Hello! Today I have a great guest post from Boris and Susan. They bought their first property in 2017 and became Airbnb hosts. This was a 4 bedroom house that had sales of $ 120,000 in the first 12 months. They now accommodate almost 10,000 guests a year in all of their accommodations and do all of this remotely. Below is her story, have fun!
A foreword considering the current state of the world
We wrote this post back in February to describe and share our real estate and Airbnb experience over the past 3 years to build additional (semi-passive) sources of income. Like everyone else, we had no idea that the world would change so dramatically in less than a month after.
Although this has certainly changed – especially given the fact that the travel and hospitality industry has come to a standstill and caused heartburn for a few weeks – the basics remain valid.
As we'll discuss at the end of the article, we were able to make adjustments and pan so that our properties remain occupied, the costs are covered, and yet a profit is made (albeit less than usual).
The truth is that when we look at a 3 to 9 month horizon, things remain challenging and uncertain. However, this has never been a short-term strategy for us as we try to plan the next 3 to 10 years and make decisions based on such a schedule. But first we start at the beginning.
So it all started as an Airbnb host.
Real estate wasn't really on my radar for many years.
I rented happily, enjoyed the flexibility it offered, and generally thought of real estate related to owning your own home – mostly that it limited your options and didn't really bring too many positive aspects apart from the effort Maintenance and make your own lawn every Saturday.
When I met my wife Susan, she grew up with a completely different attitude.
When she grew up in China, the general wisdom was that you should always strive to have your own place as soon as you can afford it.
When she moved to the United States, she shared the same view that property ownership is a key to financial security.
We met at the end of 2013 and started dating shortly thereafter. At that time I rented while she already had an apartment she lived in, and the subject of real estate and financial independence came up occasionally.
In late 2015, we decided to go to Seattle for Susan's birthday, and as a surprise, I rented a small houseboat on a lake for the weekend on Airbnb. If only we knew what that would have led to!
We enjoyed the weekend on the houseboat so much that when we got home we turned the idea upside down to buy our own houseboat to rent to others on Airbnb and occasionally use it ourselves.
Although we went back to our daily routine, we continued to play with this idea – although we weren't sure how to proceed.
Then, as so often, the situation changed when Susan decided to leave her seat, and we considered moving in together and started thinking about the options. Late one night I was on Craigslist and typed "Liveaboard Boat" into the search.
The first result was a beautiful twin-engine 36-foot motorboat with a description that started with "Perfect for a liveaboard". With 2 (tiny) bedrooms, 2 (tiny) bathrooms, living room, kitchen, and 2 outdoor decks, it seemed to offer everything you need to feel comfortable.
Best of all, at $ 28,000, it was only half the price of anything else we looked at before. Since it was about 30 years old, it has already been fully written off, so we assumed that we could buy it, use it, and eventually resell it and amortize most of our costs if we took care of it.
I went to sleep that evening and thought that like so many other nighttime thoughts that "seemed like a good idea at the time" this idea would go away in the morning, but surprisingly not. Even more surprisingly, she was intrigued when I suggested the idea to Susan to get this boat and actually live on it!
Within two months we gave up the apartments we both had, bought the boat, found a marina near the city center where a slip was available, and made it our new home. With that the new phase of our life together began.
Our foray into semi-passive income
Life on a boat was a life-changing experience for us. It was certainly not always easy, but it was incredibly special and beautiful.
We had the best of both worlds. The marina was located close to the city center so that we could benefit from easy access to work and all the amenities of city life.
However, our cost of living was cut in half because we no longer had to pay rent (there was still a significant port fee, ancillary costs, and many, many maintenance costs – but they were still lower than the rent).
We continued to work full time while living on board. During this time, we slowly realized that we want a bit more freedom and flexibility in our lives. Although we both enjoyed working, we wanted the flexibility to do other things later and not have to rely on a corporate job. Of course, all of this would depend on having enough income to pay for it.
Our thinking process started to focus again on real estate – this time, however, it was also supplemented by the idea that we thought we could passively generate a decent income by hosting through Airbnb.
We used the service on our own many times and even thought about renting the boat when we were away, but we always hesitated to make the first jump in (the marina didn't allow it either).
While we were still thinking about it, an acquaintance gave me a hint about a property that was just coming onto the market, and everything matched so we decided to go ahead and buy it.
Our start as an Airbnb host
When we acquired the property, we decided to learn everything we could find as a successful Airbnb host. Because we're obsessed with technology, marketing, and spreadsheets, we wanted to do it in a very structured, strategic way.
We wanted to find out how we could best optimize our occupancy and prices, how we could automate everyday and repetitive tasks, and how we could offer every guest a 5-star experience – without necessarily creating a second full-time job for us .
We have learned everything from scratch, from the best decorating and furnishing of the rooms to hiring a reliable housekeeper and optimizing these processes. There were a million little things, but before we knew it, our property was operating.
To our great surprise, we had monthly sales of over $ 7,000 in the first full month.
That blew us away – it was literally my monthly paycheck, and yet we were able to generate everything here on one page. I think by the end of that first month we already knew that this would be a game changer.
Michelle & # 39; s side note: You can click here to register as an Airbnb host.
Reach the next level
The experience with the first property was very revealing. When we continued to operate and optimize our first property, we were already thinking about repeating it with another one.
We decided to take what we had learned and do it again elsewhere. After some thought, we decided that we should look in other cities. This was partly due to the fact that property prices elsewhere were much cheaper, as well as the idea that we actually wanted to spread our risk a little better.
We thought it would make no difference if we did it with the goal of automation and scaling, if it was a 2-hour drive or a 2-hour flight from us.
Over the next three years, we have acquired a further 5 properties in cities in the United States, which we are now operating as short-term rentals.
Together, we are now on the right track to accept 10,000 guests a year while doing it entirely from a distance – we live hundreds and sometimes thousands of kilometers from our cities.
Short-term rentals were one of the key components of our investment strategy for us. And we would like to share part of our approach, so hopefully it could be helpful for you too.
Our pre-pandemic hosting strategy:
Every time we thought about a new city, we started thinking about the hosting strategy itself. Each market is a little different and the accommodation should be aimed at visitors who come there. We generally like cities and urban areas – especially those where large universities, hospitals or large companies are located.
This usually means that a large number of people come and go there – not just on weekends.
Other people will succeed in more traditional vacation markets or in their own garden. The truth is that short-term accommodations are in demand almost everywhere. So it's part of your personal decision on what you want to focus on.
According to our strategy, we prefer to rent out the properties we have in the bedroom, at least before the pandemic. Contrary to expectations, it's usually less work than renting full houses because people leave less mess and respect the space more when they share it with others.
We also generally find that at the right price people don't mind that the common areas and bathrooms are shared. After all, they pay a fraction of what they would pay in a hotel.
At the same time, we also notice that on weekends when groups travel, a premium is granted in a larger room. For groups, renting a 3 to 4 bedroom house is much more convenient than renting multiple hotel rooms. Therefore, they are willing to pay a premium for it.
For this reason, we rent the entire house on the weekends as a single entry and then rent the bedrooms – individually – during the week.
From a revenue perspective, this will help keep occupancy high and ensure that the property isn't vacant during the week. With this approach, we usually see an occupancy rate of over 90% for all of our properties.
Our first step was to really nail down our processes. If you just start everything manually and continue, it can quickly become overwhelming to manage it – especially if you do multiple properties. You would essentially create a full-time job around the clock for yourself.
There are basically several key areas for running a short-term rental business:
Guest communication, Check in and check out,Housekeeping and Price optimization.
Fortunately, we can now benefit from a variety of third-party tools available on the market that can automate 95% of our work in a really simple way. Here's how we did it:
Guest Communication – The most time consuming process is usually guest communication and sending instructions. This includes details about checking in, using everything around the house, checking out, etc. Fortunately, we can solve this with a tool like Smartbnb.io. This sophisticated service enables us to automate the entire check-in and check-out communication for your guests and automatically send answers to the most common questions.
Automatic check-in and check-out – We use keyless digital locks that allow us to create a code for each guest when we check in. These locks can expire when guests check out and generate new ones for each guest if necessary. This makes it very easy for guests to come and go.
Housekeeping – We usually spend a lot of time looking for, checking and training a local housekeeper. This person is very important to overall success as they have a huge impact on guest satisfaction (they need to be clean and tidy every time) and our ability to manage multiple properties remotely (they have to be on time), each Times).
Price Management – There is a reason why hotels, airlines and other industries regularly adjust their prices depending on demand, the season and a variety of other factors. This is where technology comes in again. Some tools are available on the market, e.g. B. PriceLabs, BeyondPricing and UseWheelhouse, which support Airbnb hosts in price management. You monitor the demand, competition and the occupancy of your entries and that of your competitors and automatically adjust the prices for each of your entries every day. You can set a strategy that you prefer and make the adjustments that will help you get there.
Hosting strategy adjustments during and after the pandemic:
The reality is that the crisis has affected all types of property investors – both long-term and short-term rents.
The situation was probably quite difficult for investors with long-term rents. If the tenants cannot or do not want to pay rent, the tools available to them are limited.
Short-term rentals are a little different. First of all, it should be emphasized that the effects of short-term rentals were quick and significant – but not evenly distributed.
As the occupancy of real estate in urban areas decreased overnight, the demand for more remote accommodation increased, as people wanted to book it for several weeks or months to isolate themselves.
If you owned such a property, you may have noticed a slight drop in demand when the country was initially closed, followed by an increase in longer-term bookings. Traditional vacation rentals have actually developed well – and will likely continue to do well as people are likely to switch to more domestic trips in the foreseeable future.
However, many others, including us, have real estate in urban areas that are not necessarily suitable for vacationers. As such, our demand dried up and did not necessarily recover on its own.
When the pandemic situation began to develop in March 2020, most hosts had to figure out how to deal with the new reality. The goal for most was simple: you should cover all of your holding costs (mortgage, interest, insurance, property taxes) in the short term and wait until the situation begins to improve.
As the situation progresses, we have taken some immediate steps:
The maximum length of stay for guests has been increased from 5 nights (our regular limit) to 90 nights to encourage longer-term stays. At the same time, we have the flexibility to return to regular short-term rentals when the situation improves.Prices have been adjusted to offer discounts for multi-week or monthly stays.Started exploring additional channels outside of Airbnb, such as FurnishedFinder.com – a popular website for contacting traveling nurses who are looking for temporary accommodations while on the job.Implementation and highlighting of more intensive cleaning and disinfection processes in all objects.
As a result, we quickly started filling our offers with people looking for accommodations for 2 to 4 weeks or more.
Some guests are medical professionals. Others are students thrown out of their dormitories. Some were airline employees who were floating between cities.
Although the tourist and business travel market dried up, there was no shortage of people who were suddenly evicted and needed accommodation that was furnished, flexible, and inexpensive.
And then there are some local people who want to isolate themselves for one reason or another and just need safe, affordable accommodation for a few weeks.
Although the RevPAR (sales per available room) dropped significantly with these reservations, it was still slightly higher than with traditional long-term rentals and allowed us to fill out our offers quickly.
As a result, our occupancy rate for all properties remained above 90% until March and April and is on the right path to do so in May as well. In the worst-case scenario, we can remain above the break-even point between all properties.
Support your team
We have given our housekeepers in various cities additional instructions on how to renovate the property on a daily basis and highlighted these in the listings so that potential guests know what is being done.
We also told our housekeepers that we will continue to support them and introduced a basic salary. While their payment usually used to depend on the number of sales or working days, we have informed them that they will continue to receive a fixed salary even for longer stays that reduce the need for daily sales. This whole crisis makes up about 80% the regular amount.
This was key because these relationships are critical to long-term success and the people at the other end are most vulnerable to the crisis.
Although it may be tempting to cut back on work when booking revenues decrease, I think it is advisable to offer stability to everyone until things return to normal – if you expect to continue working in the short-term rental space.
We believe that the consequences of this crisis will be felt for some time to come. Regardless of whether the government "releases the barriers," people will be reluctant to travel until the vaccine is widely available and accepted.
I think that in the best of circumstances we will consider a year or so until this is better under control.
In the meantime, the economic problems will likely continue to weigh on the hotel and real estate markets.
For people investing in real estate, however, this is an opportunity that has not been seen since the financial crisis over a decade ago:
On the one hand, real estate prices were so high that it is almost impossible to buy and finance a small apartment building in many markets. Yes, short-term rentals have made it possible to be profitable, but ideally, each apartment building should also be drawn as a long-term rental so that you have a backup plan. I think we will have a significant impact on the property market in the coming months as sellers are increasingly concerned about getting money out of the market and buyers are reluctant to use their depleted cash reserves.We will likely close a significant number of short-term rentals or switch to long-term options. Many existing hosts that could not adapt may decide that they no longer want to deal with it and simply convert their offers into long-term rentals.
Paradoxically, this can lower long-term rental prices because more inventory goes online. On the other hand, the reduced supply of short-term rentals can actually increase the average daily rates for the short-term rentals remaining on the market.
Personally, we loved the idea from the beginning of using real estate as a means of achieving financial security. That hasn't changed today.
What has changed is how we make each new purchase, what type of discount we would look for to offset uncertainty, and a property's ability to function in the short, medium, and long term – renting and staying profitable, even if that Revenue pressed.
We're not in a hurry either – there's no reason for that. While there may be some opportunities in the next few weeks, we will likely be waiting for the second half of the year before starting any further acquisitions.
Then we will probably expand beyond the urban markets to focus more on traditional vacation markets. In the coming years in particular, we expect people to hesitate to go abroad in their free time and instead look for places to go on holiday with their families inland.
We remain optimistic about short-term rents as a long-term investment strategy and will spend the next few months on research, analysis and strategy development so that we can fix everything when we are ready to act.
In summary, there is no doubt that there are significant opportunities for those who are prepared to research and act once everything has calmed down.
Are you interested in buying real estate for rent? What about an Airbnb host?
About Boris & Susan
Boris & Susan are seasoned Airbnb hosts and real estate investors who receive nearly 10,000 guests a year across the country and manage their properties remotely while working full time.
They write more about their experiences and help other people to purchase, start and automate their short-term rental properties at www.BuildYourBnb.com. Stop by to say hello or send an email to [email protected] If you have any questions, you may have!
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