VRBO is it too good to be true?

VRBO is it too good to be true?

Waco, TX 路 Member since 2016 路 16 posts 路 3 votes
VRBO's are they a good way to maximize a properties returns? I have 2 very nice properties under contract. One has a main home, 3k sq ft with a 1 bedroom cottage, a 2 bedroom cottage & an efficiency apt. The other property was a renovated barn that was just featured on the fixer-upper tv show! Both properties are extremely unique but both seem perfect for short term vacation rentals thru Airbnb or VRBO website booking services. Have local friends who are doing this with their home & stay at about 90% occupancy & they are quadrupling what their mortgage expenses are every month. In fact they are looking to move out of the home permanently to keep from living with family pretty much all the time. So in trying to decide if this is a good direction for me to take on these 2 places it if there may be pitfalls I'm unaware of. I have forecasted the numbers & at 25% occupancy (at local comp rates) I cover my NOE. Would love any advise or theories about going this direction.
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Investor 路 Austin, TX 路 Member since 2014 路 23 posts 路 16 votes
10y

Be very careful when selecting PM companies to manage your VR. We have a property in Maine that we manage from Austin and have been very successful, but a large part of that success was because we are very proactive when we have inquiries. You have to trust that a PM will be as quick to respond as you would and if we are being completely honest, most aren't. Also, many PM companies also keep a certain percentage of every booking, 10-20% is not uncommon, and that is on top of their monthly fee. I'm not saying that PM companies aren't helpful in certain situations but you need to really look at your numbers and make sure that you aren't assuming that your property will always be booked. In my experience 90% occupancy is EXTREMELY high and uncommon. If you break even at 25% you need to pad that a little and expect expenses for upkeep such as linens, toiletries, and wear and tear on your furniture. All that being said, I LOVE my VR and am always looking for another. If they are done correctly they are amazing. If you have any specific questions feel free to message me. Best of luck!

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  • Lender 路 San Antonio, TX 路 Member since 2016 路 1k+ posts 路 1k+ votes
    10y

    Kristi - I've wondered this too. I assume it's more work but I've also heard of companies that will manage everything for less than a regular PM will. How much vacation traffic is there in Waco outside of football games and parent's weekend?

  • Investor 路 Austin, TX 路 Member since 2014 路 23 posts 路 16 votes
    10y

    Be very careful when selecting PM companies to manage your VR. We have a property in Maine that we manage from Austin and have been very successful, but a large part of that success was because we are very proactive when we have inquiries. You have to trust that a PM will be as quick to respond as you would and if we are being completely honest, most aren't. Also, many PM companies also keep a certain percentage of every booking, 10-20% is not uncommon, and that is on top of their monthly fee. I'm not saying that PM companies aren't helpful in certain situations but you need to really look at your numbers and make sure that you aren't assuming that your property will always be booked. In my experience 90% occupancy is EXTREMELY high and uncommon. If you break even at 25% you need to pad that a little and expect expenses for upkeep such as linens, toiletries, and wear and tear on your furniture. All that being said, I LOVE my VR and am always looking for another. If they are done correctly they are amazing. If you have any specific questions feel free to message me. Best of luck!

  • Flipper/Rehabber 路 Union City, NJ 路 Member since 2016 路 25 posts 路 8 votes
    10y

    You have to look at your area market. I held an VRBO very successfully but this is because it is located within 15 minutes from New York City. If your area is not a major tourist attraction I would be very careful to consider it.

  • Waco, TX 路 Member since 2016 路 16 posts 路 3 votes
    10y

    Well these properties are both in Waco TX & were done by Chip & Joanna from Fixer'upper. 

  • Lender 路 San Antonio, TX 路 Member since 2016 路 1k+ posts 路 1k+ votes
    10y

    If that's the only draw for vacationers, you might not have a good long-term draw to the properties.

  • Waco, TX 路 Member since 2016 路 16 posts 路 3 votes
    10y

    Waco has become a hotspot here lately with over 25k ppl coming thru weekly (according to the Waco Trib stats on Magnolia Markets & the Silos) mainly for the opportunity to see, shop or meet with Chip & Joanna Gaines

  • Accountant 路 Houston, TX 路 Member since 2016 路 13 posts 路 3 votes
    10y

    I have spent a lot of time in Waco for the last year, and it is true that thousands come weekly to see Magnolia.  It has become the most unlikely vacation hotspot in Texas.  I think if you are allowed to advertise on VRBO that these houses were featured on the show, that would be a huge advantage.  Their own VR they did in McGregor is booked solid for the next year.  Do the furnishings come with the properties by chance? 

    What is questionable is the long term sustainability of VR in Waco.  The upcoming football season isn't looking nearly as bright as it was a year ago.  Have you run the numbers, do they make sense if the VR doesn't work out, that you could flip them and still make money, or rent them out traditionally?

  • Lender 路 San Antonio, TX 路 Member since 2016 路 1k+ posts 路 1k+ votes
    10y

    @Kristi Bass if you can make your payback happen before Fixer Upper loses popularity, then it sounds like you should capitalize on it. However, that would be way too big of an 'if' for me.

  • Real Estate Professional 路 Atlanta, GA 路 Member since 2015 路 279 posts 路 109 votes
    10y

    @Aqeel Salim have you considered fixed rent arrangements with property managers? They'd buy out your weeks in advance to sell to their guests, so there's no commission and no risk to homeowners. 

  • Real Estate Professional 路 Atlanta, GA 路 Member since 2015 路 279 posts 路 109 votes
    10y

    Kristi, it can be a really good investment if you (or your property manager) are proactive & treat it like a business. Where are the two homes? The biggest thing right now is making sure the homes are compliant with local short-term rental regulations.

  • Waco, TX 路 Member since 2016 路 16 posts 路 3 votes
    10y

    Yes I feel confident that I can still sell the properties of the Vacationers dwindle. I'm buying them at a good value without consideration of the VR side. Just trying to design a reasonable pro forma for my banker that will show cash flow projections he can feel comfortable with. It's such a new platform for Waco that he's very nervous about lending with the primary goal of doing this as a destunstion rental. But I feel very good about the numbers even once the hype blows over with the Fixer'upper. Any suggestions on how to present a business plan to him that's not exclusive to these as rentals but still could make him feel good about the loan?

  • Waco, TX 路 Member since 2016 路 16 posts 路 3 votes
    10y

    Btw- deed restrictions say I can't provide a "retail service" at one of the properties. My attorney says a rental, whether 1 day or 1 year is not a service, it's residential leasing. So long as I don't actually provide Renters any services. Cleaning would be afterwards & could not offer food service for the guests. Does that seem reasonable?

  • Specialist 路 Carolina Beach, NC 路 Member since 2016 路 390 posts 路 496 votes
    10y

    Getting a really good understanding of the local laws and regulations regarding short term rentals is very important. There can be unforeseen hotel taxes, required business licenses, etc. Talk to an attorney, or three. Even then, it's such a new industry for some locales that there can be a lot of gray area. 

    Check the local paper to see if there has been any discussion about banning short term rentals.

    Good luck! It's a fun business and can be very profitable.

  • Investor 路 Wichita Falls, TX 路 Member since 2014 路 382 posts 路 123 votes
    10y

    I am on a Facebook page that is dedicated to Fixer Upper and many people go to Waco to see Magnolia! I know they would love the chance to stay in one of Joanna and Chip's homes!

    I would ride this wave, even when it dies down you will still have a nice property!

  • Waco, TX 路 Member since 2016 路 16 posts 路 3 votes
    10y

    Yea Marylou, it's sounds too good to pass on. Plus I'm buying it at below appraised values so it's not like I'm buying on the bubble. Appreciate your encouragement. 

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor 路 Sioux Falls, SD 路 Member since 2015 路 9k+ posts 路 18k+ votes
    10y

    Sounds like a good opportunity, but I have never been able to get into Fixer'upper. There seems to be something wrong with Chip. 

  • Developer 路 Philadelphia, PA 路 Member since 2015 路 2k+ posts 路 904 votes
    10y
    Kristi Bass also make sure that there are no local ordinances limiting the number of unrelated people who can stay in a location.
  • Waco, TX 路 Member since 2016 路 16 posts 路 3 votes
    10y

    Haha Percy! That's why America loves him, he's just lil different. Really sweet guy though. 

  • Investor 路 Cedar Park, TX 路 Member since 2014 路 317 posts 路 74 votes
    10y

    This may seem like a dumb question but what is a VRBO?

  • Investor 路 Coeur d'Alene, ID 路 Member since 2016 路 551 posts 路 218 votes
    10y

    @Shawn C. Vacation Rental By Owner

    Just a question though, did the sellers give a reason why they are selling? All of them want these houses done for their "forever" home . I guess they too are trying to cash in on the oppertunity.

  • Santa Ana, CA 路 Member since 2016 路 39 posts 路 54 votes
    10y
    Originally posted by @Shawn C.:

    This may seem like a dumb question but what is a VRBO?

    Think of it like an eBay for short-term home rentals. vrbo.com is the website. They were combined with Homeaway.com and recently bought by Expedia. Along with airbnb.com, they are the biggest players in vacation rentals/short-term home rentals.

  • Developer 路 Philadelphia, PA 路 Member since 2015 路 2k+ posts 路 904 votes
    10y

    VRBO stands for Vacation Rental By Owner

  • Investor 路 Meriden, CT 路 Member since 2013 路 201 posts 路 145 votes
    10y

    @Kristi Bass my wife loves the show mostly because of Chip!!! I think you have huge potential winner on hand so ride it as long as it lasts. Just make sure that there is no problem using the show's name and Chip or Joanna's names in your ads. If you can, that will increase your earning potential!

    Good luck!

  • Real Estate Investor 路 Baltimore, MD 路 Member since 2008 路 1k+ posts 路 268 votes
    10y

    wow people come in droves to see the rehabs done by TV stars? I bet you're overpaying for the properties.... 

  • Waco, TX 路 Member since 2016 路 16 posts 路 3 votes
    10y

    Funny how God works! I'm actually buying 3 properties in a bundle from the original owners. They have had some family issues that precipitated them moving out of state. So actually buying this property for a rediculously good deal. 

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