Considering Options for My STRs

[Aaron Henricksen]

I have been operating two short term rentals in a town a couple of hours away in a college town for a little over a year now. We recently expanded and now have another property about 5 minutes from where we live, and the mix of self-managing these three properties, along with increased work responsibilities at my W-2 is getting a bit much, and I'm rethinking my strategy. Specifically, regarding the two properties in the college town a couple of hours away, I had been doing everything remotely except the cleaning and stocking, and had delegated this to a local cleaner. Well, my rookie mistake was not setting up a system to monitor her work. Over the last couple of months, I've been going to the properties a little more frequently and realized that she's doing a horrible job. I brought this up with her, told her what I found myself and pointed out what she wasn't doing correctly, and then sent a checklist of expectations of what should be cleaned/completed at each cleaning. Unfortunately, on a trip there this weekend, I found that the situation hadn't been improved and am now going to be letting her go. For a little more background, I've had quite a few comments over the course of the year, but I think by being very responsive, apologetic, and offering refunds where appropriate, I've been able to keep my ratings up. When I would bring these complaints up with the cleaner, she would generally deny the allegations or make excuses, and out of fear that I wouldn't be able to find someone else (or just putting my head in the sand and avoid the problem all together), I would defer to her and not push the issue. I realize that this is no longer viable and a change has to happen.

I'm a big fan of Bigger Pockets and have realized through reading/listening that the largest benefits of real estate come over time through loan paydown, taxes, and appreciation, and over the short term through cashflow. But if I rethink my strategy, I'm at a place in my life where I don't need to maximize monthly cash flow at any price, but still want my properties to pay for themselves (and then some) without creating another job. So, since I'm at a crossroads, I blocked future bookings, and only have a few more this month; so this would be a perfect time to change strategy if I wanted.

The options I see are:

1) Find another local cleaner, and spend many long evenings over the beginning period monitoring their work;

2) Hire a local STR property management company to deal with it;

3) Scale back my operations significantly - I realized that by only renting the property out on football game and graduation weekends, that I can probably make 70-80% of annual expenses and use this time to reset;

4) Hire a local individual to act as a personal property manager;

5) Move away from STR (at least on these two properties) and pivot to LTR;

6) Pivot to Medium Term Rentals since the properties are already furnished.

Regarding #1, this is kind of business as usual, but would have me learn from my mistakes on the first cleaner and hopefully not repeat them. This is also the option that probably makes the most cash flow, but is the most work. I'm trying to take things off my plate though, and this would not do that (at least in the short term).

Regarding #2, this would be easy, but the properties that I've seen that are run by local STR property management companies tend to have lower ratings and much lower bookings that I do, which makes me wonder whether I would cashflow anything with this route. Otherwise, though, this would be probably the easiest.

Regarding #3, this would allow me to essentially reset and only focus on the high dollar nights. I'm about to go through a very busy period at work (ramping up now until the beginning of next summer) and this would allow me to essentially take this off my plate for now (except for a few weekends), while still cash flowing. This would obviously have me finding a new cleaner, but it would give me time to evaluate their work without the pressure of quick turnarounds and extreme urgency. Also, my work will get the busiest in the spring, and I could mostly shut it down during that period, and refocus and ramp up again next summer;

Regarding #4, the more I think about this, the more I like it. If I paid someone a reasonable salary (I'm thinking $1,000/month) and they managed both properties in terms of guest communication, responding to emergencies when they appear, visit the properties (they're next door to eachother) weekly, and have a monthly meeting with me to brief me on what's going on (or someother regular timeframe). This option would provide the boots on the ground to make sure the cleaner is doing their job appropriately, and give the properties the attention they deserve. This is obviously a pretty big expense, but it would give me some control while not having to be flooded with work. Also, it is obviously more expensive than option #1, but would probably net enough money to make more cash flow than the other options (except for maybe #6, I'm not sure how that would work out). In the short term though, this could also create more work as I would need to hire both the cleaner and the local manager and train the local manager.

Regarding #5, I can begin moving away from STR (at least in the short term), and move into LTR with the knowledge that my cash flow would mostly disappear, but the properties would still pay for themselves and I would still see the long term benefits of real estate. Also, I could always pivot back to STR in a year or two if I wanted.

Regarding #6, I think reducing the number of turnovers would decrease my work, and this way, I could still keep the football/graduation weekends for STR and do 1-3 month stays for the remaining parts of the year. I would still be looking for a new cleaner and would have the monitoring work (especially at the beginning), but it would cut down on the communication when work ramps up a lot (especially in the spring).

Do y'all have any thoughts or suggestions? What would you do in my position? Are there any possibilities I'm not seeing? Also, does anybody have a method of finding a strong/reliable cleaner that has worked well for them (this is also important for us since we haven't found anyone good at the new property near our home)? 

At the moment, I can't scale up, and am spending my nights/weekends working on my real estate instead of having it work for me and need to make a change for this to work over the long term.

Thanks!