My Niche: "the Dog-Friendly Medium-Term Furnished Rental"

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Dumb luck (and a ton of work) got me into REI. In 2015 my girlfriend was spending 6/7 nights at my apartment. She had a cool little studio in a cool part of town, and we threw her apartment on Airbnb. A traveling nurse booked the place for $1650/mo (her rent was $620/mo). Wow, that was easy. I need more apartments!

This was before the phrase "Airbnb Arbitrage" was coined, and all my friends thought I was crazy. I had managed to get 3 owners onboard with my business model, and soon had 8 apartments in my name. I was working full-time as a bartender at the time, and quickly realized I didn't have the time to manage weekend turnover and shorter stays. I learned that if I increased my minimum stay to 28 nights I could still double my rent and minimize my effort.

I also learned that many of these medium-term guests book last minute. There'd always be sleepless nights towards the end of the month, with nothing but vacancy in my future and $8000 in rent due on the 1st. Sure enough, time after time, the apartments would fill up. My goal was to be the ONLY guy with nice, furnished rentals available for someone in a pinch at the end of the month. It still works.

Somewhere along the way I noticed that my dog-friendly units had almost zero vacancy. I bought a few SF homes and used the same strategy. I've since scaled back the arbitrage business, in order to focus my time on investing and my full-time career as a Realtor. Here is what I've learned along the way:

1. Dog owners are willing to pay more. I average around 80% over market rent on smaller apartments, and double market rent on SF homes.

2. Dog owners don't have many options. I'm always checking up on my competition, and I'm usually one of a few options for a month-long stay in St. Paul/Minneapolis. Many are forced to stay in extended-stay hotels.

3. Dog owners are easier to manage. They tend to be more responsible and less picky. They are usually grateful to have a nice, reasonably priced place to stay, and less critical/needy as guests. They leave great reviews.

4. Dogs leave hair behind, but (typically) don't damage anything **knocks on wood**. I've been doing this for 5 years, have probably hosted 100 guests with dogs, and I've yet to experience any real damage.

5. Cleaning fees kill you in the Airbnb business. Unless you've got a high-end property in a vacation destination, it's incredibly difficult to make numbers work hosting guests for 1-5 nights at a time. Paying someone to deep-clean a house full of dog hair once a month makes much better financial sense. 

I will continue using this rental strategy until it no longer produces amazing returns. Does anyone else have a specific rental niche that's worked well for them? I'd love to hear about it. 

@Adam Tafel

I agree that allowing pets apply to STR's as well as LTR's.

I make all my properties pet friendly and make more money because of this and appeal to a larger audience.

I believe that a STR can make more money that a Medium Term Rental, but it is more work due to the increased turnover.

Congrats on finding a niche that works for you.

Did you have any trouble booking your Medium term rentals due to CV-19?

@John Underwood - lost a little in March, broke even in April, and I've been full since May. Next vacancy is Sept 1st. People still need furnished housing when the unexpected happens, regardless of covid. Any yes, a STR will probably make more money, assuming the owner is able to handle much of the day to day upkeep. Those cleaning fees are a killer!

My niche is refinery contractors.  Big burly guys that drive jacked up 4x4s, have neck tats and chew tobacco for breakfast. Welders, fitters, boilermakers, etc. I decorate my places like Hugh Hefner decorated his mansion.  My places are man caves.

@Paul Sandhu that's awesome! I had a big 5 bedroom townhome for a few years, rented it out to traveling construction crews. Those guys were the best, they'd work 12 hour days, come home, make dinner, go to bed. Never heard from them. Paid rent up front with a company check. 

Originally posted by @Adam Tafel :

@Paul Sandhu that's awesome! I had a big 5 bedroom townhome for a few years, rented it out to traveling construction crews. Those guys were the best, they'd work 12 hour days, come home, make dinner, go to bed. Never heard from them. Paid rent up front with a company check. 

 Some of your previous tenants probably know some of my previous tenants.  Those guys have a high school education and make $2000-$3000 a week when they are working.

@Paul Sandhu Your post was hilarious!  

@Adam Tafel I really like the idea of allowing pets in rentals.  I understand the hesitancy from some landlords to allow pets due to the potential for damage.  However, I think it is an under served segment and a lot of renters have pets.  The lack of supply of rentals that allow pets makes the length of stay longer for tenants with pets.  I think minimize turnover is priority number 1 in my units.

Originally posted by @Adam Tafel :

@John Underwood - lost a little in March, broke even in April, and I've been full since May. Next vacancy is Sept 1st. People still need furnished housing when the unexpected happens, regardless of covid. Any yes, a STR will probably make more money, assuming the owner is able to handle much of the day to day upkeep. Those cleaning fees are a killer!

 Cleaning fees are a pass through to the renter. I charge a little extra to offset consumables.

@Adam Tafel Very interesting! Do you mind sharing the who and why of your medium term rentals...especially the last minute ones? Are they poor planners, consultants who are called in quickly on projects gone bad, building a house, or divorcing? I can visualize the need but wonder if it is specific to your market or if all markets would be expected to have similar demand. Thanks, and congrats on seeing an opportunity and acting.

@Marian Smith - most are here to work. Medical staff and various other industries. Some are locals displaced from their current homes paying with insurance claims (water damage, fire, etc). Families in between closings on their homes, divorce/separations, folks moving to town looking for a short-term while they find a house or apartment (also provides good leads for me as a Realtor). The key is to not accept a local who "just needs a place for a few months", the reason has to be valid. 

@Mason Hickman - most stay for 1-3 months. They book through Airbnb/VRBO, occasionally they will extend their stays and we'll draft a lease. I like the additional liability coverage I get through these ^ platforms, so I prefer to not to sign leases. There's a lot of hearsay going around about Airbnb guests squatting if staying for over a month, but after doing this for 5 years I've yet to encounter this (or hear from any other hosts who've had this happen). 

Originally posted by @Adam Tafel :

@Marian Smith - The key is to not accept a local . 

That's one of my phrases.  "I don't rent to local people, everyone I rent to already has a house.  But the house is in Texas or Louisiana.  They are here to work a temp job at the refinery."

 

@Adam Tafel

I love it!

I actually did a very similar thing when I was doing Air BNB, and I too stumbled into it. I was renovating my first floor unit of my duplex and my girlfriend told me about Airbnb.

I hopped on the site and saw that availability was near 4% in the city. This was in 216 before it blew up.

I played around with searches and saw that literally only one place allowed dogs and it was almost twice the price of other units. I can’t stress enough how doing a search to see how many units are available can help you capitalize on scarcity pricing.

I too would be getting the last minute bookings, but somehow someway I never missed a weekend.

The first year I did it I was averaging $350 a night, with highs of $400. I was doing 3 night minimums tho. I did the cleaning as I was in college living in the Reno downstairs.

I love your strategy of making it a medium term rental. Genius!

Also, I had such positive reviews over and over. The dog owners were typically just grateful to have a clean nice place.

Great share Adam!