There is a huge disproportion between the price of prefab houses and how much you can charge for them on Airbnb.
For example, you can rent this prefab glamping cabin in the Catskill Mountains for about $275 a night and it costs less than $10k to buy.
Not a bad business, right?
A real estate investment with higher ROI probably doesn't exist.
Glamping is on the rise
I've been following a couple of glamping startups doing this on scale.
They've raised quite a lot of money from venture capitalists:
From the story about Getaway on Techcrunch:
“Bookings are increasing 150% year-over-year and the startup’s Outposts are operating at nearly 100% occupancy"
They charge $129-$299/night for cabins that cost around 40k to buy.
These are exceptional results. With a good location, the average occupancy rate can be easily 70%+ and that's fantastic.
There’s not really much technology involved that might stop me or you from doing the same as these startups.
I started to collect links to interesting rental houses and pair them with prefab manufacturers. A few people reached out to me after I tweeted about it and I knew that I might be onto something.
Database of prefab rentals
I started to build a database of Airbnb listings, and collect data about how much they charge per night, who the manufacturing company is and how much that exact prefab model costs.
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The database includes prefab homes, cabins, tiny houses, and domes. All these units can be purchased as prefab and will be installed on your land. Some are ADUs in the backyard, making additional income to the home owners. Other are in the countryside.
This database can save up to 50 hours of your time researching and will help you to:
- Understand how much others charge per night and adjust your rates
- See which glamping units others are using and how much they cost
- Find inspiration in photography, interior design, copywriting and up-sell add-ons
What works
1. Glamping tents are the most profitable
You can rent a geodesic dome or a yurt anywhere from $80 to a couple of hundreds per night.
Not really "houses" but they are much cheaper to buy than prefab houses.
2. High-quality images are the key
Try to capture vibe of the place and what guest can experience.
How does the drinking of morning coffee look like?
What activities can I do outside of the house?
Avoid photographers who specialize on vacation rentals, rather search on Instagram for people who can capture the vibe and invite them to stay for free in exchange of 20 pictures.
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Airbnb also loves to promote unique listings with amazing photography, so you might also be included in some of their blog posts.
3. Well-known location is less important than you think
Most people believe that you need to be in a well-known destination to be able to charge a lot per night. Your target audience are mainly people who want to escape a city life a couple of nights. What is important that you have nice surroundings and it's easy to get there.
The countryside of the Netherlands: Not much to do, not much to see.
Epic house + top images + some trees around = €250/night
4. A-frame cabins are hot
This is something that I observed first from all the ads you can see on Facebook and Instagram. A-frame cabins are visually appealing and if they perform well in ads, they will work well on your Airbnb listing too.
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5. No internet, no problem
While having a vacation rental property without an internet connection is considered almost unacceptable these days, prefab rentals in nature might be an exception. Some are advertised as “digital detox” places to disconnect from city life.
6. Picturesque windows correlate with price
Guests love properties with large open windows and they are happy to pay more.
7. Instagram is your way to get direct bookings
Most of these listings with amazing photos start an Instagram account and I was surprised at how many followers they have. Grow your audience organically and then promote your website where people can make a direct booking. This way you avoid paying commissions to Booking/Airbnb and increase your margins.
8. Night rate doesn't correlate with the price of the prefab house
This is one of the patterns I found in the database. I really expected that you need to buy an expensive glamping unit to be able to charge a high night rate. That's not true at all. How much you can charge depends mainly on your marketing skills.
9. Prefab manufacturers entering the hospitality business
I talked with a couple of manufacturers who started to rent their houses on Airbnb. Their initial motivation was to create “showrooms” but they quickly realized, that the rental demand is high. Many of them build their own glamping sites to diversify business.
Getting the numbers right
What I see as fascinating is the scalability of this business. Once you have land in the countryside and you see that the first house might work, you can easily scale by buying more prefab houses.
You can slowly finance using your profits or ask friends and family for an investment.
A friend of mine, Tomás, helped me to create a spreadsheet that calculates how much you can actually make. People very often forget about many involved costs and also amortization.
You add seasonality, your pricing estimations, the cost of prefab units, etc. and it will calculate ROI and profits.
I made a few iterations of this spreadsheet and published it as a Free Airbnb rental calculator. It’s not perfect yet and I have been still iterating it based on your feedback but its a great place to start calculating potential profits.
Tents vs. houses
Glamping businesses are very often connected with tents. If you search for “glamping” on Google images, most of the results are going to be bell tents.
They cost anywhere between $300 and $2000. Then you need to buy or build a wooden deck and furnish them inside. It’s still a very low cost investment compared to prefab houses and you can charge a high night rate during the busy season.
The disadvantages are that you need to replace them every year if you want to keep the quality (and prices) high, you don't have a bathroom, there is no A/C, insects and other animals have easier access and once it's colder, you will have a harder time renting them.
These are the reasons I didn't include them in my database.
Instead, you can consider safari tents or glamping domes. Some of them are exceptional quality, they are more durable and can resist colder weather (and they are still relatively cheap).
Challenges
You need to have land where you are able to install a prefab cabin. This is probably the trickiest part.
If you’re planning to buy land try to be a bit opportunistic and research areas with a high occupancy rate, good night rates and not much competition. Tools like AirDNA will help you with this research.
Once you have the land, you need the permits.
The permits depend on local land-use regulations. In some specific cases, you don't need permits. But this scenario is less common than most people think.
Funny shady story: A friend of mine from Portugal told me that some people try to avoid the hassle with permits (it can take months or years, you never know in Portugal) and they simply build without them. Then they get a fine that is relatively low (about $500) and voilá, it's all legalized. Not sure if this would work in other countries but I definitely don't recommend trying.
Once you solve the permits and the land is large enough, you can start to scale by adding more cabins.
Scaling the capacity
A good hack for ambitious projects is to buy existing campsites as they already have all the permits.
Campsites for camper vans have utility hookups for each lot ready and the foundation is already prepared for the instalment of the prefab house. Glamping startups Getaway and Autocamp are doing exactly this in the US but there are still plenty of opportunities to use this approach anywhere in the world.
Once you start adding more units, you need to hire people and professionalize the business. This will involve additional fixed costs that you have to pay every month. This will always be a balancing act as you try to maximize your yields.
I'm absolutely passionate about the glamping business and the opportunities that prefab houses open. Subscribe to my newsletter below 👇 if you don't want to miss the insights from my experiments in this area.
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