Ep. 12: Airbnb
Episode 12 is here! Stay with LCo and learn all about what it actually takes to own and operate your own Airbnb! Contrary to popular belief, you may not make as much money as you might think by owning and operating your own! Want to know more? Keep reading!
the show notes
“I’m frankly surprised at how many people wanted more information on Airbnb, being a host and all that goes into owning and managing your own vacation rental!” says Kristen. She was even more surprised at how many of you thought you’d make a gazillion dollars doing so - which you’re not! Kristen and Vince’s vacation rental story goes a little something like this:
They used to live in North Scottsdale, and then made the move to south Gilbert, about 45 min south of where we used to live after Kristen’s parents moved to Gilbert. They moved for a few reasons; for one, Gilbert is one of the best cities to live in the country and it’s a great place to raise a family. They wanted to make the move to not only be close to her parents, but to also be able to buy the same type of house for about $150K less than what it costs in Scottsdale, and put the additional money into their first flip (which they did). They also wanted to have a down payment to buy a second home (which they also did)! “Vince and I think it’s important to get real estate as soon as you can,” Kristen says, ”especially if you live in a place where the market is in an upward trajectory.”
Kristen started looking and doing research on potential locations for their second home right away. They knew they wanted to be able to get multiple seasons out of the property (because, you know, in AZ it’s summer then winter, and then back to summer again!), and be able to rent it out to offset some of the costs. They ended up in Pinetop, a small-ish mountain town in Northern Arizona, in partnership with Kristen’s cousins who also happen to be their close friends. Kristen explains that they went in 50/50 and own the property through an LLC because it’s important to do so from a liability standpoint in order to protect your assets. “We keep [the cabin] as a family home too and spend holidays and long weekends up there, and one day would like to leave it to our kids,” says Kristen. They wanted to get in and begin learning what it really means to not only own a second property, but also operate it as a vacation rental, and this opportunity was perfect for them to get their feet wet.
Once we purchased, Kristen went up with the LCo team, designed the cabin, came back and ordered everything and then went back up to install and photograph everything in one day. The cabin was structurally livable when they purchased it, with only cosmetic things like furniture, paint, lighting and styling that needed updating. The total cost to make the space livable enough to have a brand identity, be representative of our portfolio and to share it with our community so we could get some bookings was around $25,000.
Before too long, we were open and ready for business. For vacation rental management, we use Evolve, which is a broker for vacation rentals that manages your profile on Airbnb, VRBO, HomeAway, etc. Kristen and Vince still use them and are happy, but about a year in they noticed they didn’t get much traffic from Airbnb through Evolve, sot hey pulled Airbnb off Evolve to manage in house (CLICK HERE). Amy, our director of ops, manages Airbnb from booking request through the end of the person’s stay, and while it’s better for us because we’re able to interact on Airbnb like the social network it is, it’s a lot of work. We think almost double the work we had to when we had Evolve manage our Airbnb profile. But again, it’s worth it for us because we saw traffic significantly increase when we took it over!
Finances
Airbnb has a resource that uses an algorithm to help you figure out what your rates should be based on prices in your area. Sometimes we use this and sometimes we don’t; we know based on our area that there are some holidays that always get booked. We can set those rates higher because we know it’ll get booked and if they don’t, we’re okay with that because Kristen and Vince would like to be there!
If you can come from a place where you’re not struggling to make mortgage payments and keep the place going, you’re going to have a lot more flexibility. Not every Airbnb is going to be perfect of course, but it’s important to think about what your goals are: make money? Offset the cost of owning? Again, do your research! For Kristen and Vince, the goal was to offset some of the cost of owning. Because they did so much research beforehand, they’ve always been in the positive and haven’t had to take money from one account to pay for it because through the bookings they’ve gotten, it’s paid for itself.
Essentially the cabin, other than our down payment, takes care of itself, BUT this is the million dollar question → a ton of money is not made from this Airbnb. We know you can and we’d be interested to hear from other owners on how the experience has been for them! If you are, it’s likely you have a very tight and sound experiences, and keep costs down (meaning you probably do a lot of the things that we have to outsource yourself). Any money made usually gets invested back into the cabin for upgrades and replacements.
Guests and Guest Satisfaction
Vince and Kristen come from a hotel background and they have certain practices that are just ingrained into their brains in regards to customer service. They’re constantly reminded that there are things that are in their control and things that are out of their control, and most of the time it’s how you handle a situation that’s most important and they run their Airbnb like they run their business - they’re always going to do what’s right.
Yes, we’ve had guests that we’ve asked to not come back, and that’s okay. It’s just part of playing the game! When something goes wrong, first and foremost apologize profusely, listen and work towards a solution. There are going to be people that are mad and don’t care and just want their money back, but most people are really understanding. As an owner, it’s likely that you’re going to have to comp a stay here in there, you’ll probably lose some money, and it’s okay. Airbnb penalizes you if you have to cancel a stay, if you get negative reviews or adjust and alter reservations. In order to be considered a “super host,” you have to be pretty damn close to perfect. We’re working on our super host status and have been eligible twice, but then things that were out of our control that took that opportunity from us (again, it’s okay! It happens!), but we’re going to get there!
Barb’s vacation rental recap
-
Do a bunch of research on your potential location. Envision what you’re going to do there, check out the neighborhoods, go to the grocery stores. If you’re wanting to do Airbnb, do as much research as you can on Airbnb as well to see what you’re up against. You want to buy in a thriving community so that you can get in on that success. You probably don’t want to buy in a place that has only five listings - you want options and options that are booked!
-
Narrow down what you want! Kristen and Vince got an agent local to the area in which they were buying. They wanted someone who knew the inner workings of the area so they could make the best choice. The 1st cabin they saw was Drift Fence cabin, which is what they bought! Drift Fence is a 1970s A-frame that needed a little work, but not so much that they needed to drive up every single weekend until it was done. They made some aesthetic changes, furnished it beautifully and began renting!
-
Once it’s renter ready, find reliable resources at your location, which is one of the hardest part! There are so many things you won’t realize you need at first…Who’s going to clean on a regular basis? Who’s going to replenish toilet paper when it’s out? Who’s going to notify you when you have cobwebs because you’re located in the forest? If you have a rental or 2nd home in your area where you can be there should anything be wrong, that’s a huge advantage. The cabin is three and a half hours away from Kristen and Vince’s house, which makes it hard to go up and back in a day. Another hard part is teaching your local resources to clean and style and leave your space in the same way you would. “In the age of Instagram, I own a creative company and everything I do needs to be reflective of that and my brand,” Kristen says. So you can imagine how challenging this can be.
-
Word to the wise, if you’re going to own a vacation rental, do not make a linen scheme for your bedding. Do white bedding - the same size and consistent across the board.
-
It’s A Lot of Work
-
There isn’t anything at the cabin that Kristen would be devastated if things got ruined, which is the mentality you need if you’re going to have a vacation rental. For the most part it’s a great experience for both yourself and the people who stay with you, but there are those people that stay with you that you don’t want to ever stay with you again because they damage things, they don’t tell you when their dog shits on the carpet, etc. There are things that you don’t know about and don’t always have recourse for, and that can be one of the downsides of inviting strangers into your home.
the links
-
Shop with us at THE LifeStyled COMPANY Shop
Source: https://podcasts.apple.com/us/podcast/the-lifestyled-company-podcast/id1457147395?i=1000444792234
