Any San Fran Investors Doing Full-Time Furnished/Vaca Rentals?

Question

Hello BP Community -

What has been your experience with full-time furnished/vacation rentals in San Francisco vs. a regular long-term rental? What tips do you have about doing this effectively? Finding tenants? (corporate housing, etc.) Marketing? Extra fees? (pets, extra people, etc.)

@J. Martin

@Al Williamson

@Andrew Wong

I own a couple of SFR's in SF that are on annual leases. These are 4BR homes on the south end of town (Oceanview/Excelsior area). I am considering converting one to a furnished rental for 1-12 month stays. This avoids short-term rental restrictions and makes property management reasonable. I have started speaking with folks who do rentals >30 days in the East Bay and South Bay, and they are generally getting returns well above long-term unfurnished rentals. For purposes of feedback, let's assume the property is:

- 4BR/2BA single family residence

- 2-car tandem garage

- near SF state and public transportation

- big back yard/patio

Thank you for your feedback!

Ariel Smith · Answer

@Ethan Cooke

From my experience, the most desirable and consistently booked properties in San Francisco are studios, 1, or 2 bedroom units. The demographic of a corporate traveler is typically someone traveling alone and looking for their own place rather than a hotel. The family demographic you described is definitely another group to target as guests, but they are a smaller subset of the overall "corporate traveler" market.

Most of the families I placed in my time doing furnished leasing were actually locals who were either in between buying and selling a home, or doing some remodeling on their property.

How much are you currently getting per month for that property on a 12mo. unfurnished lease? The thing about short term is you can usually command much higher rents, however, even just a few days of vacancy can wipe out your profits and I saw large SFHs sit vacant much more often than smaller apartments/condos.

J. Martin · Answer

@Ethan Cooke,

Yes, what we discussed previously and what @Ariel Vincent says rings true.  (btw, had drinks w/ David Adams the other night in Seattle - blast from the past!)You can go for students by the room at SFSU during the school year, and you know the summer is easy. I think there is plenty of demand for all-school-year students at SFSU in individual furnished rooms. Then they'll leave during the summer when you can get plenty of demand anyway.

Also, like you said, check with realtors, and check online for insurance relocation companies. They will both have demand from families looking for temporary furnished housing over a month. But they usually want a flexible check-out date, which makes it tough to plan ahead..

Beyond making more money on the SF houses over unfurnished rents, it depends how much more you make for your time (after subtracting all your hard costs of course). If you were to make $5,300/mo instead of $5,000, I'm sure it would not be worth your time. What would make it worth it? $6,000? $7,000? (net)

As I said, I have mostly small units, so don't know exactly how the houses will perform. Except for my more recent room rental experience in SF.  I will say that Ariel probably knows more about who is looking than anyone else around, due to her experience..

Ethan Cooke · Answer

@Paul Sandhu That makes sense, thanks for the tip. There are very few if any hotels nearby (especially with something comparable to a 4BR home accommodating 8 people). But I can certainly do comparisons with other nearby long-term rentals on AirBnB, and the 4BR places seem to be heavily booked.

@J. Martin Great point about the value of my time. Looks like a $5K/month unfurnished rental in my area will fetch about $8K/month when furnished. I think it would take the first 12-18 months to pay off all furniture and HH supplies, and afterwards it would net about $2K/month (after supplies and utilities). Definitely worth a shot! I also like the idea of renting to SFSU students, although I would want them to know each other for compatibility.

Thank you both--I'm inspired about this future step!

Andrew Wong · Answer

I echo what @Ariel Vincent said, and probably what everyone else says. There's no point in doing furnished rentals if you're going to lose money. You should know what you will get for your property as a long term lease.

Do a sample calculation (with taxes, some amount of vacancy, cleaning, furniture, etc) and determine what nightly/monthly rate you would need to make a profit. Then... compare that to a hotel nearby.

Regarding how to reach out to families in transition, I don't know. That's not my target demographic.

Ethan Cooke · Answer

@Ariel Vincent - Thank you for the good feedback! This is consistent with what I have heard from @J. Martin , Andrew Wong and others. The monthly rent for the two 4-BR homes I own in Excelsior/Oceanview is approx. $5K, which is about market rate or slightly below for these properties.

I like your point about targeting local families in transition. What are some good ways to connect with these folks? Seems like SF realtors would know which of their clients are looking for a furnished rental for a few months. Other ideas?

@Andrew Wong

Paul Sandhu · Answer

@Ethan Cooke

Four of my furnished rentals are 4-bedroom or larger houses.  One house has 9 beds, another has 7, the next 6, and the last 5.  I rent them to groups of co-workers working short term jobs at a refinery.  It can be difficult to put 4+ unrelated guys in a house together, because there are usually some people that don't get along with others.

The easiest way to rent out the big houses to big groups is when the group is an extended family that works together.  A father and son, cousin, uncle, brother, in-law, neighbor.  Also, groups of people from south Texas are use to cramming as many people as possible into the space available in order to save money.  I charge $200/week for the first 4 occupied beds in 3 of the above houses.  Beyond 4 or 5 people it gets crowded, so I don't charge any extra and pass the savings on to the tenants.  That gets me repeat business.

The house with 9 beds has 4 baths, a Jacuzzi and a kegorator.  I charge for the first 6 people.  When 6 people are paying rent and not tearing up the house, I buy the house a keg of their choice each week.  The weekly rent of the 6th person more than covers the cost of the keg, even if it is imported.

Paul Sandhu · Answer

@Andrew Wong "compare that to a hotel nearby"

That is how I priced my furnished rentals.  There are 6 motels in this town.  3 of them charge around $400 a week for a room with 2 beds.  The other 3 charge around $700 a week for a nice room with 2 beds and access to a pool, weight room, and free breakfast.

So I charge $400 for 2 bedroom places that are as nice as the $700 a week motel, but people can cook, do their laundry, have their wife visit, shoot a bow & arrow in the back yard, process a deer in the garage, work on their vehicle, etc.  Stuff that can't be done in a motel.

Ethan Cooke · Answer

@Andrew Wong - Good point about target market. The home is close to SF State, so during the school year I could target a visiting/new Professor's family, a family looking for corporate housing (e.g. for jobs in SSF biotech) or a group of international students who prefer the convenience of a furnished rental. The summer brings all kinds of options--tourists, interns, visiting professionals, etc.

Andrew Wong · Answer

As usual, look up your laws in SF. I've stopped keeping track for a while, but off the top of my head you need to get permits if you want to put it on AirBnB last I remembered.

But wow, a 4BR home is pretty big. My main question is what kind of market do you think you'll be attracting with a 4BR furnished rental? Especially if you say you want to do > 30 days to avoid all the issues with STR.

Any San Fran Investors Doing Full-Time Furnished/Vaca Rentals?

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