Tag: Short Term Rentals

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Short Term Rentals

Top 3 Tools to Price Your Short-Term Rental Perfectly, Maximizing Attraction and Profits

A small home made out of dollar bills
Source: Kostiantyn Li on Unsplash

Pricing your rental property perfectly is a complicated dance.

Price it too high, and you’ll reduce the number of bookings dramatically; price it too low, and you’ll leave money on the table and not make enough profits to cover the inevitable expenses.

So what do you do?

The task defeats most humans, but it’s nothing too tricky for technologies to figure out. So read ahead to learn the top three tools to price your short-term rental perfectly, finding that sweet spot price that attracts enough renters without undercutting your profits.

Criteria for Finding the Perfect Tool for Pricing Short-Term Rentals

There are different ways to price your rental, depending on the type of rental property it is. For example, a vacation rental will be priced differently than an urban apartment rental. And within each category, some subcategories will also change the price (i.e., a luxury condo in New York City will go for more than a standard one-bedroom in Tucson).

The perfect tool for pricing your rental should consider all of these factors and give you a competitive estimate based on comparable properties in your area. It should also allow you to adjust the price according to your goals and objectives, whether you’re looking to maximize profit or occupancy.

So, here are four key things to look for in a rental pricing tool:

  • Ease of Use: The best pricing tools are easy to use and don’t require a lot of data input.
  • Accuracy: The tool should be based on real-time data and accurate market trends.
  • Flexibility: You should be able to adjust the price according to your own goals and objectives.
  • Integration Ability: The ideal tool can integrate with other vacation rental software (e.g., channel managers, property management systems, and property listing sites).

We’ve used these criteria to provide you with five of the best pricing tools in the market today.

Top 3 Short Term Rental Pricing Tools

As a property management company, we’ve used nearly all the tools you’ve heard about. Based on our experience, these are the top five pricing tools we’ve found to be easy to use, accurate, flexible, and integrate with other software easily.

1. Airbtics: Get Ahead of the Pricing Competition

Source: Airbtics

Airbtics is a dynamic vacation rental pricing tool that allows users to filter daily prices of similar rentals based on trends. The tool will recommend pricing based on its machine learning algorithm that uses real-time booking data, so all its suggestions are accurate and considers spikes in supply and demand. You can also integrate it with any property management system or tech solutions you’re currently using.

Source: Airbtics

Moreover, Airbtics charges a fixed rate—unusual for pricing tools that usually takes a 1-2% commission from the user. There’s also a 15-day trial period for property managers with at least 5 properties.

2. Beyond Pricing: Optimize Your Pricing Opportunities

Source: Beyond Pricing

Beyond Pricing is an advanced short term rental pricing software that considers changes in demand on a daily basis, all to help you maximize your short-term rental occupancy and revenue. It even rates your properties with a Health Score to ensure that you’re aware of your opportunities for optimization.

Moreover, you’ll see detailed insights with every price recommendation, so you understand the reason for every suggested price. And it’s not just for the current landscape, as Beyond Pricing will provide forecasts and recommendations for pricing your rental next year.

Source: Beyond Pricing

Beyond Pricing comes with a free insights package, but you can take it a bit further with their paid plans. It also offers custom plans for unique portfolios, and can connect to popular property management systems and channel managers.

3. PriceLabs: Customize According to Market Movements

Source: PriceLabs

PriceLabs is a customizable, data-driven pricing tool to boost your revenue. Its price recommendations are based on the market’s supply and demand, seasonalities, short-term rental trends, special events and holidays, and lead time. It’ll pinpoint the dates where demand is high by checking the data of nearby listings, analyze historical data, and evaluate your listing’s performance to give the best pricing possible.

PriceLabs’ customization features include setting dynamic minimum stays, enabling occupancy-based pricing adjustments, and more. Plus, the tool can easily connect to more than 30 property management systems and channel managers.

Source: PriceLabs

Its pricing structure works as you scale your business, which is perfect for growing portfolios. There’s also a 30-day free trial before a contract that you can cancel anytime, and it charges a flat monthly fee.

Price Your Short-Term Rental for Maximum Occupancy and Revenue

All three of the dynamic pricing solutions above are excellent choices for optimizing your short-term rental prices. They use different methods for price recommendations, but they’re all accurate to your market. And, most importantly, they integrate well with other software solutions you’re currently using.

Of course, the alternative to using technology is to hire an expert property management company that knows the local market inside out. If you’re investing in the Metro Detroit area, give us a call! We have the experience and knowledge to manage your rentals for maximum occupancy and revenue.

Sign up as a REIA member, subscribe to our newsletter, and join our upcoming meeting to get insider knowledge on real estate investing. This is your opportunity to network and become a better short-term rental landlord and investor as fast as possible.

Categories
Short Term Rentals

Modern Management: 6 Best Tools for Short-Term Rentals (And How They Can Boost Your Profits)

Source: Photo by National Cancer Institute on Unsplash

There are more than 2 million vacation rental properties up for grabs—and that’s just in the United States alone! You already know that the competition is strong. Plus, you have to constantly deal with:

  • Responding to inquiries from potential guests
  • Updating your property’s availability on multiple platforms
  • Managing the schedules of your cleaning staff
  • Handling check-ins and guest demands

With all these tasks to consider, it’s easy to get overwhelmed—even if you only have one short-term rental property. Luckily, there are a ton of great apps and digital tools to help you automate your most tedious tasks. Not sure where to begin? Read on!

How Will My Short-Term Rental Property Benefit From Apps and Digital Tools?

Generally, people embrace automation when they want to quickly and easily complete tasks. It’s no different in the short-term rental industry, where landlords like you must deal with repetitive chores.

Not only do apps and digital tools clear up your to-do list, but they also allow you to boost your occupancy rates and dominate the competition. Here’s a list of how tools help you manage your short-term rental:

  • Save time: You can automate tasks that are repetitive and time-consuming yet critical to the success of your rental. Apps and digital tools can save you time on listing properties, answering guest inquiries, and managing booking requests.
  • Improve communication with guests: Your guests’ experience in your short-term rental unit is enhanced by messages and reminders that they automatically receive to their phone. Using digital tools to communicate with your guests also helps in avoiding misunderstandings.
  • Increase efficiency: You’re enabled to manage multiple short-term rental units from one central location. Some apps and digital tools even track and analyze data, which allows you to make informed decisions about your business. 
  • Increase revenue: Potential guests receive quicker responses to their general inquiries and booking requests when you automate your messages to them. This can help increase your occupancy rate, which, in turn, boosts your overall revenue.

Clearly, automation allows you to enjoy the benefits of being a short-term rental landlord without having to deal with its associated burdens. But there are so many apps and digital tools out there, that it can be hard to figure out which one is right for your business.

No worries—we have you covered! Here are several tools that we believe will increase your occupancy rates and make your business a huge success. 

6 Best Tools for Short-Term Rentals

From automated reminders to tracking data, there are apps available for every aspect of managing a short-term rental unit. These are our top recommendations:

For Scheduling Cleaners: Breezeway

Managing a cleaning schedule isn’t as easy as you think. To ensure that your guests will always be greeted by a spick-and-span vacation rental, you must have a system in place that allows you to seamlessly coordinate with your turnover service providers.

Enter Breezeway—a platform that features innovative scheduling and quality assurance tools for both cleaning and maintenance staff. It even analyzes how productive staff members are, which allows you to assign the right task to the right person at the right time.

For Synchronizing Your Listings: iGMS

If you want to list your properties across multiple websites, invest in a good channel manager. Aside from increasing your short-term rental unit’s exposure, list synchronization eliminates the risk of accidentally double-booking dates.

iGMS is a challenge manager that allows you to seamlessly list properties on some of the industry’s most popular websites, including Airbnb, Booking.com, and VRBO. It features a world-class dashboard, too, which allows you to easily keep an eye on everything.

For Managing Your Property: Tokeet

Want a fairly hands-off approach to managing your short-term rental properties? Tokeet is your best bet. Its core features include a direct booking website builder, which allows you to easily create your own page for direct reservation management. No more paying hefty commission fees to Airbnb or Booking.com!

Tokeet also offers a dynamic pricing tool called Rate Genie, which automatically updates your rates across multiple channels. It’s powered by data-driven algorithms that determine the best prices for your properties, allowing you to increase your rental revenue by as much as 30%.

For Messaging Guests: Duve

Communicating with guests is a labor-intensive task that takes up a lot of your time. From patiently answering their inquiries to confirming their bookings, you might just find yourself spending hours on your booking platform’s chat function.

Duve allows you to genuinely and smartly manage every single aspect of your guest communications. Send automated messages, provide contactless check-ins, and collect important information before your guests arrive. The single smart platform even offers a customizable welcome app that will enhance their experience and ultimately increase your revenue.

For Turning Your Property Into a Smart Home: Operto

In the short-term rental industry, going above and beyond to provide guests with an excellent stay is key to keeping bookings full. Nowadays, most guests are tech-savvy and work remotely, so giving them a positive experience can be as easy as investing in smart technology.

Operto offers exactly that. It’s an integrated suite of smart home solutions that allows you to streamline your operations and create a contactless guest experience. For instance, Operto implements smart locks and sensors. It can even regulate the property’s thermostat, which saves you big time on energy costs.

For Welcoming Guests: HelloHere

Most—if not all—travelers want to experience new places like true locals. So, if you want to avoid being bombarded with messages about which restaurants to eat at, consider investing in HelloHere, a “digital guestbook” that caters to their every need.

HelloHere offers a destination guide containing every answer to your guest’s inquiries, from fantastic local restaurants to sights that shouldn’t be missed. It also features a live chat function, so you’ll no longer have to worry about guests calling you in the middle of the night!

Automation: A Foolproof Way to Boost Your Business

With countless apps and digital tools available, embracing automation for your short-term rental business is no longer an insurmountable challenge. By investing in these nifty software solutions, you’ll reduce your workload without sacrificing your occupancy rates and revenue!

If you’re a short-term landlord in Oakland, streamline your daily rental tasks and boost your guest interaction today with these top-recommended technologies. We’d love to have you in our community!

Join as a REIA member today to attend our meetings and sign up for our newsletter.

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Landlords

5 of the Most Important Clauses Your Lease Agreement Should Have

: A beautiful single-family residence along E Kirby St., Detroit
Source: Zillow

We’ve seen many poorly written leases – and the legal implications can be devastating. That’s why it’s important to avoid cookie-cutter leases that fail to give you the protection you need as a landlord.

Because the truth is this.

No matter what kind of property you’re leasing, you need to have a great, not just a good, lease agreement. This document will protect you and your tenant by outlining the lease terms, including the rent amount, length of tenancy, and rules for using the property.

To help you create a strong lease agreement, we’ve compiled a list of 5 critical clauses that every lease should have, in addition to term, lease payments and other basics.

1. Use Clause

The first clause in your lease agreement should be the use clause. This clause outlines how the tenant may use the property. For example, if you’re leasing a commercial space, the use clause might specify that it can only be used for retail purposes. If you’re renting a residential property, the use clause might determine that it can only be used as a primary residence.

2. Subletting Clause

The second clause in your lease agreement should be the subletting clause. This clause outlines whether or not the tenant is allowed to sublet the property. If you ‌allow subletting, include provisions about how it must be done (e.g., the tenant must get your approval first).

3. Maintenance and Repair Clause

The third clause in your lease agreement should be the maintenance and repair clause—this clause outlines who is responsible for maintaining and repairing the property. In most cases, the landlord handles major repairs, and the tenant is responsible for minor repairs and routine maintenance.

4. Utility Clause

The fourth clause in your lease agreement should be the utility clause—outlining who pays for utilities, such as electricity, gas, water, and trash service. In most SFR residential leases, the landlord is responsible for paying for trash service, while the tenant is responsible for paying for electricity gas and water.

5. Security Deposit Clause

Your lease agreement’s fifth and final clause should be the security deposit clause. This clause outlines the security deposit amount and how it will be used. For example, the security deposit can be used to cover damages to the property or unpaid rent at the end of the tenancy. Be sure to include provisions about how the security deposit will be returned to the tenant at the end of the lease.

Don’t Make Mistakes with Your Clauses

Including these 5 crucial clauses in your lease agreement can help ensure that you and your tenant are protected throughout the tenancy. And don’t forget that these aren’t the only clauses you should include in the agreement! Several other clauses are commonly included, such as a late payment fee clause, a pet policy clause, and a no smoking clause.

Do you need help drafting a strong lease agreement? We can help!

Join as a member today and get in touch with us. You can also sign up to our email newsletter so you never miss any important information like this.

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Landlords

5 Pro Cleaning Tips for Short-Term Rentals

Source: The Cleanest Room NJ

Whether you’re a new Airbnb host or landlord with a portfolio of short-term rentals, it’s crucial to learn how to clean your space for guests. Doing so not only protects your reputation, but also ensures that the home’s well-maintained, generates consistent bookings, and gives you high and stable profits.

But while deep-cleaning your rental may be at the top of your to-do list—it’s innately a daunting task. It’s different from maintaining your own home, as it comes with a slew of specific challenges, like:

  • Fixing damages caused by guests
  • Coordinating cleaning with guest check-in and check-out times
  • Making sure the cleaning adheres to COVID-19 rules

If you’re dealing with all these challenges, don’t worry. We’re here to help. Here are our expert tips and tricks for cleaning and maintaining your short-term rental.

1. Establish Standard Operating Procedures (SOPs)

Step-by-step SOPs are the backbone of any successful business, which is why you should implement them in your short-term rental. Apart from ensuring that the cleaning process is running smoothly, they also help coordinate your staff, allowing them to work like a well-oiled machine.

Here are a few examples of what they should include:

  • How do you recruit, onboard, train, and manage new cleaning staff
  • How do you schedule, coordinate, and communicate with the team
  • How your team handles things that guests leave behind
  • How your team documents any damages caused by guests
  • How does your team cleans each part of the rental (e.g., what products to use)

You can even turn this into a checklist for your cleaning staff to remember all the things they must do. They can use it to check off tasks as they’re completed, standardizing the entire cleaning process and ensuring nothing was overlooked.

When they follow the SOPs, you can better maintain consistency and reduce the chances of extra stress and unexpected surprises for you and your guests.

2. Adjust Your Turnover Time

Competition on Airbnb is fierce, so most hosts tend to cram as many bookings as possible—often at the expense of maintaining the property. However, if your cleaning measures require more time to execute, consider lengthening your turnover time so the property is completely clean before the next guest arrives.

Adjusting your turnover time may seem like it could hurt your business. But that isn’t the case.

A clean and well-maintained property emphasizes that, as a host, you’re consistent, trustworthy, and reliable. All highly valued by short-term renters. On the other hand, finding crumbs on the floor or broken appliances will put guests off from booking your space again, stopping any chance you have of acquiring rebookings and high occupancy rates.

Cleanliness will make or break you. So always allot time to complete it, or your guests won’t return.

3. Consider Using Digital Tools

Thanks to technological advancements, there’s now a slew of digital tools for real estate companies that you can use to maximize your cleaning process.

Here are a few examples:

Digital real estate tools solve tedious management responsibilities, like scheduling and payroll. Specific ones like remote smart locks also allow you to grant and revoke access without stepping foot on the property, so you can coordinate cleaning and repair work while keeping the rental secure.

5. Be Transparent

The COVID-19 pandemic has made travelers more aware of their health, so they’ll undoubtedly appreciate knowing the various measures you’ve taken to ensure the rental’s cleanliness. Even a simple note saying you changed the bed linens will increase the chances of them returning.

Here’s what your welcome note can look like to assure your guests:

Hello there! Our team has cleaned this rental for your safety. We are fully vaccinated, wear masks while cleaning the home, and use professional-grade products to disinfect every nook and cranny. Should you have any concerns, feel free to reach out to us and we’ll address your issues immediately.

Transparency also helps reinforce what a great place your rental is, making guests feel confident they’ll enjoy their stay away from home without compromising their health. If you took any additional precautions, mention them in the note as well. Guests will love that!

Short-Term Rental Cleaning: Tough, but Manageable

Cleaning a short-term rental isn’t just about mopping the floors and wiping the counter. It also involves managing the staff and ensuring that the property remains consistently well-maintained—no matter the number of guests who walk through its doors.

As long as you have established standardized processes and staff trained to adhere to them, your short-term rental will undoubtedly stay sparkling clean and, ultimately, profitable.

Do you need more help? Get in touch with our team of expert property managers at Logical Property Management. We have more than two decades of experience and can answer any of your questions.

Categories
Landlords

Top 5 Areas for Short-Term Rental Investments in Michigan (And Why)

Source: Airbnb listing

Websites like Airbnb, VRBO, and Homeaway have made it easy for short-term rentals to gain popularity among real estate investors today. In Michigan specifically, you’ll benefit from the growing short-term property market, generate a higher return on investment compared to traditional rental properties, and quickly find new guests thanks to online booking platforms.

Michigan is one of the hottest real estate markets in the nation today. The only thing left is to know which city to purchase your short-term rental in, which we’ve listed below.

5 Best Michigan Cities for Investing in Short-term Rentals

We based our list on two key factors: high cash-on-cash returns and rental income. They contribute the most to your short-term rental investment success, which is why we’ve based our list on the two factors.

Disclaimer: All the figures below come from Mashvisor, AirDNA, and Zillow reports.

1. Traverse City, MI

Traverse City is the largest city in Northern Michigan, and the largest producer of tart cherries in the nation. In 2012 alone, more than 3.3 million visitor trips were made to this city, resulting in $1.18 billion in direct spending toward its tourism sector.

Guests come here to see the grapevines at Traverse Wine Coast, swim in deep freshwater lakes, and grab a cold one in many craft beer spots. Traverse City is a rustic, charming small city filled with artists, craftsmen, and musicians that contribute to its rich local communities.

Source: Zillow
  • Typical Home Value: $416,822
  • Home Value Increase: 25.4% year-on-year
  • Cash-on-Cash Return: 7.13%
  • Rental Income: $4,572
  • Rental Growth: -16% quarter-on-quarter
  • Capitalization Rate: 7.13%
  • Occupancy Rate: 65.37%
  • Active Rentals: 1,310
  • Rental Channel: 46% Airbnb, 24% Vrbo, 30% listed on both

2. Grand Rapids, MI

Grand Rapids is one of the fastest growing cities in the nation, attracting travelers interested in art museums, galleries, and competitions. Its tourism industry has also been growing for ten consecutive years from 2009 to 2019, thanks to economic growth and an evolving, diversified community.

Guests come here to visit the John Ball Zoological Garden, Belknap Hill, Gerald R. Ford Museum, Van Andel Museum Center, Frederik Meijer Gardens & Sculpture Park, and Grand Rapids Art Museum. There are also countless craft beer spots, as craft beer is the leading tourism driver in Grand Rapids since 2013.

Source: Zillow
  • Typical Home Value: $308,077
  • Home Value Increase: 17.6% year-on-year
  • Cash-on-Cash Return: 5.42%
  • Rental Income: $3,029
  • Rental Growth: 4% quarter-on-quarter
  • Capitalization Rate: 5.42%
  • Occupancy Rate: 68.79%
  • Active Rentals: 438
  • Rental Channel: 78% Airbnb, 9% Vrbo, 13% listed on both

3. Kalamazoo, MI

Kalamazoo is known for being the home of the US Tennis Association Boys 18 & 16 Championships for the past six decades, but it’s also the manufacturing domain of Gibson Guitars, Checker cabs, Kalamazoo Stoves, Kalamazoo Sled, Kalamazoo Corset, and Shakespeare fishing gear.

Guests can immerse themselves in the youthful energy and cultural spots in Kalamazoo, such as the Kalamazoo Institute of Arts, Kalamazoo Valley Museum, Gilmore Car Museum, Air Zoo, Bronson Park, Arcadia Creek Festival place, and Kalamazoo Nature Center.

Source: Zillow
  • Typical Home Value: $215,027
  • Home Value Increase: 14.4% year-on-year
  • Cash-on-Cash Return: 7.31%
  • Rental Income: $2,759
  • Rental Growth: 8% quarter-on-quarter
  • Capitalization Rate: 7.31%
  • Occupancy Rate: 70%
  • Active Rentals: 151
  • Rental Channel: 78% Airbnb, 9% Vrbo, 13% listed on both

4. Dearborn, MI

Dearborn is a historic destination for travelers worldwide. In fact, it is home to Michigan’s leading tourist attraction, The Henry Ford—the nation’s largest indoor-outdoor American history museum and entertainment complex. The Henry Ford alone attracts around 1.6 million visitors every year.

Apart from The Henry Ford, guests can also enjoy Greenfield Village, Arab American National Museum, Henry Ford Estate, Islamic Center of America, Automotive Hall of Fame, and more.

Source: Zillow
  • Typical Home Value: $214,291
  • Home Value Increase: 16.4% year-on-year
  • Cash-on-Cash Return: 7.48%
  • Rental Income: $2,469
  • Rental Growth: 19% quarter-on-quarter
  • Capitalization Rate: 7.48%
  • Occupancy Rate: 61%
  • Active Rentals: 63
  • Rental Channel: 64% Airbnb, 22% Vrbo, 14% listed on both

5. Lansing, MI

Lansing is Michigan’s capital city that attracts traveling families all year round. The city welcomes around 4.8 million visitors every year that fuels its strong tourism industry.

Here, they can visit the Michigan State Capitol with a cast iron dome, Michigan History Center that details the state’s past, Potter Park Zoo with more than 160 species of animals, Impression 5 Science Center with interactive exhibits, and the R.E. Olds Transportation Museum for unique and vintage cars.

Source: Zillow
  • Typical Home Value: $142,780
  • Home Value Increase: 14.6% year-on-year
  • Cash-on-Cash Return: 8.66%
  • Rental Income: $2,556
  • Rental Growth: 8% quarter-on-quarter
  • Capitalization Rate: 8.66%
  • Occupancy Rate: 65%
  • Active Rentals: 212
  • Rental Channel: 74% Airbnb, 8% Vrbo, 18% listed on both

Short-Term Rentals, Long-Term Success in Michigan

Take your pick from the list above and start investing in Michigan short-term rentals! All the areas we’ve listed are profitable areas for you to take advantage of local tourism industries.

As long as you conduct property rental investment analysis and create a comprehensive income sheet, you’ll be on your way toward investment success in Michigan.

The list doesn’t end here. We’ve gone ahead and evaluated the rental property opportunities in every Metro Detroit city and neighborhood, too. Head to our Deep Dive series to find more hotspots in Michigan.

Categories
Shortterm Rentals

How to Find The Best Neighborhoods for Airbnb

To earn the biggest profits from your STR, you need to find the right neighborhood to invest in. Here, we look at some of the things to consider.
An STR in the woods
Photo by Karsten Winegeart

Investing in a short-term rental (STR) is a great way to make some additional income. In fact, according to 2021 figures, the average Airbnb host in North America can make $41,026 annually from a single rental.

But you need to be smart and focus on a lot of factors to earn that impressive amount. 

For example, just picking a neighborhood can make or break your investment. While the right neighborhood with all the right conditions will give you high occupancy and rental rates, the wrong neighborhood will only give you high turnover rates—or worse, complete vacancy.

So, what are the right conditions that make a neighborhood perfect for STR investments? 

Let’s discuss the conditions you need to consider when picking a neighborhood for your Airbnb.

What Makes a Good Neighborhood?

No one factor makes a good neighborhood. You have to consider several characteristics when choosing the area for your Airbnb. When you choose a neighborhood to invest in, look for: 

  • Airbnb occupancy rate
  • Airbnb rental income 
  • Airbnb rent averages
  • Cash-on-cash return

Each factor is as important as the next and they all have to come together seamlessly. For example, if you only take into account the Airbnb occupancy, you could see an 80% rate. But each tenant might be paying you a low amount—and that might not be worth the effort.

So, let’s define each factor and go through their details:

Airbnb Occupancy Rate

The occupancy rate measures the dates a property was booked versus the total number of days it is listed for rent. Factors like location, market saturation, and seasonality can affect a neighborhood’s occupancy rate. 

Now, the average occupancy rate in North America is about 44%, but you’ll want to find areas that give an even higher number. Instead, focus on locations that have the highest occupancy rates such as:

  • Seaside, CA: 71.3% 
  • Little Rock, AR: 75.0%
  • Phoenix, AZ: 64.1%
  • Los Angeles, CA: 55.6% 
  • Columbus, OH: 60.6%

A quick search on Google will give you these numbers. If you find another neighborhood with a good Airbnb occupancy rate, you can consider investing in property there. 

Airbnb Rental Income

The Airbnb rental income will determine how much income your property will generate over time. For you to determine the potential rental income you can earn in a neighborhood, you need to conduct a market analysis. Using market analysis, you can learn: 

  • The real estate appreciation rates of the neighborhood
  • The current and upcoming trends of the real estate market in an area
  • If the neighborhood you’re scouting is suitable for an STR
  • If long-term rentals are more popular in a particular area instead of an STR
  • The overall demand for rentals in the area

Take, for example, Mashvisor’s heatmap. With this tool, you can see the average occupancy rate in Detroit. You can also get a glimpse into the estimated rental income of an Airbnb.  After you perform a market analysis, you should have a good idea of what your Airbnb rental income should look like in that particular neighborhood. 

Airbnb Rent Averages

This is the simplest metric you need to find out. You basically need to look at the average rent STRs are going for in a neighborhood. If you skip this, you might invest in an expensive property that’ll take too long to generate a good return on investment.

You can use Mashvisor to get a good idea of how much people are charging for rent on their Airbnbs. In general, you want to look-out for properties with similar specifications to the property you’re looking to invest in. Watch for things like: 

  • The number of rooms
  • The number of beds and baths 
  • The kinds of amenities available
  • The location (e.g., if it’s near tourist attractions)

Once you have a general picture of how much people are charging for stays in their Airbnbs, you get an idea of how much you can charge. 

This will also help you estimate the maximum amount you should spend acquiring the property, as you’ll want to charge at least 1% of your total property price to recoup costs fast enough. For example, if a property costs $212,000, you’ll want to charge at least $2,120 for the monthly rent.

Cash-on-Cash Return 

Finding out the cash-on-cash returns for similar Airbnbs in a particular neighborhood will give you an idea of whether investing in a neighborhood is worth it. Again, Mashvisor gives you the cash-on-cash returns of Airbnbs in a neighborhood.

To calculate your cash-on-cash return, you just need to follow a simple formula:

Cash-on-cash return (CoCR) = (annual rental income – operating expenses)/total cash investment 

Let’s look at the potential CoCR of the listing we mentioned earlier, with an annual rental income of $25,440 ($2120 x 12) as an example. With a total cash investment of $200,000 and a safe estimate of operating expenses being 1/3rd of the annual rental income, it’ll look like this: 

CoCR = (25,440 – 8395.2)/200000 

CoCR = (17044.8)/200000

CoCR = 0.0852

For this particular example, the cash-on-cash return is 8.52% per year. This is within the benchmark for good CoCR, which is between 8-12%. If you find an area with a CoCR that measures within that range, it’s a good opportunity for your STR.

Pick the Right Neighborhood For Your Investment 

Airbnbs can be a great investment opportunity. However, much like any investment, you need to invest wisely. Choosing the wrong neighborhood will put you at too much financial risk, and you might not see numbers anywhere close to the $41,026 average.

Do your due diligence, analyze your opportunities well, and maybe even consult with experts in the industry, and you can be confident in earning that $41,026—maybe even higher.

Do you think there are other factors to consider when choosing a location for an Airbnb? Let us know your insight in the comments below!

Categories
Shortterm Rentals

How to Choose the Right Market for Short-Term Rentals

Short-term rentals (STRs) are currently one of the most thriving sub-industries in real estate. In fact, a 2019 survey found that 60% of American tourists prefer staying in an Airbnb over a hotel.

However, if you plan on investing in an STR, you need to do your due diligence to find the best market for your property. Diving straight into it without doing any research will likely your Airbnb is empty more often—resulting in less cash in your pocket if it’s just sitting there. Plus, you might end up in an area that’s either saturated with too many excellent STRs already, or an area with barely any guests to attract.

For instance, a property in Palm Springs, Florida, could potentially earn you upwards of $125,000 a year. This figure might sound like an enticing gain for a potential STR investor, but you have to account for all the costs and potential pitfalls that you’d have to expertly navigate in the particular market.

You have to ask yourself questions like: 

  • How popular is the area?
  • How many STRs are already in the area?
  • How easy will it be to fill with guests?
  • What kind of guests are staying there?
  • How much are the utilities and general maintenance?
  • Can you make enough in busy seasons to cover slow seasons?

Let’s take a look at how you can choose the right market for your STR investment venture.

The Four Markets of STRs

There are 4 main types of STR markets: 

  1. Traditional vacation markets
  2. Unique locations & experiences
  3. Business markets
  4. General convenience

Each of these markets comes with its share of risks and advantages that you need to navigate. For example, an STR located downtown might have stricter laws in place when compared to a traditional vacation rental. 

Let’s compare them all to help you decide what’s best for you.

1. Traditional Vacation Markets: 

The traditional vacation market exists both regionally and nationally, relying heavily on tourism. The main difference between the two is accessibility and affordability:

  • Accessibility: The regional vacation market is usually within close proximity to cities. Visitors can reach these destinations with a short drive out of town. An example of this type of market is Panama City Beach, Florida. This beach is within driving distance of major cities in both Alabama and Florida, where Montgomery and Birmingham are three hours away and Jacksonville is a four-hour drive from the coast. 
  • Affordability: Real estate prices will usually be more affordable than the national vacation market. Additionally, the regional vacation market will have the most accommodating regulations out of the three, as these are hotspots for vacations.

Panama City Beach, for example, allows for STRs in all areas designated as commercial zones, limited multi-family zones, unlimited multi-family zones, and townhouse zones.

Another benefit of the vacation market is its resistance to the effects of a recession. Unlike its national cousin, the regional vacation market is more accessible and affordable to visitors making it more resilient against the effects of an economic recession. 

Tourists wouldn’t need to make big vacation plans to visit a regional vacation rental, such as booking a plane ticket. These locations can be reached by car ride. Additionally, the more affordable lodgings will allow tourists to visit despite an economic recession.

While regional vacation markets rely on tourism, a major hit to the industry isn’t nearly as devastating to these markets. In fact, during the COVID pandemic, many city-slickers fled cities during the pandemic. Regional vacation markets can tap into these potential customers during occasions like the COVID outbreak.  

2. Unique Locations & Experiences 

Next up are STRs located in unique areas for experiences that you can’t find anywhere else. These might be activities out in nature or just places nearby popular attractions. Some different types of STRs that fall in this category are:

  • Properties near ski resorts
  • Properties beside amusements parks
  • Vacation homes on a lake
  • Beachside villas in tropical countries

These all offer a unique experience that you can get anywhere else. Typically, this kind of rental will have an off-season because tourists aren’t usually booking all year round. However, if you can make a ton of profits in the peak seasons, this could be worth it even if it’s unbooked during the slow times.

3. Business Markets

STRs in an urban location doesn’t rely solely on tourism to generate revenue. Of course, tourists will also visit your property, but the main source of income will be from business people. These are often professionals traveling due to a variety of reasons, such as a convention or business deal. 

The metro market is potentially the most lucrative market for an STR due to the frequent turnover of tenants. A busy city will have many occasions that will see an influx of visitors, such as during sporting events, conventions, concerts, etc. 

Despite being potentially the most profitable market, an urban rental also comes with the most risks:

  • Rules and Regulations: Different cities will have different regulations when dealing with STRs. In the case of Oakland, Michigan, the city prohibits STRs except in a few select locations, such as near the airport, along the freeway, or the waterfront. 
  • Market Saturation: Another risk is market saturation. Because an urban rental is one of the most profitable markets, it is a hotbed for STRs. A lot of competition could potentially limit your revenue, especially if you can’t compete with the existing rentals in the market.

Overall, the metro market is a great avenue to establish an STR. But you should educate yourself on the risks involved with entering the urban rental market—especially in your specific city. 

4. General Convenience

The traditional leisure vacation rental is the conventional STR we all think of when we hear the words “short-term rental.” But a lot of people use Airbnbs for general purposes where a hotel simply won’t satisfy all of their needs. 

Here are some of the most common reasons people use Airbnbs that aren’t for vacation or business purposes:

  • Hospital Visits: Individuals staying in a city for hospital visits. Major cities will have the best medical facilities, which means that a patient’s family could need a place to stay while their relative is receiving treatment
  • Weddings: Hotels are expensive, so for a wedding, a lot of guests will choose to go with Airbnb to cuts costs. It also gives them a space that they can make feel like home if they’re coming from far away and turning the wedding into a vacation afterward.
  • Reunions & Graduations: Another common reason to use Airbnb is family or school reunions where, again, your guests are likely saving on costs associated with a hotel and they want a palace where they feel like they’re at home. 

If your STR is located near a hospital, a popular wedding venue, or a large university you might see more guests staying for these purposes. And if you don’t know, try asking your guest why they are staying! That will give you a lot more insight and allow you to optimize your listing in the future. 

Set Your Goals and Expectations When Deciding a Market

To decide which market is the best for you, you have to be clear with your goals. Each market comes with its share of benefits and negatives, so you need to align your expectations while keeping these in mind. 

Here’s our list of recommendations: 

  • Business Market: These are good for a steady stream of income year-round if you’re located near conference centers and in a downtown area that professionals are staying in.
  • Unique Experiences: These kinds of rentals may have more downtime, but you can often charge higher rates as they are quite specific in what they offer guests.
  • Vacation Market: These can be resilient if you’re attracting people interested in regional vacations However, for areas that have on seasons and off seasons, you need to be careful. Make sure you can stay profitable on the season alone. 
  • General Purposes: These can be quite resilient depending on where you are and if you optimize your STR listing well. Make sure you ask your guests to understand why they’re booking your rental property. 

Pick the Right Market to Reach Your Investment Goals

Deciding on where to put up your STR is one of the biggest challenges facing real estate investors. With how competitive and unpredictable the STR industry is, identifying the right market and location for your rental could make or break your investment.

But the solution is always to return to your investment goals. As long as you align your objectives to what type of income a market provides, you’ll be well on your way to gaining the highest and most consistent cash flow from your STR investment.

What STR market are you targeting? Feel free to leave us a comment below!

Categories
Shortterm Rentals

Why Security Deposits Are Necessary and How to Enforce Them in Short Term Rentals

A person counting hundreds of dollars
Image from: Alexander Mils

So, how do guests and tenants really feel about security deposits? 

A computer software company that deals with security deposits, called Obligo, ran a survey on this issue, and found that over 70% of people prefer rentals without security deposits. 

This could be because guests don’t want to shell out extra money or find the whole process of a security deposit to be an inconvenience. But, even though guests dislike having to pay a security deposit, it’s necessary to protect your property from damages, and more importantly, undesired expenses.

So, what can you do as a short-term rental (STR) owner that benefits both you and your guests? Keep on reading to find out how to find the right balance.

Why are Security Deposits Necessary?

Security deposits are necessary in the event that guests damage the property or steal things during their stay. The deposit serves as a backup fund in case there are necessary expenses after the guest leaves. In addition to having a financial safety net, enforcing a security deposit is a way to filter your guests so that you only attract respectful and high-quality applicants.

can also prevent guests from damaging the property in the first place, since they want to get their deposit back!

What can I charge for Security Deposits?

There are two things to consider when it comes to determining the costs of your secret deposits: your local laws and the rules on that platform. 

When it comes to the laws and regulations for STRs, most states don’t yet differentiate between long-term and short-term rentals. So, for example, in Michigan, you need to abide by the standard laws surrounding security deposits. 

As for platform rules, you need to read the fine print before to make sure you are allowed to collect a security deposit. In the case of Airbnb, the platform does allow owners to add a security deposit to their listings. However, they are optional and not always expected by the guests.

How Do I Justify Security Deposits?

As important as it is to look out for your finances and property, it’s important to look out for your guests, too. Since a lot of them would rather not pay a security deposit, you have to find a way to get them comfortable with it. 

Losing a good potential guest just because of a security deposit is the last thing you want to do—especially in a competitive market like STRs! So, how can you justify security deposits in a way that shows your guests that they can trust you? 

Here are some tips that can help do the trick.

1. Assure your guests that they will get it back.

It’s possible that some tenants and guests had bad experiences with security deposits in the past, so you’ll want to do everything you can to change their perspective. The most important thing you need to address is how to convince them that they’ll actually get it back. And the best way to do this? 

Tell them WHY you have a deposit. Because at the end of the day, the deposit isn’t just to get more money from them, it’s there to protect your property from damage. Another way to improve that trust is to share your own tenant horror story, so they understand why you’re not willing to accept someone who refused a deposit. 

To combat the negative association they have towards deposits, you should also always be prompt in returning security deposits. Short-term rental platforms, such as Vrbo, require that you return security deposits within 2 weeks maximum. If you’re prompt with returning security deposits, it also shows you care about your guest and are a trustworthy host. Then, they’ll leave glowing reviews that future guests can read so they know what to expect from you.

All of this will help your guests see why it’s necessary. And if they still can’t understand your perspective, you probably dodged a bullet anyway.

2. Show guests how you’ll keep a detailed record for fair deductions.

Before you let guests stay in your rental, take note of the property’s state and its items. Keeping detailed records and photos along with a check-in date can help you keep track of everything. 

In the event that you need to use the security deposit, you can accurately pinpoint the reasons that led to the deduction. This way, you conduct yourself professionally and show the guests that using their deposit is warranted and completely fair.

Explain your process to prospective guests so they feel comfortable in putting down a security deposit.

3. Lay down house rules and damage policies. 

Communicating these things beforehand can save you and your guests from an argument in case the full security deposit won’t be returned. By letting them know ahead of time what the house rules and damage policies are, your guests will know how to treat the property.

More so, in case they do break rules and damage things, you can say that you made things clear from the start. Similar to keeping a detailed record, in the event that you have to use the deposit, the guests will know that it’s being deducted in an honest and transparent way.

Get the Best Guests From the Start

Security deposits not only take care of possible damages committed by guests but also act as a filter to ensure you’re only attracting quality guests to your rental property. Because at the end of the day–you don’t want to rent to anyone you don’t trust. 

Although security deposits can put off some guests, being professional and honest about it can make security deposits easier for them. With a security deposit in place, you can worry less about your property, while your guests can enjoy your place responsibly. 

Is there anything else you want to know about security deposits for STRs? Feel free to leave a comment below!

Categories
Shortterm Rentals

Post-Pandemic Challenges and Opportunities

If you have a short-term rental, COVID-19’s travel restrictions likely had a negative impact on your short-term rental investment.

The pandemic challenged everyone’s travel plans all across the globe last year. In turn, travel-related businesses, such as short-term rentals, initially took a major hit and saw business declined. Many markets rebounded relatively quickly, but COVID challenges haven’t fully disappeared yet.. 

Although we are finally regaining our freedom to travel, the World Health Organization (WHO) still advises that individuals and business owners engage in their COVID-19 safety measures. This includes avoiding crowds, spreading high traffic areas out, and cleaning surfaces which many people touch. 

With all this in mind, there are new challenges for short-term rental investments in the post-pandemic world. But, there may just be some new opportunities as well. 

Challenges for Short-Term Rentals

COVID-19 has brought an increased focus on hygiene, cleanliness, and even crowd density. These days, people are still advised to avoid public places, where cleanliness and social distancing can be compromised. 

This means that if your short-term rental property does not meet the current standards for cleanliness and safety, you may find it challenging to rent out your property. You’ll need to make your rental property a desirable option for people and that it keeps their health and safety in mind.

We suggest you prioritize the following aspects:

  • Cleanliness: Now more than ever, having a clean rental property is a key factor in getting booked in the post-pandemic world. Since the spread of COVID-19 can occur due to unsanitized surfaces, people want hosts who go the extra mile to make sure it’s well cleaned. 

Make sure to highlight your cleaning policies in your posting, and in great detail. You want to show them you care about their needs and will go above and beyond to make their stay with you safe.

  • Pandemic Measures: Another consideration is how your property provides safety measures for the pandemic. Onlookers feel safer when they know that rental property owners promote practices to mitigate COVID-19. Leaving extra bottles of hand sanitizers in different rooms, Lysol wipes, bottles of surface disinfectants, and even complimentary masks, can help your property stand out in the sea of online options.

For the general safety of your guests and yourself, there must be a strict adherence to these standards of cleanliness and safety. More so, even if you do your part, your guest might not. So another set of challenges are the ones presented by guests themselves.

  • Unsafe Guests. To keep yourself and your rental unit safe from COVID-19, you have to examine your guests thoroughly and pick them wisely. For example, Airbnb’s COVID-19 guidelines align with the current advice provided by authorities. Guest bookings for a stay after exposure or after testing positive are not allowed. 

Always keep yourself updated with the guidelines and advice regarding COVID-19 and apply these measures when booking guests. 

Opportunities for Short-Term Rentals

While there are some new difficulties for STRs, there are also some opportunities for short-term rental property owners. Here are some things you can promote about your rental property to make it a hot pick for people’s vacation or business plans in a post-pandemic world:

  • Preferred Lodging. As you already know, the way people travel has changed immensely due to the pandemic. Locations that involve high-traffic areas where the virus can easily spread are still advised against by the WHO. As such, places like hotels, restaurants, and public markets are categorized as higher risk.

Luckily, when weighing the pros and cons of hotels versus STRs, an STR is considered safer and more preferable. Due to an STRs exclusive nature, it minimizes the risk of contracting COVID-19 from strangers staying at the same location. 

In addition, guests don’t share facilities and spaces with other guests, so both airborne and surface contamination is far less of a concern. As long as you do your part and keep your rental unit clean and safe, your rental unit will be the preferred choice for bookings.

  • Local Attractions: Most short-term rental properties cater to people looking for lodging while they’re on vacation. And when rental properties are designed to cater to these people, the surrounding area usually provides options for all sorts of activities for guests to enjoy. 

Some may look to retreat in nature, while others want to explore a new city. Whatever options and activities your short-term rental property provides, you can advertise. 

Since short-term rental properties are a safer option to stay in for holiday, more people are shifting to this option. Pair that with the resurgence of traveling, and you can expect that your short-term rental property will be fully booked!

Want to keep doing business? Keep up with the changes!

COVID-19 has brought many unexpected changes in the way people travel—including what kind of short-term place they want to stay in during vacations and trips out-of-state. But these changes aren’t all bad, as the safety measures that go along with COVID-19 can actually heighten the attractiveness of your short-term rental properties if you can make them stand out from the crowd.

The pandemic may have negatively impacted your short-term rental investment, but that’s all about to change. If you deal with the challenges and seize the opportunities given the travel changes, your investments can make a comeback. 

Did we miss anything? Let us know in the comments below!

Categories
Shortterm Rentals

How to Encourage Repeat Guests for Your Short-Term Rental

Investing in rental properties is one of the best ways to build wealth. That said, the market is getting increasingly competitive, especially when it comes to short-term rentals (STRs). 

While the STR industry took a hit during the height of the pandemic, research showed that many guests stayed longer in vacation rentals to fully take advantage of the work-from-home situation, and data forecasts expect the industry to resume its year-on-year growth starting September 2021.

Given the situation, STR owners like yourself need to grab the opportunity to attract repeat customers to grow with the market. For long-term rentals (LTRs), you only have to find a good tenant once a year. With STRs, however, repeat business is the only way to gain strong cash flow and secure business continuity.

As the industry resumes its annual growth, you need all the tips and tricks you can get to encourage repeat guests and remain competitive against other STRs, hotels, and home-sharing services. 

Here are a couple of ways to do precisely that.

Target Business Travelers

With COVID-19 slowly letting go and businesses restarting regular operations, a large portion of your guests will be business travelers visiting the area for work and extending their stay for leisure. In the industry, this is called ‘bleisure’ or ‘bizcation’ tourism. 

There are several ways to target business travelers, and these are some of them:

  • Promote a Work-Conducive Space: Apart from fast Wi-Fi connection and a proper desk, you can invest in a few essential devices that make your rental work-friendly. This includes a phone line, personal printer, and even a laptop. The more work-conducive it is, the more your guest will feel comfortable enough to extend their stay.
  • Promote Convenience with High-Quality Service: You’re competing with hotels that pamper their business guests. So, meet them head-to-head with convenience and good service to earn repeat customers. For example, provide quality bedding and branded toiletries. 

And since hotels offer concierges, it’s also worthwhile to provide daily housekeeping services to your guests. The absence of these amenities may not bother backpackers and frugal tourists, but it may very well be a deal-breaker for busy business travelers.   

  • Promote Easy Access to Event Locations: Business travelers look for an accommodation close to their meeting locations. You won’t be able to move your property closer to their venues, but you can certainly offer ease of transportation and accessible parking facilities.

If most of your guests don’t have a car (and won’t rent one either), consider partnering with a cab company to have pick-and-drop services included in your business traveler package.

Think of the things business travelers will prioritize and try to include them in your package. Remember that they’re working out-of-office and will gladly enjoy luxurious convenience.

Start a Referral Program

One great way to attract repeat business is by word-of-mouth referrals. To encourage this marketing strategy, start incentive-based referral programs for the highest chance of guests recommending your short-term rental to friends and business associates. 

Here are two of the many types of referral programs you can run:

  • Friend Referral Discounts: You can reward or provide discounts to customers who bring in more business. For example, offer guests a free night’s stay if they give you two weekend bookings by referring your rental to their friends and colleagues. 
  • Discounts and Rewards for Repeat Stays: You can also offer reasonable rewards and discounts to repeat guests to encourage them to return. If their experience with you is fantastic, there’s no reason why they’ll waste the opportunity.

Take inspiration from Airbnb’s Referrals 2.0 program as well. The platform got people to send customized altruistic invitations to their Gmail contacts, giving their friends a discount to travel. The email says something like “gives your friends $25 to travel!” which motivated people to refer Airbnb to their friends.

The program was so successful, it drove Airbnb’s first-time bookings by 900% year-on-year growth, and daily bookings and signups increased by 300%. When done right, Airbnb proved that referral programs could bring in guests and generate a lot of profits.

Promote Upgrades to Past Guests

Of course, you need to stay in touch and follow up with your past guests to keep them interested. There are two effective ways for you to retap past guests: 

  • Constantly Update Your Listing: Did you install new upgrades, features, or have new amenities for guests to enjoy? Whenever you add or improve things in your short-term rental, update your listing right away and update your previous occupants of the new changes.
  • Respond to Negative Reviews: Negative reviews aren’t so bad if you can use them as insights to improve your offer. Any pain points your guests experience are opportunities for you to improve according to their expectations. 

So, encourage all guests to leave feedback and respond to their concerns. Being proactive will also boost your referral program, as guests will undoubtedly recognize your willingness to give them the best experience.

From a business standpoint, it’s much easier to gain back previous guests than earn new ones. Therefore, identify and focus on the factors that will encourage guests to book with you again—and make sure that they hear about your upgrades. 

Focus on Guest Experience

Aside from providing guests with a clean and comfortable place to stay in, add small details that will enhance their experience with your short-term rental. Here are a few examples:

  • Detailed Welcome Packet: Ensure that your guests feel welcomed as soon as they enter the short-term rental. You want them to know how much you care about their stay.

For example, prepare a welcome packet or gift with all they need to know about the rental (e.g., Wi-Fi passwords and technical instructions) and throw in some pleasantries (e.g., free sunscreen or some chocolates) to welcome them in.

  • Send “Thank You” Notes After Their Stay: In the same way, make your guests feel appreciated once they end their stay. Give them something to remember you by even when they’ve moved on. 

For example, give them a hand-written thank you note, personalized thank you email, or even a small gift (possibly in exchange for feedback, too). As they say, how you end is as important as how you began!

At the end of the day, no amount of features or discounts can beat an amazing experience. So focus on providing your guests with the most memorable stay to have the highest chance of getting them back.

Conclusion

It’s not easy to encourage repeat guests. You’ll need to be persistent in figuring out which combination of strategies works best for your particular short-term rental. So, to get the ball rolling, try attracting business travelers, starting a referral program, promoting upgrades to past guests, and focusing on giving the best guest experience ever.

Before you know it, you’ll be fully booked with a long line of guests just waiting for the opportunity to book your place again!

Any other tips we’ve missed? What strategy works best for your short-term rental?

Image courtesy of Dan Gold

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