A few years back, I provided the training 5 Steps to Short Term Vacation Rental Investing and those lessons are just as applicable today as they were in 2016. In this new teaching, you will discover 7 powerful advanced vacation rental investing tips. These new advanced tips will simply add to those foundational principles and will help take your vacation rentals to a whole new level.
1. Be on Solid Legal Footing
This is so important because if you’re not, it can be a real mess to deal with. I’ve been head-to-head with the land use and zoning commission. I’ve even had to sell some of my properties due to zoning laws. There’s a war going on right now between the hotel industry and vacation rentals. The hotel industry is really upset with the way things have disrupted their machine. As a result, they are trying to get governments involved. They want to use the land use laws to try to shut vacation rental owners down in areas where the laws are ambiguous.
I was reading the land use and the zoning rules in one of my areas in Florida, it was over 650 pages. I had to look through each page highlighting until I found the loophole. Find the loophole and it can make all the difference in the world. Now if you get in an area where other properties might be illegal but yours is legal, it can be a winning situation.
In certain areas, it’s not a problem at all. You can just do vacation rentals and there’s no concerns. I have a vacation rental that I paid $130,000 for. After investing $100,000 into the furnishings and renovations I’m in at roughly $230,000. Now I’m bringing in a net of $4,000 a month, which is $48,000 a year. So, when you do it right, it can be a complete home run.
You can’t just rely on what you read online or when talking to a zoning or a land use person at the county office. You need to do your own research and go into the actual code. Be sure you are on solid legal footing because if you’re not, you can and will be shut down.
2. More Bedrooms are Better
This is so important. You want to sleep as many people as possible. You can be creative with this. By furnishing with a futon or pull-out couch, a loft can do double duty as a living and sleeping space. The more bedrooms you have, the more likely you can compete with hotels. Remember hotels have restaurants and cleaning facilities, and guests can call guest services anytime. You don’t have some of those benefits.
How do you compete against the hotels? More sleeping capacity. You win with the ability for people to stay together as a family. That makes all the difference in the world for you. Not only today, but down the road. I have a seven-bedroom property that is very profitable, and I’ve worked with several other people that do great as well.
3. Don’t Hold Back on Furnishings
Go for it and go big. I know nothing about interior design or home furnishings. This is typically a female thing. They see something like a centrepiece and think it’s cute and would be perfect for the space. Gentlemen, you must let them buy it. I know it sounds reckless but let them go crazy with furnishings on a vacation rental.
This is important for 3 reasons:
- It covers deficiencies your property might have, like not a great location or view.
- It’s the woman who usually makes the final decision on which cabin or house they’re going to rent.
- They’re the ones that are most likely to give a positive review.
This is tough for anyone who makes decisions mathematically. We doubt that we need to spend a couple hundred dollars on a lamp or centerpiece. However, you do need to go big on furnishings. I have tested this over many years and have found it to be true. The better the furnishings, the better you will do. It also means taking a deep breath and saying yes when the creative one in your group decides that they want to buy that crazy looking lamp. People love it and they’ll give you reviews like, “I absolutely love the lamp!”. They’ll ask you where you bought it.
4. Get Your Bookings from HomeAway and Supplement with TripAdvisor
You need to get most of you bookings from HomeAway and then supplement with TripAdvisor. Stay clear of Airbnb. In other words, you want to be very selective and choose services that are pro-owner. When you have a problem with a guest, HomeAway VRBO is pro-owner. They will side with you in most cases. On the other hand, Airbnb will side with the tenant. This may not seem like a big deal in the beginning, but over time it will stack up and you can lose quite a bit of money. Whereas HomeAway, which is VRBO, will treat you very differently. They think you’re the king and that makes it a lot better as an owner.
When I do list on TripAdvisor I list them for the same price as HomeAway, because TripAdvisor is comparable to HomeAway in the way they treat you as an owner. In the cases where I still have an Airbnb listing, I usually jack up the price a little bit to compensate for the hassles that the platform puts us through.
This advice has come from years of experience and repeatedly hearing my property managers say, “I hate Airbnb”. If you optimize your listing correctly, you really can get most of your bookings just from HomeAway VRBO. They’re huge and a much better platform to work with.
5. Dynamic Pricing
You need to tie your pricing to a dynamic pricing tool. The difference is in my older post I talked about using Wheelhouse. They’re still great but only good for TripAdvisor and Airbnb. They don’t work with HomeAway anymore, therefore I use Beyond Pricing for HomeAway and then I use Wheelhouse for TripAdvisor and Airbnb. By making sure I keep up with the Beyond Pricing settings, I know I’m maximizing my pricing.
If you are using a service like Evolve, they will take care of everything in tip four and five. I started doing this before I knew about Evolve. I have great reviews on my listings, and Airbnb and HomeAway won’t let you transfer the listing to Evolve. I want to keep that status, so I trained a property manager, but you don’t have to mess with this if you have Evolve. If you’re more manual like myself or my property manager, make sure you’re hooked up on these dynamic pricing tools. They will ensure you maximize your profit.
6. Go High on Your Cleaning Fee
This is an insider tip I learned the hard way. I tested this out and found that it really works. First, you collect the cleaning fee at the check out process. My experience is that no one will balk at a higher fee and it will give you more money to pay for the best cleaners. And great cleaners make all the difference. Also, raising the cleaning fee allows me not to charge a deposit or any other damage protection policy. As a result, the client can just make the booking without that hassle and they think they’re getting a deal.
You may be thinking that not charging a damage deposit is a bit risky. It’s true, some guest will be irresponsible and mess the place up. And some people will steal some of your stuff. However, if instead of charging $120 for the cleaning fee you charge $190, that’s an extra $70. If you have 50 guests in a year, that’s a significant increase. When you have an $4,000 coming in because you increased your cleaning fee, you have enough money to cover the cost of theft and damage. It’s worked for me now for five years and I have a ton of vacation rentals.
Ultimately people are less likely to balk at a cleaning fee than they are at your overall price. With this in mind, when you jack up the cleaning fee, make sure you use that extra money to cover all the problems that can come up.
7. Stay in Your Properties
Either you or a close friend or a family member needs to stay at the property at least once a year, if not twice a year. In the beginning you will have no problems going and staying at your rental, but then over time you will stay there less frequently. It’s important you inspect your properties because you know your property best. You’ll know the little things that nobody else knows. By going there you’ll notice things are missing better than even your cleaning company. So, you need to stay there and stay up to date.
I have a lot of properties, so how do I do it? Well, I bonus my employees and ask if they want to stay there for free with their family. As part of the exchange, they do a thorough review of the property for me to see what’s going on. They won’t know exactly everything that might be missing, but at least they’ll get a good look at it from my perspective.
Make sure you always get a Wi-Fi-enabled thermostat. This allows you have more control, and you know what’s going on. Nest is a popular one, however the drawback is it’s best if you live in the property. Ecobee seems to be a better choice for rentals because gives you a cool little feature. It allows you to program it so you can block their range. Invariably what will happen is in summer your guests will turn the thermostat down to about 62, which is going to cost you a fortune. Then of course in winter, they’re going to bring it up to 85. That’s why you need to control these things, because it can get way out of hand sometimes and it can make all the difference in the world of profitability.