All Forum Posts by: Paul Sandhu

There is a refinery in my town. 99% of my renters are contractors doing short term work at the refinery. A cheap motel is $400/week, and that's what I charge for a 2 BR STR. Over the course of 6 years, I've slowly taken most of the business from the cheap motel, mainly through repeat customers and referrals. The 3 main advantages of an STR over a motel room are being able to cook, doing laundry, and having more space.

The owner of the cheap motel sold it this month, but is helping run it.  The new owner used to be a welding inspector, a contractor, just like all my tenants.  Of course the new owner bought the motel with every intention of making money by doing a better job than the previous owner.  

What would you do if you ran the motel to compete against STRs? And what would you do as an STR owner to offset what the motel is doing new?

1. Motel puts in a food truck in the parking lot. People still have to pay for their food, and they can't cook for themselves. It may not be open 24/7 like the kitchen in a STR.

2. Motel provides laundry service. Guests might still have to pay for this service, and it may not be available 24/7 like it is in a STR.

3. Motel lowers their rates.  They are already the cheapest place in town, but I can go down on price if they do.

4. Motel lowers their rates.  I can keep a base rate the same for a bigger house.  $400/week now rents a 3 BR.

5. Motel lowers their rates. I can put a 3rd bed in all the 2 BR STRs.

6. Motel offers better service.  My renters get a place to shoot guns and hunt, my 40 acre back yard.

7. Motel puts in Smart TV's and faster internet.  I already have Smart TVs in half my units and 15.0 Mbps WiFi in all.

8. Motel has a cookout once a week or every few weeks for their tenants.  I can do the same, and I have a the capability to do it at an apartment complex that has 10 STRs.

9. Motel owner runs for city commission and tries to ban or limit STRs.  I need to be friends with other commissioners.

My biggest STR has a Jacuzzi on the 3rd floor. Yes, it's a big house. 4 baths and sleeps 9. The Jacuzzi gets used maybe 3 or 4 times a year. It's a good selling point, but it's not useful.

This summer we bought an above ground pool.  It's a real pita to keep it clean, check the chlorine and adjust, check the ph and adjust, add water when necessary, clean the filter, vacuum the inside, remove dead bugs and leaves, and this is only 20 feet from my back door. 

If it was at a rental property.  It would have been the first and last summer the pool was up.

4 units.  I'm guessing they rent for $500/week.  That's $2000 per week, or about $9000 a month 100% occupancy.  So in real life it's probably $4500 to $6000 per month in rent.  A flat 15% with no fee for visits or house checks seems fair.  That's $700-$900 a month to you.  Or 10% with a fee for visits and house checks.

I'm completely hands on with my 22 STRs.  The furthest one is 7 minutes from my house.  The closest is 3 minutes.  I personally collect rent, mow, do most repairs and maintenance, restock them, etc.  I'm the one that shows them to prospective tenants. 98% of the time they take the house after seeing it.  The ones that don't take the house end up staying at a mobile home park that has furnished trailers that cost less than my houses.  My 2 bedrooms are $400/week.  The trailers are $600/month.

I generally buy my things from Walmart. 82 beds is my total. I buy 2 types of pillows, one standard and one oversize. As far as sheets go, I don't buy the cheap one. I buy the 2nd cheapest ones that WalMart has. If I'm starting with a bare mattress, I buy the 2 pillows, a mattress pad cover, and a "bed in a bag" package. Try to get the same pattern or color of linens, that way sheets and pillow covers can be swapped. Don't buy white, for obvious reasons. These are not VR's, they are STR's for travelling workers.

Originally posted by @Valerie Rogers:

Hi @Julie McCoy,

I recommend setting a specific rate for each configuration instead of charging extra per person. In my opinion charging per person is very hard to enforce and only encourages people to lie about the number of people in their party if they think it will save them some money. 

I sort of do the same thing.  Flat rate for the entire house.  There are extra beds in the living room or dining room that people can sleep in.  These houses are not VR's, they are places to stay for refinery contractors doing short term jobs.

My logic is that the more people I can put into a place the longer it will be rented out.  1 or 2 guys might be transferred to a Texas or Louisiana refinery, the other guys stay in the house and find new room mates.  This has worked for the last 6 years.

I tell them that the rate is for 2 people.  If extra people are there, there is no charge.  

Other people doing STR's in this town would charge extra for extra people. I don't see those people advertising houses anymore.

@Steve B. You have my interest. How am I practicing predatory pricing? I never mentioned anything about prices or rental amounts. I did say I put people out of business. In my niche of STRs, people rent the first place they hear about. I make sure my future renters know about my rentals before they even know that they are coming to this town to work. My previous competition did not.

It sounds like you are leasing a property (for 12 months?) and then you plan to furnish it and rent it out for a STR. You don't know about furnishing or marketing the property, but today you are signing a lease?

RUN AWAY! Don't do it. You should already be knowledgeable about furnishing and marketing before you sign a lease.  What is your target market in Duncanville TX?  Vacation goers, refinery workers, students, retirees?  You need to know who you are renting to and what they want before you sign a lease.  You also need to determine if there is  sufficient demand for what you are offering for it to be profitable for you.  You also need to determine what your competition is like and how big they are.

I have 22 STR's in this town. Every 12 months someone comes along and tries to do what I do. They start with one or two houses. When that new person enters into what I am doing, I change my focus from "Renting out houses" to "Putting them out of business". I've put 4 people out of business and was a contributing factor to cause a motel owner and an RV park owner with cabins to sell their property. Someone else in Duncanville TX will do that to you.

I follow the KISS principal.  They renters pay me cash for the first week when they move in.  They pay again one week later and repeat.  They generally don't break anything, but if something is broken when they move out I just fix/replace it and claim that expense on my taxes.  

Coffee pots and sheets are consumables, just like pillows, towels, toaster ovens and old style televisions.

Not to toot my own horn, but I'm the resident expert on this question.  14 2-bedroom and 8 3+ bedroom houses is what I currently have as STRs.  Most of my 2 BR's have 3 beds in them.  All of my 3 BR's have 4 beds.  My 4 BR's have 6 or more beds in them, with 2 or more baths.

2 bedrooms rent for $400/week.

3 bedrooms rent for $600.

4 bedrooms, the rent varies on the number of occupants.  The most they can make is $1200-$1600 per week.  But on average it's $800-$1000.

These are not VR's. They are STR's for refinery contractors. My typical renter is 40 year old male from Texas or Louisiana with a high school education making $30/hr and working 60 hours a week.

At the end of the year I add up how much each of the 22 houses make in rent.  They all make between $12-$16 k a year.  Some years a 4 BR makes the most money.  Some years a 2 BR makes the most money.  

A 2 BR is as easy to rent out as it is to pour water out of a boot with the instructions printed on the bottom of the heel. But they don't bring much in each week.  Half the time it's one person renting the place.  I charge a little less.

The 4 BR's are hard to rent out.  Not only do you need a group of 4-6 people, the 4-6 people need to get along with each other.  It's usually a father, son, uncle, in-law, cousin, neighbor.

It isn't the number of bedrooms that determine how many people a house can hold.  It is the number of bathrooms.  A rule of thumb is you need 1 full bath for each 3 people.

If I could do it all over again, I would only buy 2 BR houses and any 3 or 4 BR house that is a bank foreclosure.  A 3 or 4 BR bank foreclosure sells for the price of a 2 BR house in this town.  6 months of rent pays for the house.  It can take 7-12 months to get 6 months of rent.