Avon, Colorado is a popular place to vacation, both for the beautiful summers in the mountains and the ski paradise it becomes in the winter. An Airbnb study showed that across Colorado, guest arrivals grew 68% from 2016 to 2017. That’s 1.2 million visits and $183 million of revenue!
One surefire investment is to buy all properties, netting a cool billion every several years.
Although this would be cool, for most people it’s easier to start small. Avon is a gateway city, two miles from Beaver Creek Resort and a significantly lower cost of entry than Vail (median house prices are $620,000 in Avon vs $1 million in Vail). Not only does it have lower barriers to entry, but It’s rated 98/100 for its investment potential by research company AirDNA.
Let’s look at a few numbers. If you purchased a median priced three-bedroom for $620,000 and listed it on Airbnb for the average daily rate of $468, you would take in about $5500 a month at the 39% average occupancy rate. Subtract a few hundred for various fees and you’re at $4900 a month. If you put down a 25% down payment and get a 3.9% 30 year mortgage, you’ll pay $2913 a month. Add about 50% for property taxes, maintenance, utilities, etc and you’re at about $3289 a month. That’s a $1,611 monthly profit. At the end of 30 years, you’ll own the property free and clear and the profit gets much higher—around $55,000 a year in today’s dollars! In this way, your vacation home can actually become your retirement plan. Now imagine if five years into the process you had bought a second home, and then five more years in a third home. You’re building equity while building a profit stream at the same time. Not to mention this assumes an average occupancy of 39%. If you get that number up your profits will be even higher. Plus, you can use the property (or properties) for a nice ski vacation or summer in the mountains whenever you want. One or two weeks of vacation a year will save you several thousand in lodging.
There are a few downsides you should know about. First, there’s the down payment, which can represent a fairly steep commitment (you’re generally looking at 20 or 25% minimums for a commercial loan, though you may be able to leverage equity in another property or use the $15,000 homebuyer grant provided by Eagle County. Second, Airbnb passive income in Avon isn’t exactly passive. That’s because unlike normal long-term landlord arrangements, running an Airbnb rental is more like running a hospitality business! You’ll need to arrange for housekeeping, find a trusted person to handle maintenance or do it yourself, and handle the details of each booking. There are guides online for all of these steps and while it’s a learning curve, it can be done. Also, vacation rental management companies like Away Agents can do it all for a percentage of your profits. If that sounds interesting feel free to give us a call—we’re always happy to chat!