Rental Property Investor · Hugo, MN · Member since 2014 · 283 posts · 257 votes
Hey everyone. We currently have 3 long term rentals that have done pretty well for us and for our next purchase, I want to dive into a short term vacation rental.
This will be located too far away from me for me to handle the turns or maintenance issues, so a lot of the operations will need to be outsourced.
Here’s what I believe I need so far.
Financing. Are there banks out there who specifically lend on a BRRRR type basis for a short term rental?
Cleaning company. I believe I’ve read a few posts about using a cleaning company to come in and take care of each turn in between guests.
Licensing with the local municipality and making sure any property is within compliance.
Handyman. Having a handyman on call for any maintenance issues will be key as well.
Furnishing the property. Tv, bedroom furniture, couch, wall decorations, etc. Any go to stores for cheap items that are durable?
Budgeting for cable/internet, utilities, and the other normal expenses involved in a real estate asset. Anything I’m missing here?
Setting up a lockbox paired with an app for guests to do self checkin along with forms for them to fill out noting any issues with the property prior to them checking in.
Amenities like a bbq/grill, patio furniture, etc. Yay or nay?
Professional photographer to really make the property stand out on air bnb and vrbo.
Price out comparable properties in the area to properly analyze deals.
Is there anything I’m missing here or that you would add?
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
6y
Hey @Matt J., there is a lot that goes into providing a 5 star experience to guests. Here are my 2 cents:
Your cleaner and handy person is your number one consideration. They will be your boots on the ground.
Furnishing the property is also a key area. Frankly we did our house mainly with used pieces from Craigslist, OfferUP and LetGo. Go with USA made furniture and solid wood. They will hold up much better and look great. Nothing screams cheap like laminated particle board. It is amazing what good deals you can find out there.
Always go with new mattresses. I highly recommend Zinus Green Tea or the like. You can get them on sale for under $200 for a queen and under $300 for a King. They hold up really well and everyone loves them. I use a 1.5" memory foam topper and a Serta Black mattress protector over the hold thing. Works awesome. We get good reviews.
Artwork, absolutely necessary. You don't need to get really complicated or fancy. I bought nearly all of our stuff at second hand stores. Goodwill, St. Vincents etc. There are a lot of great pieces out there for next to nothing. We went a bit eclectic with a beach theme for our lake house. Try to avoid having large bare walls. Put something on there.
I have our house setup as a smart home. A simple smart home. I have a Samsung SmartThings hub that manages the thermostat and the lock. The thermostat is a Emerson Sensi and I use the Schlage Smart Connect lock. I can do everything from my couch 360 miles away. Easy to use and setup. You will need to check the furnace and make sure you can use a smart thermostat. If you have a "C" wire, then any unit will work fine. If not, the Sensi works without a "C" wire. We have A/C so it just pulls power from the unit that is not operating. Everything is Z-Wave. The lock uses AA batteries and the last a year or so.
Definitely get a grill and patio furniture. I have a Weber Genesis II 3 burner setup. It's a Weber so it is great. Many on here have charcoal. I have been buying the aluminum patio stuff from Costco. Rust free and UV resistant fabrics (Sunbrella I think). 3 years in and they still look great. If you wait until end of summer, you can get them on clearance.
You didn't say where the property is so linens can be up in the air a bit. Our home is primarily a summer rental so our sheets are a 70/30 percale weave white sheet. I can't stress enough the percale weave over the sateen. Sateen will pill up. We tossed our first set of sheets due to that in less than a year. Percale weave sheets sleep cool and crisp. I am using the Big One sets from Kohl's. They have been awesome. They are also cheap when they are on sale.
For blankets we have a ton. Both small throws for snuggling up as well as king and queen for extra warmth. The primary bedspread/comforter is the Charisma units. Costco and they are the best. They wash up great, sleep cool and hang great on the beds. Not under sized like so many others. 3 years in they still look great. I just buy them when on sale and add them to the pile. We have 4 per bed at the moment. They are summer weight so we have a bunch of generic comforters that are winter weight just in case.
I would make the kitchen the center of the house. If you go overboard anywhere, this is the place. We get rave reviews about our kitchen. It is very well stocked. 40+ spices, flour, sugar etc etc. More pots and pans than you can shake a stick at. There is a wok, steamers, 2 coffee makers plus 2 Keurigs. We provide coffee pods, creamers, Splenda/sugar packs and tea.
All those amenities make for great reviews. There are more things that go into making the place solid, but this is a start!
Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
6y
I get all my furniture and appliances from estate auctions. A Smart TV or at least a Roku is a must, so are grills. All my places have a gas and charcoal grill. When a gas grill craps out, convert it to charcoal using a welder, angle grinder and iron. You can also make your own cooking grates with the welder and 1/4 rod. Bed frames can also be reinforced by welding the joints solid. Some of my big beds really take a pounding. If you knew/met my clientele, you would understand.
Investor · Roseville, CA · Member since 2016 · 893 posts · 1k+ votes
6y
@Matt J. You can use this to get an idea of your cash flow and it helps you think about other things that could be involved that you are not thinking about. There is no conventional financing (that I know of) for a BRRRR STR and very limited (if any) conventional that will use future STR revenue as income. STRs run a very high Op Ex ratio so be sure to not over leverage and make sure it can easily pivot to an LTR (and still cashflow) should regulations or other black swan events arise down the road.
Rental Property Investor · Hugo, MN · Member since 2014 · 283 posts · 257 votes
6y
@Jon Crosby thanks Jon, so do you basically finance it as a long term rental and then utilize it as an STR? That was my plan was to buy a place that would cash flow as a long term rental with the short term rental potential being extra icing on the cake.
Most people when 'applying for financing' do the first one as a 2nd home and then any subsequent ones after as investment properties. Rates go in order of Primary Home > 2nd Home > Investment properties.
That really doesn't have to do with your DTI though which might be what you are asking? If you mortgage it claiming to be an LTR but then instantly make it an STR to get the income qualification, that's technically mortgage fraud so generally speaking your income all will have to come from the other LTRs and your W2 income.
Now, if you already own an STR then you can usually use previous years' Schedule E or C income on your tax returns as income also...but when it's your 1st...you can't use the future income of the property like when it's an LTR.
Disclaimer here: I'm not a mortgage expert by any means and there are a lot of programs out there that offer different things, this is just my experience in the past is all. : )
Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes
6y
Hey @Matt J., there is a lot that goes into providing a 5 star experience to guests. Here are my 2 cents:
Your cleaner and handy person is your number one consideration. They will be your boots on the ground.
Furnishing the property is also a key area. Frankly we did our house mainly with used pieces from Craigslist, OfferUP and LetGo. Go with USA made furniture and solid wood. They will hold up much better and look great. Nothing screams cheap like laminated particle board. It is amazing what good deals you can find out there.
Always go with new mattresses. I highly recommend Zinus Green Tea or the like. You can get them on sale for under $200 for a queen and under $300 for a King. They hold up really well and everyone loves them. I use a 1.5" memory foam topper and a Serta Black mattress protector over the hold thing. Works awesome. We get good reviews.
Artwork, absolutely necessary. You don't need to get really complicated or fancy. I bought nearly all of our stuff at second hand stores. Goodwill, St. Vincents etc. There are a lot of great pieces out there for next to nothing. We went a bit eclectic with a beach theme for our lake house. Try to avoid having large bare walls. Put something on there.
I have our house setup as a smart home. A simple smart home. I have a Samsung SmartThings hub that manages the thermostat and the lock. The thermostat is a Emerson Sensi and I use the Schlage Smart Connect lock. I can do everything from my couch 360 miles away. Easy to use and setup. You will need to check the furnace and make sure you can use a smart thermostat. If you have a "C" wire, then any unit will work fine. If not, the Sensi works without a "C" wire. We have A/C so it just pulls power from the unit that is not operating. Everything is Z-Wave. The lock uses AA batteries and the last a year or so.
Definitely get a grill and patio furniture. I have a Weber Genesis II 3 burner setup. It's a Weber so it is great. Many on here have charcoal. I have been buying the aluminum patio stuff from Costco. Rust free and UV resistant fabrics (Sunbrella I think). 3 years in and they still look great. If you wait until end of summer, you can get them on clearance.
You didn't say where the property is so linens can be up in the air a bit. Our home is primarily a summer rental so our sheets are a 70/30 percale weave white sheet. I can't stress enough the percale weave over the sateen. Sateen will pill up. We tossed our first set of sheets due to that in less than a year. Percale weave sheets sleep cool and crisp. I am using the Big One sets from Kohl's. They have been awesome. They are also cheap when they are on sale.
For blankets we have a ton. Both small throws for snuggling up as well as king and queen for extra warmth. The primary bedspread/comforter is the Charisma units. Costco and they are the best. They wash up great, sleep cool and hang great on the beds. Not under sized like so many others. 3 years in they still look great. I just buy them when on sale and add them to the pile. We have 4 per bed at the moment. They are summer weight so we have a bunch of generic comforters that are winter weight just in case.
I would make the kitchen the center of the house. If you go overboard anywhere, this is the place. We get rave reviews about our kitchen. It is very well stocked. 40+ spices, flour, sugar etc etc. More pots and pans than you can shake a stick at. There is a wok, steamers, 2 coffee makers plus 2 Keurigs. We provide coffee pods, creamers, Splenda/sugar packs and tea.
All those amenities make for great reviews. There are more things that go into making the place solid, but this is a start!
Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
6y
You definitely want artwork. I've bought at least 500 pieces of artwork over the years on eBay. It's unframed giclee most of the time. I use a table saw, sander, wood stain, urethane, a drill and some screws to make my own frames from 2x4 or 2xwhatever lumber. Every living room has a unique theme. All my bedrooms have the same theme...Hefner's Mansion. The first thing they see when they wake up and the last things they see before they fall asleep and the are T's and A's. What a way to start and end a day.
Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
6y
@Matt Jennissen
Here is how simple Airbnb is truly. I’ve owned one for the past two years I made a ton of money off of it. I know a pocket in southern Minnesota on a lake, were you get clientele from surrounding states that are willing to pay anything for a vacation or for work or for anything college related or hospital related. All you have to do is move into the area which is very affordable remote access to work making better money, and you can make a freaking killing. You do all the turnover all the handyman calls and you can make literally your entire retirement fund doing this. I personally don’t want to do it because I don’t want to live down there but if I did wow. If anybody want to talks about this with me I’m willing to chat with them personally.
Property Manager · Kissimmee, FL · Member since 2019 · 445 posts · 266 votes
6y
Matt, I am not a financing expert but can address the other issues. Depending on your market you should be able to hire a professional property manager/marketer to handle ALL of the above, starting with professional photography, listing on all the channels, revenue management, scheduling cleans, handling maintenance and more. The most important aspect is your revenue management. Vacation rentals have entered the sophisticated and complex world of dynamic pricing. Prices can and should fluctuate every day, depending on seasonality, local events, weather patterns etc. A professional manager will be able to generate top revenue for your unit by using the right software and understanding the marketplace.
Matt, I am not a financing expert but can address the other issues. Depending on your market you should be able to hire a professional property manager/marketer to handle ALL of the above, starting with professional photography, listing on all the channels, revenue management, scheduling cleans, handling maintenance and more. The most important aspect is your revenue management. Vacation rentals have entered the sophisticated and complex world of dynamic pricing. Prices can and should fluctuate every day, depending on seasonality, local events, weather patterns etc. A professional manager will be able to generate top revenue for your unit by using the right software and understanding the marketplace.
I haven't found any professional managers outside of traditional property management firms focused on long term rentals. Does Air BnB or VRBO have a feature to automatically adjust to dynamic pricing?
Most people when 'applying for financing' do the first one as a 2nd home and then any subsequent ones after as investment properties. Rates go in order of Primary Home > 2nd Home > Investment properties.
That really doesn't have to do with your DTI though which might be what you are asking? If you mortgage it claiming to be an LTR but then instantly make it an STR to get the income qualification, that's technically mortgage fraud so generally speaking your income all will have to come from the other LTRs and your W2 income.
Now, if you already own an STR then you can usually use previous years' Schedule E or C income on your tax returns as income also...but when it's your 1st...you can't use the future income of the property like when it's an LTR.
Disclaimer here: I'm not a mortgage expert by any means and there are a lot of programs out there that offer different things, this is just my experience in the past is all. : )
Yeah debt to income we wouldn't qualify for a vacation loan at this point in time, so I'd basically have to do it as an LTR loan. I wasn't thinking of using the STR as income qualification for future deals necessarily, just was wondering if getting a loan on an investment property based on rents that a long term rental would bring in is the way to finance an STR without going the vacation home loan route. Does that make sense?
So after a year, then I could use that year's income towards qualifying for future loans?
You definitely want artwork. I've bought at least 500 pieces of artwork over the years on eBay. It's unframed giclee most of the time. I use a table saw, sander, wood stain, urethane, a drill and some screws to make my own frames from 2x4 or 2xwhatever lumber. Every living room has a unique theme. All my bedrooms have the same theme...Hefner's Mansion. The first thing they see when they wake up and the last things they see before they fall asleep and the are T's and A's. What a way to start and end a day.
LOL are you running a bunny ranch type of place or what do you have going on Paul??
Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Matt Jennissen consider using a dynamic pricing tool (ie Beyond Pricing, Wheelhouse or Pricelabs) and a channel manager for automated guest messaging (ie IGMS, Your Porter, Smart BnB). It’s also a good idea to install at least one exterior camera at the entrance to your property so you can discover if/when a party is about to break loose!
Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
6y
I rent to refinery contractors. They are working guys that travel without women. They are welders, pipefitters, boilermakers, electricians, inspectors and the like. I don't run a bunny ranch, but those kinds of people tend to find their own bunnies and bring them to my houses. Find my old post titled "What do you do when there is a prostitute in your STR".
Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
6y
@Matt J. Had a group of 4 guys renting a house from me. After 2 months, it went down to 3. I asked the 3 guys where the 4th guy was. They said he found a girlfriend and moved in with her. 2 weeks later he is back in my house. I asked why he moved back. He said "That woman was crazy, I had to get away from her." Couple of weeks later he wanted to buy the bunkbed that was in the house he staying in. I told him to get me another bed and swap them out. He needed the bunk bed back at his house so his kids could sleep without taking up much square footage of floor space. 2 days later he was gone. His neighbors from back home called him and said that his wife was moving all of her things out of his house.
Investor · The worst town to live in, KS · Member since 2016 · 4k+ posts · 4k+ votes
6y
@Matt J. Read my old posts. I've got posts of my STR experiences with rattlesnakes, prostitutes, intruders, more intruders, police, psychotic mutts, one tenant having an affair with another tenants wife, dead bodies, ghosts, wild animals, pellet guns, real guns, check cashing, marriage counseling, trips to the emergency room, drug overdoses, flat tires, kegorators, etc.
Investor · Cincinnati, OH · Member since 2008 · 319 posts · 243 votes
6y
For your first one, and doing it remotely you are going to want to have someone cohost it. Realistically there is a ton of setup work and management that will be difficult to do remotely. If the business plan does not make sense paying the extra fee to have someone cohost it then it is likely not going to be a worthy investment.
Rental Property Investor · Hugo, MN · Member since 2014 · 283 posts · 257 votes
6y
@Tyler W. It’s a couple hour drive from my house, so I could get up to take care of a lot of the up front stuff. Would that change how you think about it or is it too heavy a lift in your opinion to do it all remote?
@Tyler W. It’s a couple hour drive from my house, so I could get up to take care of a lot of the up front stuff. Would that change how you think about it or is it too heavy a lift in your opinion to do it all remote?
Depends how involved you want to be. You should probably look at it similar to how Brandon Turner suggests underwriting all rental deals to pay for management because at some point in the hold you may decide not to self manage. There is definitely an advantage to having someone that is minutes away rather than hours away to deal with things as they come up.
Rental Property Investor · Hugo, MN · Member since 2014 · 283 posts · 257 votes
6y
@Tyler W. Yeah I always build mgmt into the analysis. There aren’t any dedicated str mgmt companies in this market though. So a combo of a cleaning company, on call handyman and listing online isn’t enough to manage it you think?
Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Matt Jennissen the most important thing is choosing a market that has plenty of DEMAND, ie a vacation market. This is critical. And imo you can absolutely manage remotely with the right systems in place, we do it from 2,000+ miles away. Yes, it’s a lot of work up front to launch your *first str* (#2 will be much, much easier) but the management is very doable, provided you can put out the occasional fire by placing a call or two. Our most recent “fire” was a bat that took up residence above our hot tub and we found out from our cleaners just minutes prior to a new guest arrival/check in. No biggie, just made 2 calls. One to our guests to inform them and another to our Wildlife Exclusion company. If you ever want to talk about how to manage an str remotely, I’m happy to hop on a call. DM me. Hint: see my earlier post. Systems, *great cleaner*, 2 handymen on speed dial, hvac, plumber, electrician, etc. and a smart phone. In other words, once you go live and have a team in place it boils down to some text messaging and the occasional phone call.
Real Estate Agent · St. Paul, MN · Member since 2017 · 580 posts · 396 votes
6y
@Matt J. - too much to put into a forum post, but feel free to reach out. I've been managing MN Airbnbs for the past 5 years, happy to give you some insight.
Flipper · Argyle, NY · Member since 2017 · 12 posts · 5 votes
6y
@Michael Baum Love your notes on this. I have a lake house that I Airbnb during July/August. I also provide Hershey bars, graham crackers, and marshmallows for guests...the s’mores care package always makes them happy and I double down with a brick of cheddar, English muffins, and a dozen eggs. It soothes the grumpies after a long drive.
I don’t like solid color sheets and my place is a bit ‘Scandinavian Granny Chic’ so I routinely grab Ralph Lauren sheets when I find them on clearance or at estate sales.
