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You’ve decided to run short-term rentals

Your ultimate goal - Consistent healthy profits

With that goal in mind, there are 6 objectives that support your goal:

  • High occupancy or margin (from the algorithm, presentation, amenities, location, and price)
  • Manage, predict, and control costs
  • Protect your property (clear rules, secure locks, ring camera, locked storage cabinet)
  • Provide a good experience (expectations met, responsive and resolute with problems)
  • Garner the highest ratings (impacts your exposure and desirability)
  • Assure property is ready for the next guest (reliable cleaning crew, good management systems)
Short-term rentals are hospitality “experiences”, not “rentals”. Similar to a hotel, guests expect a place that is clean, stocked, and trouble-free for their uninterrupted enjoyment during their short stay.
In fact, your financial success is largely tied to:
  1. The consistent quality and effectiveness of management, cleaning, and maintenance
  2. Your ability to quickly respond and solve problems

It's all about your guest rating

The preceeding 2 factors above are what influences your guest rating, which in itself can make or break you.

Being a landlord for an annual rental is different. There is much more flexibility and less consequence to the time it takes to respond and resolve an issue. After all, the tenant is in there for at least a year, they’re not going anywhere, and no landlord wants to be at the “beck-and-call” of any tenant.

Running short-term rentals are like being the manager for a top hotel: To continue to outcompete other hosts and maintain a high occupancy you MUST be more attractive and equally prepared to address and solve problems quicky.

(1) Occupancy:

A property’s occupancy is the 1st major component of a successful short-term rental, and it’s greatly affected by its relative desirability compared to locally competing properties. you must be able to influence guests to consistently select YOUR property over the property of the competition.

Here is what affects your property’ desirability:

  • Extent of exposure to guests (Airbnb algorithm**)
  • Impact of visual presentation (professional photos vs. myPhone photos)
  • Influence from the reputation of property/operator
  • price relative to competing properties
  • location (how it meets preference and safety concerns)
  • amenities (additional factors - parking, gym, pool, internet etc)
**The Airbnb algorithm

Pro-tip for Thrifty Nebishes: Want to know why your occupancy, price, and profits are so low? It’s because you are getting out-competed. You believe that you can get away with buying a nasty sofa and a 1980s scratched table and chairs you bought at a garage sale and the property overall looks like the host doesn’t give a damn. Plus, you used homemade DIY photos from your iPhone to advertise, which while cost-effective actually pushes would-be guests to look at alternative nicer properties. Don’t get into short-term rentals thinking you will shortcut spending on home goods and be successful.

Airbnb has the majority % market share of the short-term/vacation rental market by a longshot, with VRBO and Bookings.com taking up a substantially lower % of the market, and bringing up the rear is Flip Key and HomesToGo. According to an article in Hospitable.com it is estimated that Airbnb now accounts for upwards of 20% of the vacation rental industry as a whole and generates half of its revenue from listings outside the US.

(2) Management:

This is the 2nd major component of a successful short-term rental, and it’s greatly affected by how prepared you are and how quickly you can respond to guest/property issues.

Challenges

  • Getting the place sufficiently cleaned between the time the last guest left and the time the next guest arrives
  • Preventing or breaking up a Party (make friends with neighbors)
  • Finding and keeping a reliable and reasonably priced cleaning team
  • Responding to AND resolving guest problems quickly
  • Logistics
    • How will trash be taken out and the can be returned
    • Who will you call if there is a problem with
      • AC
      • Pool pump
      • Fridge
      • Washer/dryer
      • An issue with the plumbing, electricity, or property

Additional Costs (above real estate):

  • Up Front (WHAT IS REQUIRED BEFORE YOU CAN LAUNCH YOUR RENTAL)
    • State or regional Bureaucracy and compliance
      • Licensure and/or registration
      • Property inspection
      • operator background checks
      • Installation of wired smoke detectors
    • Furniture, appliances & goods (see complete list using the button at the bottom)
      • Sofa $7000
      • Bedframe, mattress, nightstand $2000
      • Kitchen table and chairs $1000
      • Kitchen pots, pans, plates, dispensers, and utensils $2000
      • Towels, sheets $1000
      • Artwork $500
      • Keypad Locks and Ring Doorbell $1000
      • Washer & Dryer $5000
  • Ongoing (regular reoccurring monthly costs)
    • Supplies (toilet paper, paper towels, shampoo) – allocate 5% of revenue
    • Utilities
    • Additional insurance ($150/house/month)
    • Clean linens
    • Empty trash
    • Repairs (expect appliance repair people to charge a different weekend/emergency fee)
    • Cleaning
    • Pest control
    • Pool servicing

Insight

Cleaners and tradesmen are CRITICAL:
If you haven’t found a reliable and responsive cleaning crew you can trust YOU WILL BE BROKE SOON!
Befriend Neighbors:
If you are going to run a short-term rental you must already accept that occasionally shit will go down, and you may need some extra eyes or a simple favor. That’s how it is wherever we live. So get to know the neighbors around the property and work together to keep the area where your investment sits in a safe, clean, and secure environment.
Communicate constantly with guests:
The more you communicate with guests the easier it will be to get a problem that suddenly appeared back under control simply and quickly. FYI When problems arise. Airbnb wants you to first try to work out problems with the guest directly. They only want to get involved if the host can’t resolve it or the guest is not compliant.
Structure Additional profits:
When you charge your cleaning fee give 75% to your cleaning people but keep 25% for use towards maintenance products
Get additional insurance:
Airbnb has some insurance included, but get additional insurance to cover everything (cost is approx. $150/house/month w/$1000 deductible).
When buying furniture/housewares:
Go to Amazon and search for “Used like-new” for big discounts on brand new items that have been opened or returned
Don’t buy expensive linens:
Linens wear out quicker than you think. You’ll find yourself throwing away thousands instead of minimizing the expense to merely hundreds
Buy a Washer & Dryer:
When There’s not much time between cleaning up the last guest’s major mess and the next incoming guest, best get yer arse movin. Plus are you really going to force guests to go to a public laundromat or communal laundry room in a strange place with people they don’t know? How might that affect your sacred 5-star ratings?
If you get a bad review:
Respond to the guest with DEEP regret and shame. Let them sense how DEEPLY sorry you are about the strand of blonde hair on the countertop, and how they must be frustrated and don’t deserve this. Let them sense how you are suffering over their bad experience and how you can’t sleep, look at yourself, or bring yourself to even enjoy a beer at this point.
Make < 30-day cancellations a profit center:
let guests know CLEARLY in your rules that your fee will be equal to the booking amount (and CPAs says the fee is NOT taxable!)
ADA compliance:
If you hire a broker to manage the property, or if you place more than 3 rentals in an LLC you will have to be ADA compliant
Confirm insurance:
Make sure the policy covers more than “rental” earnings – make sure it covers “SHORT-TERM” rental earnings. Usually, gas grills are not covered
Avoid attractive nuisances:
Lock up toys, paddleboards, bikes, etc so that only an adult can have access and make guests sign a waiver to use them. Avoid a setup that might attract children to get in danger.
Provide but don’t install safety features:
Opening or installing baby gates, play stuff, etc should be done by the guest
If you use cameras:
You must disclose that you have cameras and make sure they are not pointed in a direction where privacy can be an issue.

Additional agreement directly with guest

This agreement is to formally enter into an additional DIRECT agreement between the GUEST and the HOST, as opposed to the existing agreement INDIRECTLY between the GUEST and the HOST through Airbnb transitively. Hosts use this as additional protection in case there's legal action that needs to be taken, or for liability purposes.
Download agreement

conclusion

Airbnb is an “active”, not a passive investment whose success is intimately tied to:

  1. its virtual attractiveness
  2. the responsiveness and reliability of your cleaning crew and tradesmen
  3. the extent to which you have an organized system and are prepared and responsive

Additional platforms to consider

Detail graciously provided by my colleagues Luciano Svetlitze and JB Bullock

RealPlaces - Keller Williams - Jonathan Asbell
2424 N Federal Highway Boca Raton, FL 33431
561.247.5650 | office@realplaces.io
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