All Forum Posts by: Carlos Carbajal

I operate almost 30 units in the San Francisco Bay Area. AirBnB and VRBO guests expect some sort of video entertainment to be provided for them is my experience whether it is cable/satellite or an online service like Netflix.

Because pay tv services are typically pretty expensive we make sure all of our units have a Netflix account that the guests can use.  This is pretty inexpensive as we only need a few Netflix accounts to cover all of the units (Netflix allows up to 4 simultaneous streams).

I have some strong opinions on user friendliness though! In my opinion none of the "Smart" TV's are very easy to use with clumsy remotes and non-intuitive menu options with one exception (see below):

In my experience the Roku solutions are the best and easiest for people to figure out. My recommendations are :

1. New TV - make sure to get a TCL brand TV with Roku built in from Amazon or Costco

2. Existing TV - get a Roku box or stick but make sure you get the model with a WiFi remote. The lower end Roku units without the Wifi remote are not as responsive and easy to use.

The new Apple TV units I think are not easy to use because of the touch sensitive remote - requires too much dexterity for an older person or child to use effectively.

@Michael Mueller yes but what rent control means is that your guest would be locked into whatever the original rate is they booked for their 30-day stay.  So lets say they paid you $5000 for 30 days then yes they could just decide to squat and not leave but they would be on the hook legally for that $5000 every 30 day period after that.  Rent control just means that $5000 can only go up a certain amount indexed to inflation every year.  The rate you get for your vacation rental is much higher than what you could get as a normal unfurnished rental so I am going to assume you would be OK with that in the unlikely event that happens :)

x

Andrew - I operate 30 units in your area (Palo Alto and Sunnyvale and San Francisco).  Most of my units never had AC and it wasn't a problem most of the time.  However, each summer has become progressively hotter and each time I have received a complaint about heat I have purchased an AC unit (which is not expensive - probably $200 - $400 per unit depending on the size).

The reality is that people coming in from most parts of the USA or overseas are looking for AC as a feature even if it isn't needed most times.  We almost never need AC in our units in San Francisco but nevertheless we get people asking for it all the time.  If most of your units are in the South Bay or Peninsula then I would say equip them all with AC.  The reviews alone are worth it. Your listing lives and dies by reviews.

I'll let you in on a little secret that you may already know.  Each time you receive a positive review on AirBnB your listing will automatically get boosted to the top or near the top of search results for a short period of time.  You may have noticed this correlation when a new review gets posted you'll often get a few new inquiries or bookings.

Another point about "nightly rate".  The nightly rate is variable as I am sure you notice which is a function of demand. What you should be focused on is occupancy. Keeping your place booked 80%-90% of the time at the best rates you can. You have competition and much of your competition is hotels and they all have AC.  So don't be cheap on AC units :)

In terms of things you can "upsell" I would say I have had good luck selling maid service for people staying more than 1 week.  Also you can sell rides to and from the airport.  

Other people here on this forum I think are giving you sound advice (@Mindy Jensen, @Blair Russel) about providing value without charging for each little thing is the path to success.  

AirBnB charges 6% - 12% on a sliding scale depending on the amount of the reservation.  Higher the reservation amount the smaller the percentage

VRBO is on a similar sliding scale of 5% - 12% but in my experience a little less.

VRBO didn't use to charge a service fee (guest fees) at all but after they were acquired by Expedia they decided that pursuing a business model more similar to AirBnB was going to be more profitable for them and their shareholders.  Most hosts have not been happy with the change myself included but I can't blame them.

A company called CBIZ specializes in vacation rental insurance.  Premiums are pretty reasonable when I have used them.

Hi Mario-

So here is the deal as far as I can tell.  Pretty much any city/county in the United States has what is called an Transient Occupancy Tax (TOT) which is levied on visitors to a given area and normally collected via Hotels, B&Bs, etc.  The TOT tax in Inglewood is 14% just like Los Angeles.  

TOT tax is applied to any rental for less than 30 days.

If you were going to run your short term rental 100% by the book then yes you are subject to the  TOT tax and the traditional way cities (Inglewood included) enforce collection is by requiring business licenses.  So if you go down to city hall and say you've got a business renting accommodations for less than 30 days and ask them if you need a business license I am pretty certain they will say yes and be all too happy to take your money.

Now the more practical question is should you do this?  I would say no you should not go to city hall and get a business license for a few reasons:

1. You are Los Angels county.  AirBnB has a special arrangement in LA county where they will collect the 14% TOT on your behalf from every booking.  In fact there is no choice in this matter. Each AirBnB booking you receive will have 14% tacked on to be paid by the guest.  AirBnB remits that 14% on your behalf. You don't need to do anything.

2.  Inglewood has no STR laws. As far as I can tell Inglewood has no STR laws, permits or regulations. This almost always means there is no corresponding enforcement from the city to try and go after individual operators such as yourself. This is why point #1 exists - cities and counties know tax collection from individuals is very difficult. Getting platforms to do it for them is a very attractive solution.

 Inglewood is in the early stages of a progression we have already seen played out in other cities like San Francisco, Santa Monica, Paris, London, etc. Depending on several factors you will see a fair amount of debate in your city and local government on how to treat short term rentals. 

One extreme is to ban them altogether similar to what Santa Monica did.  Another extreme is to legalize them across the board which is what Arizona did across the state.  Most cities are landing somewhere in between where it's permitted but regulated meaning you need a license and there are restrictions.  My guess is that Inglewood will eventually adopt something similar to LA but you will have plenty of warning and notice of how that is leaning before it becomes law.

In summary I would say go for it and don't bother with the Biz license for now. List on AirBnB and VRBO and find the sweet spots for your area. I also recommending finding other STR folks like yourself in the area - they can be a font of great info on how to price and manage your STR. Good luck!

Hi Michael-

I manage almost 30 furnished units here in San Francisco Bay Area.  20 of those units we are doing on the "Master Lease" model where we lease, furnish and sublet.  The remainder are on what you are calling the "commission split" model where we manage a unit on behalf of an owner and they already have it furnished.

When I started doing this about 4 years ago 100% of my units were "Master Lease" and you are right the start up expenses are not exactly trivial.   

For a studio apartment we spend about $4000 - $7000 to furnish all in (Ikea, Target, Overstock.com, Amazon). 

1BR $5000 - $8000. 

2BR $7000 - $12000.  

We haven't furnished anything larger than a 2BR.

As far as financing the start up costs we often just use the profits but in the beginning we used 2 forms of debt and I will mention a 3rd.

1. Credit Cards. We used a combo of low-interest credit cards from a local credit union (8.5%) or sometimes just an AMEX if I wanted the points.  The high interest rate didn't bother me as the card would be paid off within 90 days.
2. Unsecured Credit Line.  Again credit unions are a good source here. I think our interest rate was like 11%. These are basically "signature loans" meaning the bank/credit union gives you a line of credit you can use for anything you like.
3. HELOC. This is the cheapest source of money I know of.  It's a line of credit against a property.  Interest rates are variable but typically 3%-5% amortized over 30 years. I never used this to buy furniture but you could easily enough.

So one thing about your "commission split" model that I think is uncommon is that you are "splitting the profits".  This is not a common arrangement in my experience.  For all of my units that I am not the leaseholder on I charge a percentage of the monthly gross revenue. It ranges from 15% to 20%. So if the unit in question grosses $10,000 (not including cleaning fees charged to guest) I keep $1500 - $2000. Cleaning fees are still charged to the guest/tenant on top of the gross so you can think of this percentage as the "operating margin".

Goes without saying that charging a percentage of the gross is a more robust business model for the manager compared to "splitting profits".  The manager makes money every month regardless of the operating expenses and overhead.  Do you have competitors in your locale offering a similar business model as yours?

Before AirBnB broke the Short Term Rental market wide open there was already an established industry of property managers operating vacation rentals and furnished corporate apartments. These companies always charged a percentage of the gross and almost all of them still do as far as I know.

My profit margins are higher on the properties I hold the lease on.  But it is more stress since I am on the hook for the rent, utils, operating costs each month and I don't always breathe easy until I see enough bookings for that month to put me in the black. Especially true in the slower seasons which for us is Nov - Feb.

Good luck on your road to signing new leases!  I do however recommend you get some new clients where you are charging a percentage of the gross. You might find that model less risky and more scalable.

Carlos

Credit Unions almost always have the best rates and terms for residential real estate loans.  I would shop there first.  

Hi all-

I am an experienced STR investor in the SF Bay area looking to buy a property (SFH, townhouse, or possibly condo) on the Big Island. What areas are best in terms of demand from visitors? Should I avoid the Hilo side and stick near Kona?

I will be managing bookings myself but obviously hiring local help for cleaning and maintenance. 

Your feedback and experiences much appreciated!

Carlos