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Ep. 12: Airbnb

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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

  1. 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!

  2. 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!

  3. 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.

  4. 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. 

  5. It’s A Lot of Work

  6. 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

Ep. 10: Building Revenue Streams

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After a small hiatus, Barbs is BACK and better than ever with episode 10! This one's all about building revenue streams, so if you like making money, take extra notes…or don’t! We did that part for you! 

THE SHOW NOTES

Why is building revenue streams so important to a small business? In episode 10 Kristen shares here thoughts based on her experience as a business owner the last 6 years. “For me, the alternate streams of revenue I set up early on, that have since morphed and changed into other revenue streams, are what allowed me flexibility in being able to select the direction that I wanted my business to go,” she says.

In thinking about your business and other revenue streams, make sure you still keep the “main function” (or bread and butter), the main thing. For us, interior design is our main function and always will be! It’s what we base everything off of from a branding, marketing and numbers standpoint; and then we have the brick + mortar, online shop and airbnb (and for a while we did flips and investment properties) because over time the company has pivoted (if you know, you know) and morphed into being those things also. In creative businesses, it’s easy to forget to keep the main thing the main thing, but it’s important to not let your “side hustles” outshine your main function not matter how much growth happens along your business journey.

As you probably know by now, THE LifeStyled COMPANY started as a blog, with its primary intention being to get interior design clients, because Kristen wanted to tap into and style all aspects of your life. Around the same time though, Kristen started an Etsy shop selling printables while she was also still working her full time job as a wedding coordinator and blogging. While the Etsy shop grew and changed, she started creating wedding invites and seating charts along with printables, and was able to save enough money to make LCo her full time gig! “I made $16k the first year, $21k the 2nd, $21k the 3rd and then $11k the 4th year. There was definitely a peak in the middle and for a small business, the revenue made was a lot of money! This alternate stream of revenue provided me flexibility and peace of mind, and it allowed me to have the confidence in taking risks for my main function. All that said though, I never let it with or get in the way of my main function,” Kristen says. Now, she’s not saying you need to drop everything and start an Etsy shop because back then Etsy was new-ish and all the traffic was organic. Now the landscape has changed and you have to pay to play, so maybe now it isn’t the vehicle to have an alternate stream of revenue, but back then the timing was right and it worked for Kristen. 

A LITTLE WORD ON HOUSE FLIPPING

House flipping - it’s really hard. It was envisioned to be another stream of revenue so Kristen could let weddings go for good. Kristen talks about how the projects her and Vince did were “good-ish” - they made between $10-$30k per project, but then  got sued so now it’s like we didn’t make anything (she talked about this in episode 8!). “It was worth it because we gained so much knowledge and it taught me a lot about builds and managing trades and subcontractors,” says Kristen.

This market is also super saturated and pretty cut throat. Not only is the housing market a wild card in general, but when you have homes that are not great going for top dollar, and homes that are stunning going for top dollar, there’s not much wiggle room for flippers to break into the market anymore.

THE STORY ON THE LCO SHOP

Between house flip projects, Kristen knew she wanted to get into retail and open a boutique, but it’s a huge undertaking and at the time she didn’t have much bandwidth left. Once she stopped flipping, she went to her first market with her mom and while she was really excited about the potential of an LCo retail shop, she wanted to test it out before she signed a 3-5 year lease. She came up with the concept of a pop up shop, and in April 2016 she rented a space for $3000 for the month. “We announced it and did the pop up for a week. In typical Barbara fashion I couldn’t half ass it. I invested so much money, time and effort and at that point we hadn’t installed a retail location before (1500 square feet of furniture in a house is a lot different than 1500 square feet furniture in a retail space!).”

The team pulled out all the stops and installed the space in 2 days! It was wildly successful, they walked away with $15k of profit in a week, balls to the walls busy and Kristen says it was the first pinch me moment she’s had after seeing all the support! This experience allowed Kristen to get a taste of retail and it was great, but she knew she couldn’t do it to that level forever because she was frankly exhausted. BUT (there’s always a but!) after she thought that would be the end of the retail shop conversation, but after she saw the demand she came up with the shop concept that we have, and the rest is history! Our brick and mortar is located in downtown Gilbert, AZ and just like our company, it’s changed so much from the first merchandising set. Overall the shop is more streamlined and brand identifiable; we introduced clothing, shoes and accessories, and launched an online store (which is a whole other beast and separate business), and all of these “pivots” were all trying to build additional streams of revenue so we could have choices.

LET’S RECAP

You can’t be an expert in a million things and a sure fire way to let your network know that you’re all over the place, is to be all over the place. “If you’re trying to build a profitable business as an entrepreneur, whether or not you want it to be just you or grow into something larger, you need to pick a theme and stay in your lane - for me it was design,” she says. “From printables to weddings to homes, it was always design. You have to pick and choose!”

The more you dumb down your experiments and efforts, the more lost you’re going to be, which as an entrepreneur is not the place to be. Additional streams of revenue are important and vital to a business so that you don’t put everything on your shoulders and all eggs in one basket; that can be a slippery slope and a scary situation, so give yourself a buffer for those “just in case” moments.

THE LINKS