All Forum Posts by: Craig Jones

Quote from @Jake Andronico:

@Craig Jones

Super cool property!! Awesome makeover. 

I'm curious, have you run into any insurance issues? 

Insurance was a huge challenge, but BiBerk (a Berkshire Hathaway company) was willing to write a policy for us. Three Insurance (another Berkshire company) would also have written a policy if we had three years of hospitality experience. Our prior STR experience didn't count for them.

I posted briefly about this back in July or August before we closed, but thought I'd write a little update because it's been an interesting ride.  We bought a place in Truckee, CA (Tahoe area) across the street from Donner Lake, a few minutes off I-80.  It's a good market with year-round demand that peaks in both winter (ski season) and summer (beach / lake / hiking / etc) season.  April is the only real low month.

It's a funky place -- essentially a 5 room motel (originally built 1959) with a manager's unit (built 1984) tacked onto it. But the manager's unit is really a 3000 sqft / 4 br / 2.5 ba SFR, and we live there as our primary residence. Though the buildings are attached, the guest rooms all have individual exterior entrances with no interior connection to the residence. The upper story and deck of the residence come out over the top of the motel forming kind of an exterior corridor or breezeway that pops out on the front of the building. There's also a detached two-car garage and workshop.

It exists in kind of a twilight zone between commercial and residential. In some cases that's amazing -- one part of the town gov't considers it to be a commercial lodging establishment so it's exempt from STR permitting and regulation. And another part of the town considers it to be residential, so it's exempt from most building codes and inspections that would normally apply to hotels. 😊

In other cases the ambiguity made it almost impossible to buy and insure.  No residential lender would touch it.  Nor any commercial lender, because the previous owners ran it as kind of a retirement hobby and the historical P&L's were crap.  In the end we presented evidence that no buyer would be able to finance it and got them to agree to 85% seller financing.  That was truly a rabbit out of a hat.  

We made light investments in guest room makeovers, outfitting each room with a Queen + Twin XL bunks.  Also pro photos and a PMS with listings on Expedia, Booking.com and AirBnB.  The previous owners took reservations mostly by phone, wrote them on a big paper wall calendar and hand keyed CC numbers into a terminal 😲

The bunk beds have been a huge win.  Families with two teens (or tweens) can get one room and their kids don't have to share a bed.  Same with three dudes up for the weekend to snowboard.  And it doesn't seem to spoil the charm for couples on a romantic getaway.

We've been able to raise the nightly rate 2-3x with better occupancy.  We're priced somewhat above a fairly new Springhill Suites about 4 miles away.  And I think we still have some headroom with rates as we build reviews.  AirBnB has been the biggest surprise.  I didn't expect that audience to go for what is essentially a hotel room, but more than 1/3rd of our bookings come from there.  

We'd definitely do another similar property if the opportunity arises.

Before (actual website / listing photo):

After:

I don't think there's any one platform that gets gold stars across the board.  It's a matter of finding the one where the weaknesses are in areas that aren't relevant to your needs and/or don't aggravate your personal pet peeves.  (Like I think Craigslist is still one of the best websites on the internet, but for some people it's a total turn-off because it still looks like 1995).

Capterra.com is a great site for research in this category (and business software in general).  All the major PMS platforms have hundreds of reviews on there and you can get a great sense of what will and won't work for you without having to sit through 5 or 10 sales demos.

I discovered both OwnerRez (for our STR) and ThinkReservations (for our hotel) on Capterra.

Quote from @Joel Oh:

Quote from @Craig Jones:

For chemistry nerds:

A salt water tub uses a cartridge with titanium plates in it.  When electricity passes through the titanium it acts as a catalyst that converts the dissolved salt (aka sodium chloride) into sodium and chlorine.  The chlorine goes into the water and the sodium builds up on the titanium plates which is why the cartridge eventually has to be replaced.

These systems don’t actually measure how much chlorine is in the water or how much is needed.  They just generate chlorine at a constant rate depending on the system setting.  Which may or may not be enough.  Usually on the “not” side if the tub gets heavy use.

 Nerds win! That is what exactly the sales person said. He said to just put at the highest setting and change filter more often filter cost is honestly nothing for Airbnb hosts. So... do I still need to check PH level.?

The cleaning company I use started offering hot tub service about a year after I got the salt water tub and I took them up on it.  It's honestly way way better with the pro servicing it at every turnover.  It's sparkling crystal clear when he's done in a way I could never achieve on my own.  In addition to PH I believe he also checks chlorine level, salt level and total dissolved solids.  That last one lets him know when it's time for a drain and refill.

For chemistry nerds:

A salt water tub uses a cartridge with titanium plates in it.  When electricity passes through the titanium it acts as a catalyst that converts the dissolved salt (aka sodium chloride) into sodium and chlorine.  The chlorine goes into the water and the sodium builds up on the titanium plates which is why the cartridge eventually has to be replaced.

These systems don’t actually measure how much chlorine is in the water or how much is needed.  They just generate chlorine at a constant rate depending on the system setting.  Which may or may not be enough.  Usually on the “not” side if the tub gets heavy use.

Quote from @Dina Schmid:

I found this post as I was searching for more information about State Farm's coverage and hope someone who has posted on here can help clarify something for me.

Are you getting a homeowner's policy with an endorsement for use as a STR or a business policy? Is one better than the other.

Our agent provided quotes for both. The business policy is significantly more expensive. It includes loss of income and higher liability coverages but covers less on contents and sewer backup. 

The homeowner's policy requires us to rent it for a minimum of 30 days and stay in it a minimum 1 night/year which should not be a problem.

Both of these are a fraction of the ridiculous quote I got from Proper and much less than Steadily's quote so I am planning to go with State Farm. Just not sure which one is the best option from a STR standpoint.

Ours is a State Farm business owners policy (BOP) which has the features you mentioned -- building replacement cost, $1M/$2M commercial liability and loss of income coverage.  For us the BOP premium was higher, but not outrageously so.  Maybe because high wildfire risk at our location is the most substantial contributor to the policy cost in both cases.

I have also heard a State Farm agent (not mine) say that homeowners /w STR rider is allowed if the owner stays at least one night per year.  That language is definitely not in the rider itself, so if you decide to go that route, I'd ask for it in writing.

Our decision to go with the BOP was driven by the fact that they write commercial STR under a hotel / motel policy.  So I have a fair amount of confidence that it will cover most of the scenarios we might encounter.  I have little confidence in what a homeowners policy /w STR rider will cover, because no other insurer I've talked to is okay with this for an (essentially) full-time STR operation.

My STR is covered by a commercial hotel/motel policy from State Farm. It's a SFH and I don't rent it by the room, but I bet State Farm wouldn't have a problem with it on this type of policy.

I ended up with this policy after searching almost 6 months for someone who would cover an STR in a high wildfire risk area.

Don't let your State Farm agent push you into a homeowners policy with STR rider. Tell them it's an investment property with no owner use and you want a commercial policy with $1M/$2M liability coverage. If they give you pushback, call a different agent. Some State Farm agents might not know that they do commercial hotel/motel policies for SFH STRs but their underwriters definitely do.

Kitchenettes are a great idea, but zoning won't allow it.  Current zoning would prohibit the whole setup actually, but the building and commercial use are allowed to continue as-is because they predate the town's incorporation in 1993.  It can't have any more guest rooms than it already does and the commercial use loses its legal non-conforming status if the main residence isn't occupied by the property owner or an onsite manager.  So in theory it can't be a LTR if we move out someday, but a lease naming a tenant as "manager" probably gets around that.

I've thought a bunch about how to improve the property's cash flow, and there's lots of marketing and operational low-hanging fruit before we get to capital improvements.  One idea we want to test out is a room setup that can accommodate families who would need two rooms at any other hotel.  Like families with three kids or two teens who refuse to share a full/queen.  Theme park hotels and places like Great Wolf Lodge who have rooms like that charge big bucks for them.

We could possibly add an ADU, but as LTR only.

There are a set of destinations in northern Wisconsin and Michigan that I think are potentially untapped STR markets. The lakeland area around Minocqua and Eagle River, WI. Door County near Green Bay. Northern MI around Traverse City.

These are not nationally known locations, but still pretty popular drive-to vacation spots for Minneapolis, Chicago, Milwaukee and Detroit metros.  Lake time in the summer, leaf peeping in the fall, and snowmobile / ski season in the winter.  

The skiing pales in comparison to Colorado or the Sierra Nevada of course, but I still thought it was pretty great as a kid growing up in the midwest 😃

Yes, it's BP buzzword bingo -- but also a real deal. We're closing in a couple weeks on a 5-room motel in the Tahoe area that also has a 4 bed / 2.5 bath / 3000 sqft SFR "manager's unit" that will be our primary residence. Year round tourist demand in Tahoe creates lots of opportunity for the guest rooms. The town treats it as a commercial lodging property so it's exempt from heavy-handed local STR restrictions.

The sellers have been open for biz only part time in their retirement.  Which created historical financials that made commercial financing pretty much impossible.  And no lender was willing to look at financing it as a residential property.  In the end we pitched seller financing, which I thought they'd never go for, but we ended up working something out on pretty favorable terms.

I'm interested to connect with others who are doing boutique hotels / STR hotels, whatever you want to call it. Especially on the software stack you are using. We use OwnerRez + PriceLabs for a traditional STR we own which I've been very happy with. But not sure it's the right fit for this property. And wondering if I should be looking at platforms like CloudBeds, ReservationKey, ResNexus, etc.