Starting an Airbnb vacation home

One year ago, I decided to purchase a waterfront cottage. It would be in the Laurentians aka Quebec’s cottage country.

In December and early January 2020, Twitter alerted me to the sanitary situation in China. It was clear it was coming this way. Since authorities didn’t seem to care, I thought it would be a complete disaster in North America, with the economy and infrastructure paralyzed. I also knew the stock market has been bullish for the past decade and bet it would crash. So let’s flee the incoming apocalypse, I thought.

A cabin (aka “chalet”) hours away from any major city would be a safe haven against panic. It would be also a great way to park liquid assets against any hyperinflation or stock market crash. I also thought that if there was no pandemic, I could turn it into an vacation home that could be offered for weeks or weekends on platforms such as airbnb of vrbo. It is also a personal dream to have a waterfront chalet and be able to share it with friends & family.

This is not an easy decision. It is easier to follow your 9 to 5 job or organize the vacation in the Dominican Republic. And to prepare the future, financial managers would tell you to put money in RRSPs and in life insurance. In contrast, putting this into place required:

• doing market research and confirm that vacation homes could indeed be profitable, and are also legal
• doing real estate research, and be willing to visit properties during the pandemic
• learn as much as possible about real estate, so as not to be conned by sharks
• and be ready to seize the moment, even if risky.

I remember having to visit a property when it was forbidden to travel between regions. Highway 15 is always busy and it was surreal to see it completely empty, except for one or two cars from cleaning companies. There were police barrages in Mont-Tremblant to dissuade Montrealers from coming in regions.

It’s amidst ever increasing infections, government restrictions that I visited a log cabin, 1h45 from Montreal, in Rivière-Rouge. The cabin borders the river with heaps of white sand all around. It has 3 bedrooms, including one in the basement. I remember being blown away by the interior, the high ceiling, the warm colors. The architecture and the land were not too bad either. You could see yourself living here and be happy. One would happily fish in the morning and then take a couple of hours to take care of a greenhouse and a couple of honey bee hives.

View the chalet on Airbnb

To top it, the previous owner already put it on Airbnb and would transfer keys and codes to me. It was also already decorated and furnished, ready for me or for any guests. This was a compelling argument. I had a couple of other properties in mind, with better location, or bigger/better. These however had to be furnished entirely and nobody wants to do that in the middle of a pandemic.

Right now, the vacation home makes on an average about $5250 per month, except last October when the government issued stay-at-home orders. The majority of guests right now are small families looking to spend a weekend or a week, apart from the hustle & bustle of Montreal. There are also couples, or the occasional group of roommates who’ve had enough of seeing the same 4 walls. I send them a custom door code and a few basic instructions 72 hours before. Check-ins are automated. Families are self-sufficient, have the most fun of their lives for a few days. By the time they pack up, a highly professional cleaning crew comes and gets the property ready for the next family. The system works well, and the overwhelming positive reviews reflect this. Or you can try yourself and book a week, I can guarantee you will not be disappointed. Right now, it is still not profitable (at all) since I had to install a hot tub ($12k), install a 3-stage water filtration system, buy a washer/dryer combo, replace the stove, add a Sonos speaker, add Ring video cameras, amenities for kids and children and so on and so on, but it is in a good path of making $75k gross and $50k profit pretax 2 years from now.

If you are interested in having your own Airbnb/vrbo vacation home, please however know it is not straightforward. I know a few who stopped because they couldn’t deal taking care of customers, and they couldn’t break even. There are others on the other hand who bring in $120k annually. The vast majority make just enough to pay costs and mortgage. To succeed, what’s essential is:

• know what sells and what doesn’t. Location is key (Mont-Tremblant commands big $$$ while your shack in Gaspésie won’t). Lakefront is great, an alternative would be a ski-in/ski-out property near a popular ski station.
• it needs time, care and effort. It’s not passive revenue, to the contrary. Think yourself as a vacation resort operator whose primary goal is to deliver an amazing vacation experience to families. This is the attitude you have to adopt when communicating with customers or when giving directions to cleaning crews. If you have a full-time job, like I do, then you have to be tightly organized to make both work. Hopefully, I have never met vacation rental problems that were difficult to solve. Most are just solved by investing more time & care.
• carefully add amenities that increases average nightly rate. A hot tub increases rates by $100/night. Here are others that increase the nightly rate: a terrace with outdoor dining options, an amazing view, access to a beach, outdoor shower, a dock with boating, indoor options when weather is bad. Others offer unique activities such as gourmet tasting or kayaking sessions. Why not explore that avenue? Sky is the limit!
• you need to monitor and control expenses. I know I wanted the best at the beginning. It is easy to spend endlessly for marginal benefits. Right now, I invest in 100% what’s necessary to maintain the property & the level of service and 70% of what’s required to deliver an amazing vacation experience. And I learnt to pass on 30% of the remaining. Otherwise, it is a bottomless money pit
• have a system that controls excess and risks. There are guests who want to party. Others do not clean-up. Others will break up stuff and hide it. This means you need to be creative on how to make them clean up or not want to have a party. Also this also means having a system that decreases reliance on other parties. It is not good to be 100% reliant on Airbnb or a maintenance crew. Airbnb can abuse its dominant power and your cleaning crew can one day ask for extravagant fees, or just tap out. What are you going to do then? Do you have an alternative?
• I recommend having a partner. It can be a spouse, or a business partner. In my case, it was my brother & I. A partner allows you to bounce ideas, to get priorities sorted, and prevent splurging on expensive amenities.

All in all, this project was a great learning experience on how to operate a business and provide good to great customer service. It was not easy for me. In software engineering, you can strive for perfection. Here, you have to be comfortable with imperfections and humans. It is still one of the best satisfying feeling to share happinness with friends, families as well as complete strangers.