All Forum Posts by: John Litz

I am not a fan of the arbitrage system. Sure it can get a person started earlier. However they are missing out on all the revenue a property can generate. Arbitrage is simply transactions. When you analyze a deal as an LTR so you can pivot if necessary, you are in a much stronger position. Owning makes money from cash flow, appreciation, depreciation on taxes and write offs for your taxes. 
Your tech stack is critical. If you're trying to do everything yourself that is a sure fire way to burn out. Yes some things will require the personal touch. However when done correctly you shouldn't need to write a single message to the majority of guests and still have them feel warm and fuzzy because you have been an attentive host. Get listed on all the OTA's and a direct booking site, use good management software like HostAway, use dynamic pricing software like pricelabs, use WiFi enabled smart locks like Schlage encode, use an email capture system for guests to login to WiFi like stayfi, use those captured emails to do marketing for your direct booking site, and automate scheduling and payments for cleaners and maintenance. The more of the day to day items that can be handled with tech the more you can be freed up to do higher ROI on your time items. Things like acting like a guest searching for a property and seeing how well your property goes to the top of the algorithm or not, as a guest looking at pricing of your property vrs your closest competition, looking at properties that are doing well and seeing what you could be doing better. Listening to YouTube big shots that have great advice on professional ways to handle problematic guests ( most are great but everyone will get bad apples), staying at the property when you have an open window of time and actually get the guest experience (this is critical), and looking at your click thru and conversion rates to get a good baseline.

There is way more work to running an STR than a LTR. Yes good markets are over saturated. But if you're a top operator who cares if the bottom 50% are struggling. You're still getting booked. National occupancy rates are 50-55%. This year I was at 71%. Still not good enough but for my first year not bad at all. This is my first property. I was able to replenish emergency fund money I had to dip into for furnishing, was able to pay off a hot tub, was able to replace 2 garage doors and paid for a larger repair this year. My cash flow for the year was $13k. Nothing fantastic for sure but the property paid for all its own bills and made money with a newbie operator. Next year will be even better with improvement that are constantly getting made as this is not a set it and forget it business.
This hospitality business is not easy money like so many think. But if you’re willing to put in the work it does tend to make significantly more than LTR. Stay focused on providing excellent guest experience and you will stay higher in bookings and revenue. 

You will want keyless keypad entry for sure. Smart TV does not need Chanel’s just access to whatever the guest currently streams. It’s even better with guest mode turned on so they can enter a date to auto log them out. Games are a must, less pieces the better. Cooking is huge so well stocked kitchen plus bbq. Fire pit with string lights is very popular. The biggest pain in the butt is also the best for increasing bookings and that is the hot tub. Not for every property but it does make a huge difference. 

Garret completely agree with you. Clicks and conversion rate are extremely important. Quality pics are by far the number one contributing factor. Color also plays an important role in this area. If the search produces a sea of natural earth tone pics, the one that stands out has a splash of color. I tell people all the time to think of any pic of a hotel room- 9 times out of 10 it’s nice professionally done but it is also boring. Nothing to really grab that attention. If possible it is awesome to test with a focus group. Do a small sampling of listings that are your direct competition. Show the hero photo for each listing to the group and ask them which one they are most likely to click on and which is least likely. So valuable to get people’s opinions!!!

Not sure why you would refinance a lower interest primary loan into a higher interest DCSR loan. You're planning on staying for a year so no issue there. Only downside is keeping the PMI on the loan which really in minimal cost. Until you reach the limit of 10 conventional loans I wouldn't even think about the higher interest of a dcsr loan. When you're ready for the next one simply use another conventional to either refi and get the FHA back or leave the FHA in place and do another conventional on the next property. Plenty of options available.

Simply have another service in place before breaking away from evolve. Plenty of services and managers all doing similar things that are much better than evolve. 

1. Pro photos for the best chance to grab attention. Look at your competitors hero photos and do something different with other colors

2. Pricelabs is the most common dynamic pricing software but just make sure you’re using something. 

3. Amenities have to be incredible. Hot tubs are expensive and a pain in the butt. However they are also one of the best investments to drive booking in.

4. Management- evolve sucks, get a really good manager that has a team to support both them and you. They will get you on every platform- Airbnb, Vrbo, your own booking site, booking.com, google vacation rentals, Marriott’s, Expedia, furnish finders, there are plenty of smaller ones as well. They will help with your tech stack as well such as Hostaway, pricelabs, WiFi locks, stayfi for marketing etc.

5. Design- in my market I don’t see crappy units, they are all nice. However think of a hotel room, it’s nice right but it’s also kinda boring just a place to sleep. Again look at competitors see who is being successful. Don’t copy their design make your own but look at styles that work, what can you do that makes you special, can you do a theme that will stand out? 

6. You are not in a real estate business, you’re running a hospitality business. Your management has to be top notch, your marketing has to be top notch, your pricing has to constantly change with the environment, your design has to be incredible and the photos have to trigger that booking response. Gone are the days of easy money. Guests are picky and entitled so you have to be elite in your market. The goal is not to just have a nice property with a sea of other nice properties. The goal is to be in the top 10% so you have a much higher chance of getting booked, first breaking even and then creating cash flow because that is the goal of any business. Or would you rather be paying out of pocket to provide a house to your guests

If you're still planning on selling but waiting a bit you may want to do the LTR strategy, perhaps on a month to month set up. STR is expensive to furnish correctly and you said you already have to much in the property. An LTR tenant will likely be easier on the property than a bunch of guests every few days.

I take a more conservative approach to STR. Analyze the deal as an LTR first. Location is always important, never invest in war zones. Make sure the LTR rental income will service first all of the PITI then handle another 15% for vacancy, repairs and cap x. Then it needs to cash flow even a bit. I analyze with a 25% down because that is what lenders typically want for an investment property in my location. If all of the above are a yes, then you can go further and do research on if your market is even good for an STR. Find out what a typical nightly rate is for your area (not what air bnb charges, the actual nightly rate the owner will receive not including the cleaning fee). See what typical occupancy rates are. Figure out all the extra expenses of utilities, management, perhaps hot tub, internet etc. go low on income and high on expenses and see how the numbers look. STR is not the same as LTR at all, this is a hospitality business not real estate. It is much hard than LTR and you have to be elite at it to make decent money, otherwise it can be a sink hole for money. Best of luck

First I would never buy a property that wouldn't cash flow as an LTR. That way is you choose to do STR you can always pivot if needed. Often people will do a a dollar amount per square foot that helps them calculate furnishing cost. This is good for getting some rough figures. Only you know what level of furnishing will be you personal niche. Some are rustic while others are luxury. I can tell you nationally average occupancy rates are approx 55%. Obviously this is dependent on your local area, saturation and quality of product. But it is a good starting point to estimate your revenue. For a 3 bed 2 bath my average nightly rate is about $215. But every market will differ. I would do more research on YouTube university to analyze the property and then get familiar with your local area so you can be more confident with your numbers.

Arbitrage was a better model when there was stimulus money and revenge travel going on. Now it is a more normal market or even a bit depressed as we are arguably in recession. People are being more cautious with spending as stimulus money is gone, cards have high balances, many folks are losing their jobs and inflation prices are very high. It is expensive to set up a property, the costs are high and you are not able receive any equity. Risk is high and as such many will fail and some will hit it big. No different than gambling.