share with me valuable information/tips to help me succeed in the comments.
Looking forward to hearing from you.
This is so cool Alex! I love how you’re so open to trying different things and then sharing along the way, it’s really inspiring.
We had planned on converting one of our rentals in Washington State to a short term rental but received a high rent offer that we couldn’t refuse so we took it. They just opened up a local airport for commercial flights really close by so we’re hoping at some point in the future to try out Airbnb too.
I’m excited for you!
Hey Jennifer! Thanks so much! It seems every year I do try something totally different. I guess it keeps me going! And I love to share all this kind of stuff.
Oooh yeah I bet that property you have would make for a good vacation rental. Honestly, if this property I converted had a qualified tenant apply as soon as it went vacant, I would have approved the tenant and wouldnt have even tried this. But now that I am, im happy to do it because I think I will learn a lot from it.
Thanks for commenting!
Alex, thanks so much for writing this, I am literally about to take the same adventure myself here in a few weeks! One of my relatives got a little spun up about it. Should I consider getting an LLC in the event one of the renters tries to sue me for whatever reason? I tried to find the answer on the air bnb site and it looks like they have some coverage for property and personal injury up to 1 million? If you could let me know what kind of supplemental insurance I should get or other legal protections I have not mentioned that would be great. Your article was fantastic, I look forward to more in the future, thanks!
Sounds awesome and those ikea skills will always come in handy! I’ll be keeping up with your progress 🙂
Ha thanks rachel!!
Very cool! I’m thinking about doing the same thing in Indy. Looking forward to your updates!
Awesome!! Thanks Julie
Oooooo, I’m curious to see how this works out for you and your wife! I wonder if the money will be great, but the workload will lead to burnout? I manage my own buy-and-hold rental homes and I just wonder if I could maintain the AirBnb turnover? I hope it goes well and I’m to subscribe today so I can be sure to follow along!
After at least a month or maybe 2 months I will have a much better idea of how much money its making and workload. I only spend a few minutes per day looking at the calendar and answering questions from potential guests. So far we have had two cleanings and each one with my wife and I both cleaning, it took about an hour and a half. We are being very meticulous about the cleanliness though for now. I dont see us getting burned out at all with workload. Mainly because my wife and I are tackling this on together. Plus we both work from home, the house is in our same nieghborhood so its easy for us to just leave anytime of the day to take care of anything including cleaning.
would love an update – we have a rental at 16th/carrolton that I think might make a good Indy Airbnb. How’s it going for you so far?
would love an update – we have a rental at 16th/carrolton that I think might make a good Indy Airbnb. How’s it going for you so far?
It’s going great so far. Here are some numbers for my first two months
Any updates on the vacation rental? I was thinking about purchasing a second home and renting the one we are currently in. I have since been talked out of doing so.
The Vacation Rental is still chugging along. We are averaging anywhere from $1600 to $1900 per month in income from it minus about $300 monthly expenses which ends up only being about $400 to $700 more per month then if it was a regular rental. I wouldnt say its great but its consistently extra cash flow. The main problem as to why we aren’t making more is because there is just too much competition in Indy for vacation rentals. If your home is in a HOT location then I would try it out, but if not, I would stick with making it a normal long term rental property.
Hi I love your posts!! This Airbnb adventure is so much fun! Very curious what your interior look like with all the furniture and wall art? Do you mind to share some pictures?? And tips and tricks to make it look awesome for vacation rental?
I have to admit that I came across your blog last year, it impacted so much and I bought my first 2 rental properties last year! they are doing great and I’m buying my 3rd property. You literally changed my life
Thanks! We put up local Indianapolis wall art in each room, have a guest/comment book, a keurig machine with free coffee/creamer. Guests love it! The main thing is just to keep it as clean as possible. If it even looks dirty, guests wont like it.
What a great story. We currently have a Airbnb you in Indianapolis, we are trying to find a good cleaning service can you recommend anyone?
Completely awesome and inspiring. Love that you took a chance/risk of converting your rental property into a vocational property. That might have worked or it might not have worked but your devotion inspires me a lot. There are very few people who share that experience of life to help others.
Thanks Mate ?
Can you tell me what the process is to become able to have a short term rental in Indianapolis? Is there a business license/permit I need? Registration? What do I need to do in order to do this?