Real estate has been on my mind a lot lately, in case you haven’t noticed. For starters, I’m going through the process of buying my first home. Other than that, you know I’m a huge advocate for multiple revenue streams. And there’s no denying that investing in real estate can be another great source of income. Between my personal interests and this common knowledge, I found myself bingeing episodes of Thanks for Visiting. Thanks for Visiting, hosted by Annette Grant and Sarah Karakaian, is a podcast and educational resource all about running a short-term rental business. So excuse me as I try to contain my excitement. Because Annette and Sarah join us today for a chat all about building a short-term rental revenue stream.
Building a Short-Term Rental Revenue Stream
Short-term rental properties have become synonymous with one company: Airbnb. So much so that Airbnb has even become a verb (“I’m Airbnbing my place!”). Both Annette and Sarah fell into Airbnbing and the short-term vacation rental industry by chance.
“I actually started with a property developer and I didn’t own the properties,” Annette recalls. She decided to explore her interest in shared economy services after getting let go from a job. “I had a relationship with someone that had a beautiful building and some spaces that weren’t renting. I was like, ‘hey, let’s try to Airbnb, one of your places.’” Eventually, Annette’s connections led her to manage several Airbnb properties all while turning it into a full-time business.
Sarah found her start in the short-term rental space after purchasing a home in New York. The property was a duplex that had a basement with a half bath and bedroom space. Sarah and her husband renovated that space with the intention of having friends stay over. That was until one of Sarah’s friends from Australia introduced her to Airbnb.
And the rest, as they say, is history…
What to Look For in Your First Short-Term Rental Investment Property
Are you an HGTV fanatic who has always dreamed of running a short-term vacation rental business? Or maybe you just want to establish another revenue stream. If you’re getting into the short-term rental business, you need to know what to look for in your first investment property.
And as unsatisfying as it is, Sarah’s biggest piece of advice is that it all depends. However, she squashes the idea that all successful Airbnbs are located in major metropolitan areas. In fact, there was an old Forbes article that says the best place to own an Airbnb was Akron, Ohio.
At the end of the day, the best property for you really boils down to your goals and who your ideal customer is. Even in terms of design and space, you need to revisit the location and what the competition looks like in that area. Annette also suggests looking at the kind of experience you want to create for your guests within those four walls. She encourages you to “take off your homeowner glasses and walk right in as a guest if you’re doing a walkthrough. Really start to think how a guest would use this space and you’ll get a lot of clarity.”
How to Know When You’re Ready for a Second Property
If you think I’m getting ahead of myself with this question, you’d be surprised. Annette shares that “we don’t know anybody that started short-term renting their place that wants to stop at one.” Looking far into the future, you might want to know when you’d be ready to invest in a second property. To which Annette suggests really running your numbers.
“We have you look at a property, just like you would if you were going to buy it if you were going to have a long-term renter there, if you were going to have a short term renter there, if you were going to resell the property, you know, maybe fix it up and flip it. We just want you to look at several different levels of what those numbers could be.”
You want to walk through many scenarios, and if 2020 taught us anything, it’s to plan for the absolute worst. Last but not least, you want to get familiar with the rules and regulations of the city before investing in property.
“Know your numbers, but also know the rules and regulations of that specific zip code where you want to buy. And if you have a realtor that you’re working with, they should be a great resource to help you figure that out,” Annette encourages.
Difference Between Short-Term and Long-Term Rental
All this talk about short-term rental properties but do you really know the difference between short-term and long-term rentals? Annette shares that “the elephant in the room is that with short-term rentals, you make more money.”
Not only do you see an increase in cash flow, you also get to spend more time in your own property. You get to keep up and maintain the property to your standards frequently, and you have full control over vacancy rates.
“Sometimes with long-term renters, they might end their lease at the most inopportune time. And then it sits there for two to three months unoccupied. With short-term rentals, even with the pandemic, we never had a vacancy issue. We always at least covered our expenses and our mortgage,” Sarah confesses.
Annette adds that the other downside of long-term renters is the possibility of conflict and not getting along. However, short-term rentals require more time, hands-on work, and upkeep. Whereas long-term rentals require management to pop in whenever there is an issue.
Managing Multiple Properties
Knowing how much work goes into running and upkeeping short-term rentals, it’s an impressive feat that Sarah and Annette run over 25 properties. They’ll also go on to manage a total of 42 properties within the next few months. In order to manage and run them all, Annette and Sarah rely on what they call their tech stack. So much of their business is operated and automated by apps, that it’s possible for them to host a guest without any personal interaction.
And if you’re interested in starting a short-term rental revenue stream but you’re turned off by the amount of time and effort it takes, Annette and Sarah both suggest co-hosting or outsourcing. “That’s why people hire us, they’re still making the money on their short-term rental and getting equity in that home.”
But before you do that, Sarah and Annette suggest doing two things. The first is running your own operations for the first six to nine months of your business. “Because whether it’s a short or long-term rental, as a landlord, you are a business owner and you need to know how your operations work.” The second ties back into a very important point that they’ve emphasized throughout this episode: know your numbers! In fact, they encourage you to factor in the cost of outsourcing as you’re tallying up your numbers in the investment phase.
Vacation Rentals On Your Mind?
I’ve preached the importance of diversifying your revenue stream multiple times. And while there are many ways in which you can accomplish just that, you can’t deny that getting into real estate is a common option. However, there’s so much more to property investments than just buying a home and renting it out. And for those of us who love traveling and hospitality, short-term vacation rentals can be a viable and profitable option. This episode with Annette and Sarah was truly a dream come true. Not only is it packed with so much valuable information on what it takes to run a successful Airbnb, but they also share how they’ve diversified their revenue streams by entering the online education space, teaching others how to build their short-term rental businesses.
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