VRBO's vs Air B&B's? Your thoughts and experiences?

VRBO's vs Air B&B's? Your thoughts and experiences?

Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes

Anyone have any hands on experience as

guests/clients or your own vacation rental investments?

I'm anxious to hear from folks who've had personal hands on experience with both. We will be expanding our vacation propertyportfolio and are curious to know which may be the better choice for the quality of clientele/guests, ROI and ease of managing.

I've heard various opinions about how difficult it is to schedule both without some degree of conflict and/or confusion and found some very interesting opinions, attitudes and philosophies about this cottage industry that just seems to be getting bigger, better and more successful by the year.

I do realize that there are a lot of municipalities and neighborhoods protected by HOA's and CC&R's who are resisting this movement in much the same manner that taxi drivers are resisting UBER and LYFT, however, it doesn't seem to be slowing it down let alone stopping it.

I understand and empathize with this dilemma inasmuch as it does pose certain problems and tends to disturb the status-quo of otherwise quiet residential family communities and that has to be addressed and dealt with.

However, in destination tourist and vacation communities it's a train that's already left the station and there's no turning back albeit there will be a price to pay in the way of Transient Occupancy Tax (TOT) on the rack rates for this type of rental activity. This is only fair and to be expected.

I personally don't have a problem kicking my fair share into the kitty. After all it is a business for profit and participating and accepting communities should be allowed to derive some benefit for this privilege.

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Specialist · Bozeman, MT · Member since 2016 · 237 posts · 153 votes
9y

We have had great success with AirBnB and VRBO this past summer. We manage one vacation rental full-time, and are remodeling another unit by next summer to function as a vacation rental. My market is seasonal, but I operate full-time, and do well. I am also legal in my area, which gives me a leg up in terms of advertising. MANY others are not legal in my town, and try to hide their rentals from the city.

To try to touch on some of the questions here, I'll just give a broad explanation to the many questions in this thread.

1. Managing your property yourself will make you FAR more money (about 30% more). You will benefit from the cleaning fees, and other fees from the internet booking sites. You need to have excellent reviews, and a PM just will not care as much about your property as you do.

2. You need to have those 5 star reviews. When we first started, our price just couldn't be beat, but we had some VERY skeptical first bookings... It was tough. You are competing with other properties with 5 star reviews. Make sure you focus on customer service, as this level of real estate is way more customer service oriented than what a traditional PM will offer you.

3. You definitely want to have your property on AirBnB or VRBO rather than directly marketing yourself. Let me explain what I've been through thus far. So 100% of our bookings are from VRBO and AirBnB (30:70% respectively). I do maintain a professional website, where a customer can go and learn just about anything about my property, and view open dates and even link to a booking page. To promote this site, I spent about $600 on Google Adwords, and did a great job with SEO. I got thousands of hits, but not one booking! I would suggest using the power of SEO through AirBnB and VRBO. They spend millions of dollars on SEO, and marketing, and they are trusted. Just my 5 cents.

4. If you hire a PM, you will make far less money, and have reviews which are lacking. With that said, we reaaaallly need a vacation. It has been non-stop for us since last May, and we are pretty booked up for winter. Next summer we will have two units, and will need to hire a full time cleaner. This leaves no time for relaxation and rest, even though we work from home! Subsequently, we have checked out our options, and we have come up with 2 ways to have our property managed right, while going away for extended periods of time. One option is to have someone other vacation property owner stay in your home, while you stay in theirs. There's actually websites out there where people make arrangements like this. This is what we will do, but is not applicable to the investors out there looking for a hands off approach. The other approach is to have a caretaker. Either let them live in one unit, or build an ADU or set aside a bedroom for a caretaker. Many people will do this for very little compensation, or for free in exchange for room in some markets. I'm all about PM companies in some situations, but I don't think a vacation rental will shine unless a company which specializes in these types of properties is hired. And then be ready to see your profit just dwindle away... They just never seem to be able to get 80-100% occupancy.

5. There is way more maintenance than you would imagine. We just remodeled our vacation rental last spring, and it needs new paint, and new entry floor already. I'm also constantly dealing with either ice and snow in the winter, or landscaping during the rest of the year. This is in fact another home, and that is how it is advertised, and so that is what the customer expects. If you don't already own a home, you will shocked at how much maintenance is needed. If you don't learn this yourself, and then hire a PM to manage it, don't expect to make any money. The only time I hire someone is when I need electrical or something dangerous done.

6. There's two basic ways to manage your vaca rental. One is like a mom-and-pop deal. This is how we run our place (although I am a full-time real estate agent and investor). It is a lot of work, and a way of life. I do still have time for real estate sales, but I would never be able to hold a full-time job and do this at the same time. Certain jobs will mesh very well with this lifestyle. I think any work from home job where you set your own hours will be an awesome match with this lifestyle. If you have to be at your job in a set schedule, it may not work for you, because we've had things pop up at all hours of the day. 

The other way to run it, is to get it managed, and just be totally hands off. I talked about that above, so you can read that again to get an idea of what it's like.

7. The pay is excellent. If you're in the right market, you will be able to make a living from this. You also get to stay home with your family, which I will be forever grateful for. It is wonderful to not pay for childcare, be at home with your kids, and be able to stay on top of all projects around the house. Do not expect a moment's rest though. If you had some sort of romantic notion about doing this for a living, dispel that right now. A good cleaner friend is a huge advantage! It can be grimy sometimes, and at other times you will need to have a thick skin when dealing with renters. As a landlord for 10 years and property manager for 20, this is nothing like either of those two ways of real estate management. Much more customer service oriented. 

Hope that helps! 

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  • Specialist · Bozeman, MT · Member since 2016 · 237 posts · 153 votes
    9y

    We have had great success with AirBnB and VRBO this past summer. We manage one vacation rental full-time, and are remodeling another unit by next summer to function as a vacation rental. My market is seasonal, but I operate full-time, and do well. I am also legal in my area, which gives me a leg up in terms of advertising. MANY others are not legal in my town, and try to hide their rentals from the city.

    To try to touch on some of the questions here, I'll just give a broad explanation to the many questions in this thread.

    1. Managing your property yourself will make you FAR more money (about 30% more). You will benefit from the cleaning fees, and other fees from the internet booking sites. You need to have excellent reviews, and a PM just will not care as much about your property as you do.

    2. You need to have those 5 star reviews. When we first started, our price just couldn't be beat, but we had some VERY skeptical first bookings... It was tough. You are competing with other properties with 5 star reviews. Make sure you focus on customer service, as this level of real estate is way more customer service oriented than what a traditional PM will offer you.

    3. You definitely want to have your property on AirBnB or VRBO rather than directly marketing yourself. Let me explain what I've been through thus far. So 100% of our bookings are from VRBO and AirBnB (30:70% respectively). I do maintain a professional website, where a customer can go and learn just about anything about my property, and view open dates and even link to a booking page. To promote this site, I spent about $600 on Google Adwords, and did a great job with SEO. I got thousands of hits, but not one booking! I would suggest using the power of SEO through AirBnB and VRBO. They spend millions of dollars on SEO, and marketing, and they are trusted. Just my 5 cents.

    4. If you hire a PM, you will make far less money, and have reviews which are lacking. With that said, we reaaaallly need a vacation. It has been non-stop for us since last May, and we are pretty booked up for winter. Next summer we will have two units, and will need to hire a full time cleaner. This leaves no time for relaxation and rest, even though we work from home! Subsequently, we have checked out our options, and we have come up with 2 ways to have our property managed right, while going away for extended periods of time. One option is to have someone other vacation property owner stay in your home, while you stay in theirs. There's actually websites out there where people make arrangements like this. This is what we will do, but is not applicable to the investors out there looking for a hands off approach. The other approach is to have a caretaker. Either let them live in one unit, or build an ADU or set aside a bedroom for a caretaker. Many people will do this for very little compensation, or for free in exchange for room in some markets. I'm all about PM companies in some situations, but I don't think a vacation rental will shine unless a company which specializes in these types of properties is hired. And then be ready to see your profit just dwindle away... They just never seem to be able to get 80-100% occupancy.

    5. There is way more maintenance than you would imagine. We just remodeled our vacation rental last spring, and it needs new paint, and new entry floor already. I'm also constantly dealing with either ice and snow in the winter, or landscaping during the rest of the year. This is in fact another home, and that is how it is advertised, and so that is what the customer expects. If you don't already own a home, you will shocked at how much maintenance is needed. If you don't learn this yourself, and then hire a PM to manage it, don't expect to make any money. The only time I hire someone is when I need electrical or something dangerous done.

    6. There's two basic ways to manage your vaca rental. One is like a mom-and-pop deal. This is how we run our place (although I am a full-time real estate agent and investor). It is a lot of work, and a way of life. I do still have time for real estate sales, but I would never be able to hold a full-time job and do this at the same time. Certain jobs will mesh very well with this lifestyle. I think any work from home job where you set your own hours will be an awesome match with this lifestyle. If you have to be at your job in a set schedule, it may not work for you, because we've had things pop up at all hours of the day. 

    The other way to run it, is to get it managed, and just be totally hands off. I talked about that above, so you can read that again to get an idea of what it's like.

    7. The pay is excellent. If you're in the right market, you will be able to make a living from this. You also get to stay home with your family, which I will be forever grateful for. It is wonderful to not pay for childcare, be at home with your kids, and be able to stay on top of all projects around the house. Do not expect a moment's rest though. If you had some sort of romantic notion about doing this for a living, dispel that right now. A good cleaner friend is a huge advantage! It can be grimy sometimes, and at other times you will need to have a thick skin when dealing with renters. As a landlord for 10 years and property manager for 20, this is nothing like either of those two ways of real estate management. Much more customer service oriented. 

    Hope that helps! 

  • Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes
    9y

    You almost sound like a clone @Account Closed. I too am a RE broker. But in addition to that I'm also a general and manufactured home contractor and we have a rather extensive manufactured and site built home lease/rent portfolio. 

    It was just this past year that our, daughter and CFO for all our companies and business enterprises convinced us to invest in prime VRBO properties close to the beach and downtown tourist attractions which we have done.

    We have been very fortunate to have her as our PM and my son, who runs our construction company, there to work with us. If you can't trust your family who can you trust. Not only will they be managing and maintaining both our long term and vacation rental inventory they own part of the business which gives them all the more incentive to stay profitable. 

    We to are in search of our 2nd vacation property in the same area and are looking forward to purchasing more as long as our purchasing power lasts as we are all cash investors and don't really like leveraging capital or being beholding to banks and/or creditors. 

    That stated, however, when we start to wind down our RE brokerage we won't be generating the same level of income so we may have to start looking at other forms of financing or hedging if that's acceptable lexicon for the RE industry as it is for the stock market.

  • Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
    9y

    I'm using both and it simply depends on if VRBO decides to feature one of my properties that month. When they do my rentals on VRBO skyrocket. When they don't- it's all AirBnB. FlipKey is a waste of time. (And VRBO with their new structure has NO rhyme or reason to what they feature- a newer property of mine was featured all month while my older one with 50+ 5 star reviews was at the bottom of the heap) It is a bit of a pain coordinating both in terms of changing prices and I am starting to look at 3rd party solutions for that. 

  • Investor · Valley Glen, CA · Member since 2013 · 247 posts · 111 votes
    9y

    And I agree with @Account Closed its a LOT of work. I am now managing 2 other properties since mine was so successful- which obviously is even more work. And from a PM point of view- 30 or 40% may sound like a lot to give up to the owner- but for all the work I do, it's almost not even worth it for me. Better to buy a 2nd home myself and keep the 100%. 

    Doing AirBnB and VRBO is a must and yep a lot of work. I have my own site as well- but never a single booking from it. Nice to have for recommendations/ places to eat etc- but for booking it's pretty worthless 

  • Real Estate Agent · Cleveland OH · Member since 2015 · 216 posts · 275 votes
    9y

    I manage an AirBNB in Cleveland OH.   It is 40 blocks from downtown in a neighborhood that gentrification has not yet arrived.   This is a multi-use building, I fondly refer to it as urban camping.  

    With 4 bedrooms, 2 full baths, a kitchen, living and sitting room @ only 110.00 per night it provides a lot a value for the guests.   It is full most weekend with sport visitors.   We are also starting to book some long term stays from actors in nearby playhouse square.   The unit sleeps 8 comfortably and up to 10 in a pinch.    Bookings are always for groups.

    We use a digital key system for 24 hour access, but you still must have someone available for post guest cleanup.   I attempted to solicit a hospitality college student to act as our inn-keeper without success.   Cleveland State University's student services did not even call  back.  We were offering free rent in an efficiency and real world experience.   Some much for college job assistance departments.   AirBNB has been great.  Their marketing is better than anything I could arrange, the email and text reminders are invaluable and direct ACH deposit makes it almost painless if not for the cleaning services required.   AirBNB provided a professional photographer at no charge for our listing.   I have nothing but praise for AirBNB.   

    I called the community development dept in Cleveland when we started as an AirBNB, they would have preferred that we had provided section 8 housing to a community member, but have been supportive.   Previous posts are correct,  it is all about location or more specifically being near where people want to be.

  • Denver, CO · Member since 2014 · 6 posts · 5 votes
    9y

    @John Arendsen, I Airbnb'd my entire one bedroom condo in lower downtown Denver for about a year. It is my personal residence and I split my time between Denver and the High Rockies so it worked out well for the times I was gone or traveling. I never had an issue with a guest, and I had more than 50 individual stays.

    I required verified customers - those who have uploaded a drivers license to Airbnb - and those with a thorough profile on Airbnb. Usually red flags stick out clearly on their profiles. In my experience, there were almost as many 40+ guests as millennials. 

    I worked out a deal with a house cleaner for a "turndown service" rate where she would come in and do a light cleaning before every guest's stay. This cost $30 / cleaning rather than the usual $65 rate.

    My payment on my condo is $1,850 and I charged $135 to $150 per night. With an average of 13 nights per month this covered my payment and then some.

    My Airbnb experience was easy and profitable. I would highly recommend it!

  • Denver, CO · Member since 2014 · 6 posts · 5 votes
    9y
    Originally posted by @Michael Wind:

    Does anyone have any suggestions for marketing directly - without going through VBO, AirBNB, etc?

    @Michael Wind, For digital marketing, the web traffic you get from these sites, at least Airbnb in my experience, is far greater than you could achieve without significant ad spending. Google Adwords cost would be far too high for it to be feasible. 

    I had 10 to 30 views per day on Airbnb resulting in ~$1900 in monthly revenue, to replicate this with Google Adwords, assuming an average of 18 views per day and an average cost-per-click of $1.50, would result in $27 per day in ad spend. That's $810 per month in marketing costs. I'm sure there are a lot of other online avenues you could use for marketing, but I'm not convinced there are any that will be effective enough to be worth the time or money. Most travel is booked online, so going offline doesn't make much sense either. 

  • Real Estate Agent · West Monroe, LA · Member since 2015 · 12 posts · 6 votes
    9y

    We Use VRBO on our 3 Gulf Shores AL VR's! It works good! 

  • Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes
    9y

    "I'm using both and it simply depends on if VRBO decides to feature one of my properties that month. When they do my rentals on VRBO skyrocket. When they don't- it's all AirBnB. FlipKey is a waste of time."

    That's interesting @Mike R.How does a listing get featured? Is it something you have to pay for? Or is it something you just get lucky with by VRBO's random selection?

  • Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes
    9y

    Once again @Mike R.as a RE broker, PM and general contractor we certainly don't mind doing the work. That's why we intend to keep all of our investments strictly local.

  • Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes
    9y

    Love the idea about the digital key @Michelle Fenn. We installed one of those on our first property and will continue to do so on all of them. Even our long term properties and manufactured homes. We're also looking into a 24/7 video surveillance offered by our local cable provider. 

    We put it out there to a few of our tenants and they seem to like the idea because it gives them a sense of added security and it's really not that expensive.

  • Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes
    9y

    @Tim Spires, I tend to agree with you. If it works why try to fix it. In the overall scheme of things if Air B&B and VRBO has a successful model why be greedy. All you need to do to offset the added charges is increase your rack rate accordingly. 

    Additionally, that's the same reason we only target VR friendly communities. Why go against the grain and try to be sneaky by maneuvering around local municipalities rules, regulations and TOT. It's a lot easier just to play it straight from the get go and get all those costs incorporated into the framework so you'll know what your costs are and can adjust your price point accordingly. I guess that's the RE broker side of me. As a state licensed entity we have to play it straight.

  • Property Manager · Denver, CO · Member since 2016 · 107 posts · 43 votes
    9y

    @James Carlson is our local STR expert here in Denver and can provide valuable insight.

  • Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    9y

    Thanks, @Tyler Howell, for the shout out. Just about everything's been covered, so I won't beat a dead horse. A few items I thought of as I read through the responses:

    Liability coverage

    @Kevin Shuler brings this up. This is really important. Whether you market your space on Airbnb or on an independent site, no one should be without a third-party policy. You can read about various reasons for this -- there are plenty -- but my main one is that Airbnb's Host Guarantee does NOT protect you against personal liability. If someone gets seriously injured on your property and decides to sue you, you are NOT covered. I think that's your biggest exposure and the area for which you most need to cover your ***.

    Independent websites
    I've had coffee with @Michael Greenberg. I'm impressed with his model of creating an independent site to market his spaces. I understand @Tim Spires' concerns about costs to get your site seen, but I think it's possible to do some up front marketing and hire a good SEO manager, and after a few months or a year, you might have enough organic search SEO power that you show up when people search.

    My concern is in the future and based on no evidence....that said, I wonder whether anyone will be Googling for STRs or VRs in 10 years. Airbnb is becoming so ubiquitous, will anyone try to find their own short-term rental, or will everyone who wants a vacation rental just automatically go to Airbnb to find their space? If that's the case, and you're not on there, having built up good reviews and good search rankings within Airbnb's system, it could be a problem. 

    STR sanctuary cities
    @John Arendsen,you're smart to look for Airbnb-friendly cities. It seems more and more, though, that you've got to get further from the city. If you're in a metro area of any size, regulations are coming at some point. (City council members are drawn to the siren argument from established residents that the character of their neighborhoods are being ruined by transients.) Even cities that have allowed a restricted number of non-owner-occupied STRs have started to pull back a bit. So, if you're looking to play it straight, it seems like you're playing it in the 'burbs.

    This is such an interesting topic. It's great to read about everyone's experiences.

  • Specialist · Bozeman, MT · Member since 2016 · 237 posts · 153 votes
    9y
    Originally posted by @John Arendsen:

    You almost sound like a clone @Account Closed. I too am a RE broker. But in addition to that I'm also a general and manufactured home contractor and we have a rather extensive manufactured and site built home lease/rent portfolio. 

    It was just this past year that our, daughter and CFO for all our companies and business enterprises convinced us to invest in prime VRBO properties close to the beach and downtown tourist attractions which we have done.

    We have been very fortunate to have her as our PM and my son, who runs our construction company, there to work with us. If you can't trust your family who can you trust. Not only will they be managing and maintaining both our long term and vacation rental inventory they own part of the business which gives them all the more incentive to stay profitable. 

    We to are in search of our 2nd vacation property in the same area and are looking forward to purchasing more as long as our purchasing power lasts as we are all cash investors and don't really like leveraging capital or being beholding to banks and/or creditors. 

    That stated, however, when we start to wind down our RE brokerage we won't be generating the same level of income so we may have to start looking at other forms of financing or hedging if that's acceptable lexicon for the RE industry as it is for the stock market.

     That's good to hear you've had some success with vacation rentals! I'm the first in my family to venture into vacation rentals, mostly because of my location. It's MUCH harder than most people think it would be. At any given point during the day (24 hours), I can function as a plumber, MacGyver, accountant, professional shopper, cleaner, or handyman/maintenance guy. Plus, customer service is paramount. It's more than a full-time job for us right now... I wonder how it will be with 2 or 3 units. 

  • Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes
    9y

    Hi @James Carlson and thanks for reaching out on this forum. For openers what's an STR? I'm not yet fully versed on all the nuances of this budding industry. As far liability insurance is concerned I would think that the overall homeowner policy would cover this wouldn't you? We have homeowners insurance that covers personal injury on all our properties including our primary residence and our own personal vacation home.

    As far as Oceanside, CA is concerned they are welcoming VR's with open arms as they have been undergone extreme gentrification for the past 20 years and are now in the throes of building and billing Oceanside as a "destination tourist and vacation & resort community" what with all the hotels, timeshares and myriad condo, townhouse, row houses (which is what we currently own and VRBO and Air B&B's along with the great surfing, beautiful and accessible sandy beaches, hiking, biking, walking trails, wonderful eateries, boutiques, shops, etc. Oceanside is well on its way to posturing as one of the most popular tourist attractions in San Diego. 

    Having been historically, since WWII, known as a military town rife with red light districts, X-rated movie theaters, "friendly ending" massage parlors, drugs, thugs, and gang activities for decades, they are now loving and arms wide open to the TOT and relishing in the fact that they are the "Northern gateway" to San Diego and the first stop that folks can make after leaving Orange County and traveling through Camp Pendleton with no other options.

    What with all the traffic congestion starting miles North of Oceanside on I-5 and extending on some weekends all the way south to the city of San Diego along with the fact that it's the only coastal  North/South thoroughfare you can use to get here is starting to make Oceanside a much more desirable choice for many travelers and tourists. It's actually a win win for everyone tourists and investors alike. I'll be on a buying spree for as long as the cash holds out. When it does I'll be looking for partners to buddy up with.

  • Real Estate Agent · Washington, DC · Member since 2016 · 18 posts · 3 votes
    9y

    Similar to @Kevin Shuler I've had a great experience with AirBNB. I rent my primary residence on the weekends and have had great guests who are very respectful of the space. AirBNB takes a very modest fee in my opinion and Ive been able to make a pretty nice return each month.

  • Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    9y

    @John Arendsen. No, your homeowner's policy likely does NOT cover anything that happens in a short-term rental (STR). They likely consider it a commercial use of your property and therefore you aren't covered. I've called numerous carriers and asked about it, and once they fully understand what you're doing, they're adamant that you're not covered. Try calling yours, describe what you're intending to do and see what they say. I'm NOT an insurance broker, but in my experiencne, you need to buy specific vacation rental or short-term rental insurance. CBIZ -- developed with HomeAway, VRBO's parent company -- is a good one to look at. I've also heard good things about this start-up called Slice, which is on-demand coverage. (Just as an aside, it seems like a huge oversight by the insurance industry to have not developed a product for this yet. The industry is booming, and they're missing out.)

    That's very interesting about Oceanside. My wife and I loved our experience with STRs and have been considering buying somewhere that is open to the idea. Being on the beach wouldn't hurt. Thanks for the thorough response and interesting forum prompt.

  • Specialist · Bozeman, MT · Member since 2016 · 237 posts · 153 votes
    9y
    Originally posted by @James Carlson:

    Thanks, @Tyler Howell, for the shout out. Just about everything's been covered, so I won't beat a dead horse. A few items I thought of as I read through the responses:

    Liability coverage

    @Kevin Shuler brings this up. This is really important. Whether you market your space on Airbnb or on an independent site, no one should be without a third-party policy. You can read about various reasons for this -- there are plenty -- but my main one is that Airbnb's Host Guarantee does NOT protect you against personal liability. If someone gets seriously injured on your property and decides to sue you, you are NOT covered. I think that's your biggest exposure and the area for which you most need to cover your ***.

    Independent websites
    I've had coffee with @Michael Greenberg. I'm impressed with his model of creating an independent site to market his spaces. I understand @Tim Spires' concerns about costs to get your site seen, but I think it's possible to do some up front marketing and hire a good SEO manager, and after a few months or a year, you might have enough organic search SEO power that you show up when people search.

    My concern is in the future and based on no evidence....that said, I wonder whether anyone will be Googling for STRs or VRs in 10 years. Airbnb is becoming so ubiquitous, will anyone try to find their own short-term rental, or will everyone who wants a vacation rental just automatically go to Airbnb to find their space? If that's the case, and you're not on there, having built up good reviews and good search rankings within Airbnb's system, it could be a problem. 

    STR sanctuary cities
    @John Arendsen,you're smart to look for Airbnb-friendly cities. It seems more and more, though, that you've got to get further from the city. If you're in a metro area of any size, regulations are coming at some point. (City council members are drawn to the siren argument from established residents that the character of their neighborhoods are being ruined by transients.) Even cities that have allowed a restricted number of non-owner-occupied STRs have started to pull back a bit. So, if you're looking to play it straight, it seems like you're playing it in the 'burbs.

    This is such an interesting topic. It's great to read about everyone's experiences.

    In terms of liability, I have this one completely figured out, and would like to share some experiences I have had. I have a new policy, specific for vacation rentals, as of Jan 1st, 2017 (feels soooooo good to be covered properly!).

    So yea, your home owner policy will not cover vacation rental operation (time to get your mortgage contract out!). Also, AirBnB's guarantee of $1 million in coverage is very specific. Basically this: If it was an accident, it will most likely be covered, if not, then you are S.O.L. Sorry. I have claimed damages one time, in the past 70 guests, through AirBnB, and they were good about it because it was an obvious accident. Make sure you take pictures, and have receipts. They will calculate depreciation on furniture. You can submit everything online, through AirBnB.com. Make sure to read through your agreement as to what AirBnB will cover. Obviously you want to claim through them first before you touch your vacation rental policy, which I will cover next.

    So after renting like this for awhile, you're going to hit the "what if?" wall. I mean that you will become so paranoid about what can possibly happen to your business, that you will be willing to pay 3x more in insurance to make sure you are covered properly. You will literally lose everything if something goes wrong. A traditional mortgage loan will have a clause in it which explicitly forbids the property to be used as a vacation rental. This means, if your lien holder becomes suspicious, or some irate neighbor calls them up out of the blue, and they find out you are operating as a STR, your loan can be called right then. So I did some searching, and found a great company.

    The route we took, was to close the insurance part of PITI in our escrow account. All I had to do was meet some guidelines, such as owning the property for over 1 year, having more than 20% value on my loan, and some more trivial things like that. So I close my escrow, and found a policy which was PERFECT for me, and after some haggling, got the bill down to around $2100 for the YEAR, for 2 vacation rental properties. I've got over 80% coverage of the cost of a rebuild (which will be the minimum you will need as stipulated in your mortgage documents). Plus loss of rents, over 2 million in coverage... Shop around. There are new policies coming to the market all the time, as this "sharing economy" quickly evolves.

    Another thing about policies for vacation rental properties: During our "shopping around" period, we approached our escrow insurance company (inherited with the purchase) about properly insuring our property, and after some run-around, they developed a policy specifically for me (underwritten by some giant company somewhere), which I had to turn down. I felt bad, but the terms were ridiculous. The price was ~$3000, which I was honestly ok with, as we had budgeted $3500. But they had some insane clause about how I have to delist my property on VRBO. I called the lady and asked her why, and she wouldn't tell me, so I asked her if this policy competed with VRBO's policies in some way... No answers, so I told her that I need to cancel my insurance effective Jan 1st. The end. You do not want a policy like that, as it is a potential loss of business. A lot of business, roughly $10k/year in our case. Keep on shopping if you encounter something like that. This was through Farmer's Insurance. 

    Insurance is very complicated, and you should take the time to understand all the minimum requirements you need to operate a vacation rental. 

  • Specialist · Bozeman, MT · Member since 2016 · 237 posts · 153 votes
    9y

    I'm seeing a topic which no one discusses. It's a big skeleton in the closet for STR owners: Legality.

    I'm not going to talk about what is moral, right, or anything like that, but I'll let you know how to make your place legal. Honestly, many of you will not be able to make your place legal, but I can tell you what is involved.

    First, what do your covenants allow for? If you take that risk and break these covenants, your worst case scenario involves a lengthy legal battle which you will lose, and then a lien will be placed on your property, and if it is not paid, you can lose your property. This is, strangely enough, a risk which many STR owners take. Just letting you know the possible ramifications.

    Second, what is your zoning? Generally, R2 and R1 zoning (these also vary from one municipality to the next slightly) are NOT ok for STR's. R2 maaaaay have a guideline about an ADU on the property, but will probably stipulate in the covenants that it is not allowed. R3 and R4, as well as special zones like RO (res/office) are ideal for this. If you live out in the county, check your restrictions, but the only ones you will most likely have is your property's covenants.

    Third: Get a business license! The costs associated with paying your city's tax and permits is honestly very trivial when compared to the peace of mind you will get with legal operation. This license will insulate you from further municipal regulations. Getting a license after your city has banned vacation rentals, will be much harder. 

    This is the order of precedence when it comes to restriction son property usage:

    Plat/Sub. Covenants > Municipal > County (there are no Federal property restrictions).

    So that there should tell you the order of actions you need to take to make sure your property is legal. For me, if our city cracks down on STRs, which it seems like it will in 2017, then we will be able to charge basically whatever we want per night, as we may be one of the few legal rentals in town. 

    Just some insight... If you're looking to buy property for this purpose, make sure it is the right property.

  • Investor · Denver, CO · Member since 2016 · 533 posts · 433 votes
    9y

    @James Carlson It's hard to say what will happen in the future with Independent Listing sites, however I am confirming this:  

    1.  My longer term stays (14 - 30 days) are booking directly because they don't want to pay the booking fees/commissions.  

    2.  I am capturing >20% additional nightly rate on these direct bookings over my nightly rates on Airbnb, VRBO, and Flipkey (useless).

    3.  I am building a loyal clientele of repeat guests - many of them filling Sunday - Thursday for business.

    I believe but can't confirm these "associated" factors:

    1.  having your own listing site creates credibility that this is a business and not a hobby. 

    2.  That I am serious about what I am offering likely so my guests experience is likely to be very good.

    3.  I am creating value for my business that maybe someday someone will want to acquire.

    So if you think that this list is valuable enough to create your own presence and you want to have a VR business, then by all means, forge ahead.  Feel free to let me know if you want details on the tools and resources I used for my site.  I now have a lot of marketing work to do.... not in my realm of expertise.

    Cheers

  • Specialist · Bozeman, MT · Member since 2016 · 237 posts · 153 votes
    9y
    Originally posted by @Account Closed:

    I'm seeing a topic which no one discusses. It's a big skeleton in the closet for STR owners: Legality.

    I'm not going to talk about what is moral, right, or anything like that, but I'll let you know how to make your place legal. Honestly, many of you will not be able to make your place legal, but I can tell you what is involved.

    First, what do your covenants allow for? If you take that risk and break these covenants, your worst case scenario involves a lengthy legal battle which you will lose, and then a lien will be placed on your property, and if it is not paid, you can lose your property. This is, strangely enough, a risk which many STR owners take. Just letting you know the possible ramifications.

    Second, what is your zoning? Generally, R2 and R1 zoning (these also vary from one municipality to the next slightly) are NOT ok for STR's. R2 maaaaay have a guideline about an ADU on the property, but will probably stipulate in the covenants that it is not allowed. R3 and R4, as well as special zones like RO (res/office) are ideal for this. If you live out in the county, check your restrictions, but the only ones you will most likely have is your property's covenants.

    Third: Get a business license! The costs associated with paying your city's tax and permits is honestly very trivial when compared to the peace of mind you will get with legal operation. This license will insulate you from further municipal regulations. Getting a license after your city has banned vacation rentals, will be much harder. 

    This is the order of precedence when it comes to restriction son property usage:

    Plat/Sub. Covenants > Municipal > County (there are no Federal property restrictions).

    So that there should tell you the order of actions you need to take to make sure your property is legal. For me, if our city cracks down on STRs, which it seems like it will in 2017, then we will be able to charge basically whatever we want per night, as we may be one of the few legal rentals in town. 

    Just some insight... If you're looking to buy property for this purpose, make sure it is the right property.

     I should also expand on the business license thing. If your property is R2 or R1, or something which makes your property not totally legal, you will want to file for a special use permit with your city. These can be expensive. You will fill out a form, a notice will be placed in the newspaper about your proposed "special use", and then you will go through the process of getting a business license. Will it work? It all depends on how much your neighbors hate you. Many neighborhood associations are getting savvy to these rentals and are making a stand. So you want to check and see if they are active in your neighborhood or not if you are iffy. It will cost thousands of dollars.

  • Specialist · Bozeman, MT · Member since 2016 · 237 posts · 153 votes
    9y
    Originally posted by @Michael Greenberg:

    @James Carlson It's hard to say what will happen in the future with Independent Listing sites, however I am confirming this:  

    1.  My longer term stays (14 - 30 days) are booking directly because they don't want to pay the booking fees/commissions.  

    I find this interesting. I see the booking fees are proportionately much higher for short term renters. Like VRBO will take out a percentage which doesn't change, but the cleaning fee is very high for a one night stay, as opposed to a 2 week stay. I just signed up for the annual subscription through VRBO, and my customers save a lot in fees now.

    The repeat customers, are where it's at! We always give special treatment to them, as in a bottle of wine, maybe some delicious food, flowers, etc. We get a lot of business people, and many families traveling through town in the off season. It's great, they are the cleanest people, too.

    I've also found that a website makes a lot more information available, and helps to build the trust like you mentioned. 

  • Real Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
    9y

    @Michael Greenberg. Your numbers look fantastic. That's good to know. What I found most persuasive, though, was your idea that this is a potentially attractive business for someone to buy at some point. I was just contacted by an owner in Lone Tree who is trying to sell his place as a turn-key STR. It's furnished and he's been renting for 11 years. I've approached a number of current STR owners about the opportunity, and they're definitely interested. So you're on to something.

  • Specialist · Bozeman, MT · Member since 2016 · 237 posts · 153 votes
    9y
    Originally posted by @Mike R.:

    And I agree with @Account Closed its a LOT of work. I am now managing 2 other properties since mine was so successful- which obviously is even more work. And from a PM point of view- 30 or 40% may sound like a lot to give up to the owner- but for all the work I do, it's almost not even worth it for me. Better to buy a 2nd home myself and keep the 100%. 

    Doing AirBnB and VRBO is a must and yep a lot of work. I have my own site as well- but never a single booking from it. Nice to have for recommendations/ places to eat etc- but for booking it's pretty worthless 

     Yes, we also manage vacation rentals, and luxury property, and we charge at least 30%. It just doesn't make sense otherwise, so much work. Even functioning as a contractor for each and every job can take an entire day. 

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