Biggest Mistakes/Lessons Learned: Short-Term Rentals
Melanie StephensPro Member
Investor · Tabernash, CO · Member since 2012 · 11 posts · 237 votesBiggest Mistakes/Lessons Learned: Short-Term Rentals
Most Popular Reply
Member since 2019 · 43 posts · 141 votes
4yWe learned a ton from other hosts and investors before we launched, and now that we are well down the short-term rental road, there is no doubt that certain bits of advice were more valuable than others. We’ve certainly made minor mistakes, but I’m grateful to say that we benefited greatly from the wisdom of those who went before us. So, while some of this may not fit the “lessons learned by messing up” box, what I CAN do is pay it forward by summarizing the most helpful advice and lessons “confirmed” that have led to our success.
So, for what it’s worth…
1) Location, location, location. What is nearby that attracts visitors? Is it seasonal or year-round? Does it attract families or parties?
2) Do your own research. Airdna and Mashvisor are great, but they’re not perfect. Better to watch similar properties for a while on Airbnb and VRBO, AND ask a realtor about returns, AND do the research on sites like Airdna and Mashvisor. The combination of data will yield the best analysis.
3) Gather as much data as possible for an informed buying decision, but make the leap—thorough analysis, but not analysis paralysis.
4) When setting up a property, consider things that will get people to book AND little surprises that will make them happy once they’re there. Touches like good linens, a plush mattress topper, labels and instructions for where to find or how to use things, or great coffee go a long way towards a 5-star review.
5) Speaking of reviews, educate guests on the review system. Our check-in email tells guests that many platforms consider anything less than a 5-star review to be an unsatisfied guest. As such, we tell them appreciate the opportunity to correct a situation during the stay rather than finding out about it afterwards. Nearly all guests give us that opportunity if there’s a problem that surfaces during their stay, and our average rating on Airbnb is 4.97.
6) Stay at your property before it goes active and periodically once it’s up and running. You may not realize the can opener broke or that the lamp light bulb is blown unless you spend some time there.
7) Don’t get too emotionally attached to the property. If you do, you may over-invest in things that don’t add value (wasting money on things that don’t give you a return is never a good idea), overreact to damages or things getting ruined (budget for those things to happen, buy duplicates, and then don’t give damages and ruined items another thought!), worry all the time, or be too protective of who you allow to stay (though screening is good, a fully occupied and highly profitable property may be worth very small risks—for each person to determine based upon risk tolerance, but we have very few bad guests).
8) Stating the obvious, but find ways to increase revenue. Definitely use an external pricing tool like Pricelabs, consider allowing pets with a fee (an extra $5-8k per year just might make the cost of that new rug more palatable—and it’s unlikely you’ll need one since most pet owners take care of the place), and consider one-night stays if the guests are properly screened.
9) Others will disagree and perhaps location has a part to play in areas that are and are not desirable for partying, but to elaborate on the last item above: one-night stays (between other guests) add about $10k NET to my annual bottom line. Don’t do single nights for locals, but DO consider them for the family of 4 that’s coming to town for a quick getaway or event.
10) Differentiate your property from the rest. It may be through nicer furnishings, adding a hot tub or pool table, or accepting pets. All of the above items can help create a niche, which particularly helps you stay booked during the off season.
11) Go for durability in choosing furniture and linens, and replace/service things sooner/more often than you would in your own home. A broken appliance could cost you more in frustrated guests, rental concessions, and property downtime than replacing it a bit more frequently.
12) Automate everything—bookings, confirmations, check-in emails with door codes, check-out reminders, etc. Everything! If you’re spending more than 20-30 minutes a WEEK managing a single STVR, then something in the process needs to be changed. Pricelabs, Hospitable, and a channel manager like Ownerrez or Lodgify are essentials.
13) Fear of a bad review can cause you to expect too little from your guests and to take on too much stress when something goes wrong. Provide a great (even if sometimes imperfect) experience, and most guests will leave a great review.
14) By the same token, don’t be difficult with your guests! We’re in the hospitality/service industry. If you don’t like that, then don’t buy a STVR! I’m often stunned at how hosts respond to problems/issues posted by another host seeking advice on social media (thankfully, Bigger Pockets hosts seem to have more class!). You’re going to have an occasional needy guest, difficult request, or unexpected cancellation that falls outside of your policies. Do your best to be flexible and serve your guests well.
15) Find an outstanding property cleaner/care-taker and treat him/her well! This person is the key to your success, having few headaches, attracting repeat visitors, and ensuring that guests have an overall great experience. Your cleaners may not put things in the same places you would, and there may be an occasional miss. Let these things go! If they’re committed, dependable, keep things clean and stocked well, and willing to do everything you need, then it is golden!
16) Be good neighbors. Many HOAs and local governments no longer allow STVRs. Buy somewhere that has already fought those battles (i.e. where you already know the rules of the game—not where the rules are yet to be created) and then meet the people around your property. Give them your contact information in case neighbors have problems with your guests, and assure them that you’re there to serve them as well as your guests.
123 Replies
- Lender · Newark, NJ · Member since 2016 · 695 posts · 252 votes4y
great great comments by everyone. newer to the str but definitely learning as i grow that side of things.
one mistake is not attending to things right away and assuming guest have common sense. lay the rules out and make sure your listings are accurate. have a system in place to make sure supplies are covered and cleaning is key.
provide a great product and you will get great guest. dont go cheap route as end of day it is only hurting you.
- Member since 2021 · 4 posts · 2 votes4y
I just started subletting my second room in NYC a month ago. I was also able to find a short term lease contract last minute online. Better than nothing.
- Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes4y
Originally posted by @Himmler Joachim:
I just started subletting my second room in NYC a month ago. I was also able to find a short term lease contract last minute online. Better than nothing.
Do you think when prospective renters learn your name--in New York--it cuts down on those who would rent from you (A serious question)...(???)
- Investor · Oak Park, IL · Member since 2014 · 307 posts · 150 votes4y
@Scott
@Scott MacI think people in New York are lookin g for a good product.
- Realtor · Portage WI · Member since 2020 · 13 posts · 26 votes4y
I've made many mistakes with my STRs. The largest I made was choosing a property as a master lease that did not have adequate duct work to the second floor. When the heat of summer hit, the central air did nothing to keep the upstairs cool and it resulted in poor reviews. I ran and bought three window A/C units, however the electrical outlets were in poor positions so extension cords were everywhere. All around, I should have been more diligent on checking these things.
There are several mistakes I see the other hosts doing in any location...
1. Don't take your own pictures. Hire a professional photographer!
2. Don't have the spaces entirely sparse, or too packed with items. It won't rent well if it looks like it's all cast-off old furniture. Let the place have some design and fun.
3. Don't go bare bones, especially in the kitchen...Seriously, one of the constant top raves about my STRs is that the kitchen is completely stocked. Don't go cheap here. Provide things like colanders, mixing bowls, spices, salt/pepper, napkins, knife set, cutting boards, measure cups, spoons, blender, wine glasses, wine opener, pizza cutter, etc. Include a basket with coffee, tea, sugar and creamer. Attention to detail gets lots of attention.
Another person mentioned it and I agree completely. Spend the night in your own STR. You will discover the areas that need improvement.
- 4yMary Beth BlackwellPro MemberProperty Manager · Tampa Bay/St Petersburg, FL · Member since 2019 · 41 posts · 43 votes
My biggest mistake.. and learning experience has been very simple - tech and systems automation.
I have remotely managed my personal Airbnb's for 2yrs from my phone and spend a lot of time traveling.
What I learned the hard way is how to prevent a house party using tech. I use Ring as the security system for my properties and I have it set-up to alert my phone when there is high traffic coming onto the property. However, during one guest experience this system failed me. I overlooked a very small but large issue - the front door Ring would randomly turn off!! I had no idea why but thought, oh it will turn back on.. it's no big deal! I was wrong. Not long after I noticed this issue, a guest checking-in for a wedding actually checked in to host a 30th birthday party with 30 of her closest friends - yikes! And you know what, I had no idea this was going on because the front door Ring that day was turned off! Had it been on, I would have caught the activity right away and saved myself over a $1k in damages. The side learning is Airbnb's host guarantee only covers your claim if it's reported and all itemized damages are sent to Airbnb before the next guest checks-in. Even if there is documentation with pictures and video. I had a same-day check-in the day of the party check-out. I had the cleaning team focus on turning the house so we could take care of the next incoming guest and not cancel their reservation due to the house being a wreck. This was our #1 priority before submitting the claim. By salvaging the next reservation, it cost me $1k in damages because the claim was submitted too late.
What I learned is... just call an electrician to check out what's going on! I did this after the fact and learned the Ring was turning on and off with the flip of a light switch. It was a simple fix that cost roughly $100 to solve. Lesson learned :)
The second learning is, write down your systems and automate it!
For example... I have pre-stay information, house guides and local restaurant/things-to-do lists that I packaged up and email out to each guest. This used to be sent as a one-off in Airbnb's messenger. However, in an Airbnb message, posts are unformatted and this jumbled up the content and made it hard to read. I now place all this info into separate PDF's and send it directly to each guest. It's comes across as a more personalized note and also saves a ton of time answering the same questions over and over. Plus, guests mention it in the reviews. It's my #1 tip for improving the guest experience!
- 4yZach LemasterBusiness MemberRental Property Investor · Denver, CO · Member since 2015 · 1k+ posts · 3k+ votes
I think the biggest mistake I've learned in buying STR is being too emotionally attached to wanting a vacation rental without actually running the numbers from an investment perspective. We really wanted that ski cabin for personal use, but the numbers really didn't pan out positively when reality set in and we only used it once a year turning into a bad investment. We were much better off just renting on VRBO or AIRBNB and investing that capital elsewhere.
- 4yZach LemasterBusiness MemberRental Property Investor · Denver, CO · Member since 2015 · 1k+ posts · 3k+ votes
Also, not fully knowing how much management charged in the beginning to accurately run numbers for ski cabins. We are at 50% mgnt with cleaning which is quite dramatic making it hard to be positive cash flow. I will say it's probably appreciated a fair amount.
- Investor · Newnan, GA · Member since 2021 · 2 posts · 4 votes4y
@Mary Beth Blackwell Great tip on the writing down your steps and automating your systems where possible. For parties, you can also check Noise Aware. It is a pretty good noise monitoring system to monitor your STRs
- Minneapolis, MN · Member since 2016 · 30 posts · 19 votes4y
@Cliff H. that TP advice had me rolling. lol Great call
- 4yAndrew HaneyPro MemberRental Property Investor · Buckley, WA · Member since 2020 · 76 posts · 14 votes
Talk to property managers and other STR owners. I nearly bought several properties that I would have regretted. Stay away from HOA's if you want flexibility. Learn the market demands like a pool, parking for toys....
- New to Real Estate · Lakewood, CA · Member since 2021 · 26 posts · 8 votes4y
@Melanie Stephens I don’t have any experience but I would be curious of supposedly high income Airbnbs compare to very season dependent airbnbs, like Does Mammoth Mt. produce as much as La Jolla in CA?
- Real Estate Agent · Bayonne · Member since 2019 · 52 posts · 80 votes4y
My wife and I bought a Catskills log home 3 years ago as our first investment, before we even bought our primary residence/house-hack in Northern NJ. And boy did we learn a lot the first year on multiple fronts!
Lesson #1: We quickly learned if you underprice your STR listing and allow for 1 or 2 night stays, you'll end up with occasionally really bad renters, who will do damage to your property (we had one group that broke a glass coffee table and left their large dog locked in our bathroom all day while they went skiing). The dog scratched up our door and trim pretty badly.
We now have a 1-week minimum, charge higher prices, and have not had any problems with any of our guests.
Lesson #2: Hire a cleaning person(s) that can handle your rental volume and turnover requirements. The initial cleaning person we used was not well-suited for our needs. Pre-COVID, we often had same day turnovers, and she was always stressed out and calling or texting us about every little thing the previous guests did "wrong". We switched to another cleaning provider, who has a small crew, and that's been relatively seamless for 2 years now. That's what she does every day, so her team get in and get out quickly, and we only hear from them if there is a real problem (which is very rare).
Lesson #3: Make sure you do thorough inspections BEFORE purchasing your STR investment property. We didn't know any better at the time and did NOT check the septic (and the main waste line going on to the septic field), nor did we check the depth of the well. Both mistakes ended up costing us a lot of money and a ton of stress within the first year of ownership. The well turned out to be a 48 ft gravel well that ran completely dry, while we had guests at the house. And the waste pipe under the driveway leading to the septic field turned out to be made of paper and tar and was partially crushed. We only found out AFTER our basement got flooded with waste back-up when that partly crushed pipe got clogged up. Digging a new well cost us $9500, while the emergency plumbing, hazmat cleanup, and repairs for the septic pipe and basement cost us another $5000.
Lesson #4: Don't panic and don't act based on emotion. We were so stressed out after that experience, that we seriously considered selling this property and taking a loss, but thankfully, we put emotions aside and made a list of pros and cons, where the pros clearly outweighed the cons. We changed our mentality from "woe is us" to "how do we improve this property and reduce our stress level? First thing we did was get rid of the dated hot tub that was a big source of headaches for us -- cleaning, maintenance, guest complaints. That alone reduced our stress level big time!
Lesson #5: Make sure you have reserves for emergency cap ex. Luckily, we had some cash saved up when we had to dig a new well or do the emergency plumbing repairs and basement cleanup. The central air furnace went bust around that same time, during a summer heat wave, which cost us another $7500. So all in, we had over 20k in unplanned cap ex within 2 months! If we didn't have the cash, I don't know what we would have done!
We are extremely happy with our decision to keep the property and improve it. We have made a lot of improvements to it as well, which has allowed us to increase our rental income and enjoyment when we stay there. COVID has driven prices up in the area significantly, as folks looked to escape NYC or buy second homes, so we are very glad we held onto it instead of selling at a loss. And the way my wife and I look at it is that the unforeseen expenses and stress was part of our "real estate education", which has made us better, smarter, and more resilient property owners and real estate investors.
- Member since 2021 · 5 posts · 2 votes4y
I think by far my biggest mistake is not being close enough to drive by and check on property. We have two STR one is managed by a large vacation rental company and the other we just hired a local who handles a handful.
The first has not done a great job with handling emergencies ( got hit by a hurricane and had long wait for restoration co. causing further damage to property), being selective about where your listing pops up in there lists of rentals, not changing air filters, etc.STR are an excellent way to stream lots of income but I would prefer to have my hand on the pulse. We are talking thousands of dollars in lost revenue or expenses if you don't have your eyes on the prize.
- Member since 2020 · 1 post · 1 vote4y
Hi Everyone - I'm launching an STR business and am in need of financing. Could anyone provide recommendations?
For more context, we're investing in Upstate NY through an LLC with backing from a UHNW individual who would be able to personally guarantee the loans if needed. We are seeking to acquire 10 homes at roughly $1m each over the next 12-24 months.
From initial research/conversations, it's likely that we will need a commercial lender, specialized non-bank lender or private money. Ideally, we'd like some sort of an umbrella portfolio loan but understand the first deal may be transactional in nature to build a longer-term relationship.
Curious to hear what creative solutions BP Members have found (other than conventional owner-occupied mortgages, which we will not qualify for given the nature of the business described above). Any suggestions or recommendations would be greatly appreciated.
Best,
Tristan - Real Estate Consultant · Denver, CO · Member since 2021 · 11 posts · 8 votes4y
Melanie,
This is a great post. As I do not own any personal STR properties, I have consulted with a client recently who was looking out using a 1031-exchange to invest partial proceeds into a condo in Colorado. My immediate thought was to steer them away because it is so difficult to generate a decent cap rate, but we were able to build out a strong model for a STR. My issue that I struggled with on the advisory front was how we were sourcing the data, as it is difficult to obtain proprietary data from STR companies. We had all the other data needed (capex, ins, utilities, etc.), but the rental estimates we used were sourced from the property management company which made things exponentially easier. The client is now happy with the purchase and I am looking forward to seeing the returns generated.
- 4yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
I am not sure this is a mistake, but we have a beach duplex in an area with a lot of STRs (Mission Beach, San Diego).
We once had a guest turn one half of the small yard into a mud wrestling pit for girls to mud wrestle in. Our PM collected for damages including lost rent. We did one side of the yard deck and the other side artificial turf to prevent a repeat from any other guests.
Not sure if we really made any mistake, but it is out most interesting event.
Our second most interesting event is that some neighbors were being obnoxious to a female guest. The male guest tried to be chivalrous and got knocked out. Even though the neighbors were being jerks, our guest apparently threw the first punch.
Again I do not think we made any large mistake, but it is an interesting event.
We have had the STR in operation since 1999. These are our two most interesting events (at least that we heard about, the PM is paid so we do not have to hear about minor items). In my view that is not bad for over 20 years in a party, beach area. In addition, both of those events happened over 10 years ago. So recent times my STRs have been boring (or the PM has been handling the items without getting me involved).
This one might be a mistake. We had a duplex on the beach in Gulf Shores Alabama. It got hit by hurricanes in back to back seasons. Being OOS we were getting the run around by contractors and had to go to Gulf Shores to get work performed on our units versus just promises. We sold after the repairs from the second hurricane. This was a mistake because 1) prices were down in the area due to many being fed up as a result of 2 hurricanes 2) It was many years before Gulf Shores got another storm that could do any damage (I am not sure if they have had a hurricane since the 2 that were back to back). The time to sell is not when everyone else is selling. I wish we had kept the property even though it performed worse than our So Cal properties. In So Cal a property that is on the beach likely starts at close to $10M and there are very few of them.
- Investor · Reno NV/Columbus, OH · Member since 2020 · 14 posts · 17 votes4y
I had an Airbnb in New Orleans on the other half of my duplex. It was a cash cow until COVID. There are three helpful nuggets of information I would advise for any STR host:
1) Be sure to closely inspect the area for damage BEFORE the next tenants arrive. If you're having someone else clean, be sure to coach them to do the same. Any damage needs to be documented and reported PRIOR to your next guests arriving.
2) In line with comments above, vet your cleaners. Make sure they're responsive, agile, appropriately staffed, etc. A good backup plan is to talk to friends of yours who may be looking for extra income, or who have WFH flexibility.
3) If you live in a party city or think that your guests might be on the wilder side, send a message with your expectations of respecting the home, keeping noise levels down, and sending a gentle reminder that this is your property and/or you otherwise live there.
I had guests for Mardi Gras '20 who managed to cause over $2,000 in damage to my home. They vomited on the futon and ruined it and the pillows (even after I paid almost $200 to have it professionally cleaned). They left gummy worm candy scattered all about the floor in several rooms, made a golf-ball sized indent in one of the walls, made almost a 2' scratch on another wall, and the icing on the cake was that one of them defecated right next to the back door. I was home at the time and heard them laughing about it shortly after (and no, they didn't clean it up). I took plenty of pictures and sent Airbnb 'evidence' of things they'd rather not seen. I was able to recover over $2,000 for the damage done. Thankfully, I did all of this prior to my next guests coming a couple of hours later...
My very next guests also caused a headache. While there, one of the bed comforters mysteriously went missing, and none of them claimed to know anything about it... While turning it over (also a same-day turnover) I went to Marshalls in a hurry for a new comforter. I was unable to submit my complain prior to 3pm (when the new guests checked in). Despite fighting this, Airbnb refused to pay out, and the tenants maintained their ignorance. I ate this cost. Luckily, it was only $70.
- 4yMark SheppardPro MemberRental Property Investor · League City, TX · Member since 2017 · 40 posts · 10 votes
@John Majoris
This is outstanding!
Planning to implement all of this on our 6 STR' in Fredericksburg, TX.
Thanks!
- Rental Property Investor · Fort Worth, TX · Member since 2016 · 39 posts · 20 votes4y
Our biggest lessons are:
1) decorate for the type of guest you want to stay in your place. We have found that it is better to focus after a certain group of guest than any guest.
2) cheap rates attract cheap guest and bad reviews. Know what your property is worth and stick to it.
- Realtor · Costa Mesa, CA · Member since 2017 · 52 posts · 14 votes4y
@Sam Slivinski
Where at?
- Rental Property Investor · Franklin, TN · Member since 2019 · 160 posts · 125 votes4y
In just over 7 years in STR business made my share of mistakes, especially on the first one.
Easier to suggest what to do (lessons learned from mistakes & successes).
1. Buy in right location which is high demand resort or destination location.
2. Make sure it pencils as either STR or LTR. Or you wouldn't mind living there yourself if needed or wanted.
3. Be sure STR's are allowed by City / County and HOA if a condo - get your permit, if ones required. Going without will get caught and cost you.
4. Reliable Cleaners, maintenance and boots on ground are mission critical.
5. Add amenities and creature comforts such as coffee maker, Amazon Firestick, hangers in closet, waste baskets, blow dryer, ironing board & iron etc.
6. Communicate timely and in a friendly manner with guests and prospective guests.
7. Monitor local politics and the news for any changes in law.
8. Don’t be emotionally attached and be prepared to 1031 to friendlier climes or states if rules of the game change.
I personally prefer to do higher quality furniture decor and often make hard improvements such as quartz countertops, all new lighting, paint, appliances, etc.
Tends to draw higher quality guests, higher rates. You enjoy it when visit. Plus adds value on re-sale. I also double-pay the mortgage to save interest, beat down principal and build equity. A successful STR makes plenty of cash flow for this. Often will cash-out Refi to build reserves and generate funds for other r/e investments. Keep LTV at 50% or less.
Agree that staying at your STR from time to time helps with spotting / addressing ongoing maintenance needs. Have cleaners report items that need replenished such as TP, paper towels, coffee, soaps etc. Have high volume washer and dryer so cleaners can turn bedding towels and linens promptly.
Hope this helps. Many successes to everyone!
David
- Rental Property Investor · Franklin, TN · Member since 2019 · 160 posts · 125 votes4y
PS - Purchase an umbrella policy to cover all your properties. $3M - $5M relatively inexpensive, gives peace of mind.
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