Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 16%
$32.50 /mo
$390 billed annualy
MONTHLY
$39 /mo
billed monthly
7 day free trial. Cancel anytime
×
Try Pro Features for Free
Start your 7 day free trial. Pick markets, find deals, analyze and manage properties.
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Jake Miller

Jake Miller has started 4 posts and replied 78 times.

Post: Smart Home Upgrades for Rental

Jake MillerPosted
  • Flipper
  • Huntington Beach, CA
  • Posts 83
  • Votes 40
Originally posted by @Stephen E.:

I think you will find renters are pretty price sensitive. They want substantive upgrades - improved flooring, better appliances, new paint before they will fall for a $200 thermostat. I don't think you could get $50 a month for just $1,000 in spending, especially on largely superficial things. Most renters do not have a lot of money and they look for core value items. Also, I see scope for tenant damage. What are you going to do if they take the Amazon Echo, swap out your LED bulbs and otherwise strip the property of high tech items? These things do happen I am afraid.

Agreed 100% I would focus more on substance then upgrades that a home owner would care more about

Post: Vacation Rentals seem very lucrative!!

Jake MillerPosted
  • Flipper
  • Huntington Beach, CA
  • Posts 83
  • Votes 40
Originally posted by @John D.:

  Call it "pedantic" if you like, but few owners charge the exact amount per cleaning, that they pay per cleaning.  So every clean changes their margins one way or the other (both a a percentage, as well as as an absolute number).  Being clear that cleaning is both a revenue and a cost item, and that it can have a singificant impact on margin percentage and absolute margin dollars is important.  My larger property will book around $20k in cleaning revenue per year -- to not clearly identify that as revenue, and the cleaning cost as an expense, and to not clearly understand their impact on my properties margins would seem ill advised.

That's an interesting perspective, I would actually be curious to dig into that more as from my experience the owners I've talked to charge the same amount per cleaning as they pay, and for my own personal experience it is the same, anecdotal as it is. It would be interesting to see what percentage are taking a hit on the cleanings, I would imagine smaller spaces and overly large spaces. But then one could simply factor that into their daily rates to hide it and compensate for not charging as much of a cleaning fee.

Post: Vacation Rentals seem very lucrative!!

Jake MillerPosted
  • Flipper
  • Huntington Beach, CA
  • Posts 83
  • Votes 40
Originally posted by @Michael Rutkowski:

OK, well there are no cleaners around here who charge less than $20/hr... That's per person. Maybe a college kid or some teenager will charge $15, but are those people even reliable? It takes 4 hours to clean my 1,200 sq ft place, between turnovers. We don't just change sheets and scrub floors, we deep clean the kitchen and bath, wash windows, vacuum every square inch of floor, use lint rollers on our sheets, water plants, organize books, dust the blinds, wipe down all hard surfaces and couches, and more depending on how messy the guests were. Charging a guest a cleaning fee will only cover so much. It looks spotless when it is done. That's our standard. I make it look like it is ready to sell on the market before I let someone step foot in there. I don't cut corners with anything I do in my life. I also don't use illegals to clean my place, so maybe that makes a difference?

And every single lawn care and yard care company I have talked with charges by the month, and wants me on an account. I also don't have much lawn, as my property is xeriscaped with native species. I need a gardener. I only have to mow 2-5 times per summer, depending on how wet our spring is. As you see, every single property is different. Part of my property's appeal, and also why I charge a fair amount per night, is the landscaping in the summer. In the winter, the sidewalks need to be plowed after each storm... That is big bucks. We get feet of snow here, so it's a big job. 

Can I minimize my costs? I'm sure I can, but it would compromise the quality I can present to my guests when they arrive, which I am not ready to do. We get return customers, and customers from word of mouth. Our place is booked all the time, so I don't mind the extra work. With 2 extra properties coming online soon, we will need to hire two more people, which is 4 of us working pretty much full time. Like I said, it is a business. Maybe we are a little different than other STR's, but there is no way someone will be making "lucrative" amounts of money in this area as a real estate investor, while contracting everything out. Just doesn't work out on paper. I'm not going to mislead anyone who wants to run STR's, and thinks it is a cake walk. It's a lot of work if you want to make the big bucks.

Yes you want a thorough clean, it should be like a hotel, however, nobody is talking about hiring illegals or only paying 20hr, but four hours for a 1,200 sqft place? With a deep clean after every guest? honestly I feel like you're throwing away money at that point, you can schedule a deep clean once a month for each room and save yourself the money, perhaps your house is out in boonies or on the beach and tracks in a lot of sand and mud but it really seems like you're throwing away money.

I use to clean my own vacation rentals before I hired it out, and if you're actually moving you should be able to get 1,200 sqft done in 2-3hours. What you charge for cleaning doesn't need to be the price of $100 bucks obviously there is different pricing for different needs, perhaps your 1,200 sqft simply has a lot of demands for attention, this is something I also keep in mind when I'm building my vacation rental, how much time will this add to my cleaning crews, and where can I help them save time.

Also it's pretty clear my comment was hyperbole, pertaining to scrub and change sheets, There is more to it, but the reality is it should be setup in a time efficient way so the most critical items of a vacation rental are attained with each turnover for example a guest will typically be much more attentive to the bathrooms and kitchen area so in my checklist I have a lot of extra things that are done in those sections of the home.. then you can book a separate deep clean for the long term dirt that accumulates over time throughout the house, once a month or once every couple of months, you'll save yourself time and money this way in my experience.

Post: Vacation Rentals seem very lucrative!!

Jake MillerPosted
  • Flipper
  • Huntington Beach, CA
  • Posts 83
  • Votes 40
Originally posted by @John D.:

@Jake Miller Every property management company, owner, and CPA I have talked to counts cleaning charges as revenue.  And cleaning and maintenance expenses as expenses.  Both in future forecasts, as well as historical financial reporting.  And I don't think the IRS has a section for "bonus revenue"...nor do many people do financial forecasts with "bonus revenue" in them ;)

If we want to get pedantic we'll obviously be counting it as revenue, however, that's not the point I'm getting at, and one I would hope people would obviously understand not to focus on. The point being is, cleaning costs only arise when you're making money, it's not some sort of fixed debt that will be there when you're not getting bookings. The need only arises when your customer books the home, and that need is then paid for by that same customer. It shouldn't be cutting into your margins... In comparison to a mortgage or your utility bills or property taxes which will always be there...

"beyond having paid cash for your property"... obviously

Post: Vacation Rentals seem very lucrative!!

Jake MillerPosted
  • Flipper
  • Huntington Beach, CA
  • Posts 83
  • Votes 40
Originally posted by @Michael Rutkowski:
Originally posted by @Jake Miller:
Originally posted by @Michael Rutkowski:

If you want someone else to clean, you will have much slimmer margins for example..

You shouldn't... you should be charging a cleaning fee to begin with, I agree with your mindset of understanding it's a business, and because of that the costs of business are passed on to the consumer. Cleaning Fee should be covering not only your interior cleaning but if you have a yard that needs to be maintained you need to factor that into what you charge the guests.

I do charge cleaning fees, but if I charged the customer what my cleaner would charge me, it would be roughly 30-40% of the rental fee, which is not something people want to see once they attempt to book your property.

As for maintenance, I find that signing up for a PM maintenance company is a huge waste of money. It is around $300+/month or about 10% of revenue per unit. For a few lawn mowings... No thanks. 

Once again, it is up to you how much money you want to make, but having a cleaning fee of 30% of rental, would be a deal breaker for me, so I would assume that other customers think along these lines as well. 

Sounds like you may need to find a different cleaner then, in my experience I tell the cleaners what I pay and how long it will take them between flips, if they want it good, if not I move on to someone that's motivated to get it done. I definitely don't talk to cleaning companies that advertise themselves as "vacation rental cleaning companies" reason being is they're no different than a Property Management company thinking they can gauge you because it's a vacation home.

For example one of my units is a 4 bedroom 2 bath 2000sqft home, I have my own cleaning crews that I pay 100 to clean in three hours time, that comes out to 33$perhr. Now for pure interest I called two separate cleaning crews who advertised themselves as "vacation rental cleaning specialists" and they quoted me 300 per cleaning, which is just insane.

Cleaning is cleaning folks, whether it's a vacation home or not we're talking about changing sheets and scrubbing floors. Attention to detail is the only distinguishable characteristic one generally needs to do the job, their is no degree behind it or general skill that takes one years to learn to limit the labor force to allow them to price gauge.

Same thing for lawn maintenance, I call the big companies and they quote me 40 bucks per mow, I call a handyman and he quotes me 20bucks per mow... mowing is mowing folks, there is no degree or distinguishable reason to mark up the price beyond what it is.

Post: Leavenworth WA or Chelan WA

Jake MillerPosted
  • Flipper
  • Huntington Beach, CA
  • Posts 83
  • Votes 40

Old thread but I have looked into Leavenworth, seemed like from my research on the area it was mainly just weekend getaways, not much bookings happening through the mid-week, but this was a few years back and it's possible I was looking through their bookings at the wrong part of the season.

Post: Vacation Rentals seem very lucrative!!

Jake MillerPosted
  • Flipper
  • Huntington Beach, CA
  • Posts 83
  • Votes 40
Originally posted by @Joe Splitrock:

@Kristi Bass you will find that VRBO have risks.

1. Most state and local governments have not caught up with regulating this industry. VRBO are taking business from hotels by avoiding taxes and regulations that hotels are forced to follow. That will not be allowed to continue indefinitely as cities start to categorize VRBO as a small hotel or resort. 

2. The vacation market goes through cycles with the economy. Right now, vacationing is very popular, but when people see their income cut, vacationing is the first thing to go. For this reason vacation rentals are much more volatile than the general rental market. You need a place to live, but not a place to vacation.

My recommendation is to keep cash reserves and an exit policy.

Both are very key to keep in mind.

I think one thing you can do to try and hedge with Number 2, is keep your expenses within the realm that if the vacation market tanks you could still hypothetically rent out your house long term and cover your expenses on the home. This way you keep a safety net incase things go south.

As well as that you don't necessarily have to keep your vacation rental running year round, you could very easily just rent out your home four months or however long you believe your vacation market to be and then rent it out long term furnished for the remainder of the year. This way you're not banking on having a huge hot-season booking list and enough through the slow season to keep afloat.

Post: Vacation Rentals seem very lucrative!!

Jake MillerPosted
  • Flipper
  • Huntington Beach, CA
  • Posts 83
  • Votes 40
Originally posted by @John D.:

@Jake Miller Regardless of whether you charge a cleaning fee, your margins will be slimmer if you pay someone to clean (vs. incurring no charge if you do it yourself).

Yes, but those shouldn't be calculated as expected revenue or a debt. It's merely an opportunity at bonus revenue if you deem the opportunity cost to be worth it, and it can't be considered a cost to the margin as it should already be factored into the guest paying for it. The only way it would hurt your margin is if you decide to not have the guests pay for it, or perhaps you end up paying your cleaning crew more then what you're charging.

Post: Vacation Rentals seem very lucrative!!

Jake MillerPosted
  • Flipper
  • Huntington Beach, CA
  • Posts 83
  • Votes 40
Originally posted by @Michael Rutkowski:

If you want someone else to clean, you will have much slimmer margins for example..

You shouldn't... you should be charging a cleaning fee to begin with, I agree with your mindset of understanding it's a business, and because of that the costs of business are passed on to the consumer. Cleaning Fee should be covering not only your interior cleaning but if you have a yard that needs to be maintained you need to factor that into what you charge the guests.

Post: Beyond Pricing for VRBO/AirBnB/etc.

Jake MillerPosted
  • Flipper
  • Huntington Beach, CA
  • Posts 83
  • Votes 40

I've looked at them, I don't use them though. Airbnb already has a feature pretty similar to that built into their system. I don't find airbnbs auto-pricing to be accurate at all and it frequently quotes rates for me more than half of what I know I'm able to fetch for my place.

I would say this is probably because I would imagine it would be hard to code a system that takes into account quality of amenities, true location, size, and unique features.

What both systems likely do is just dig through all the listings of homes that are around the same bedroom and bathroom size and then give you a price based on the average of those homes, but that leaves so many important factors out of the equation such as the quality of the house, the true location of the house to tourist attractions in the area, quality of amenities, unique amenities and the houses reputation through reviews.

I think the tried and true way to accurately price your home is to simply dig through the listings and find houses that truly reflect and in accuray to your own house, see how much they're booking for through the listings calendar and then price your home similarly to theirs.