VBRO/AirBNB Questions to ask

[Joshua Meisner]

Hi BP members!

We recently have refinanced to go into real estate investing, as we had a very large amount of equity and wanted to hopefully speed up our path to retirement.

After discussing multi-families and placing offers on properties it is almost un-reasonable in the area I am in to invest in a multifamily due to the amount of work needed or the price listed right now.

This brought me to looking into vacation rentals and possibly getting into condos to start in high traffic vacation areas that are close enough to me so if I needed to fix something I can be there in a couple hours, but far enough where I wont be able to clean them regularly.

I have listened to advice from a few sources and decided to schedule a meeting with my CPA, who has done wondering guiding my parents in BRRRRs over the years to allow them very early retirement.

I also have the opportunity this week to talk with a very passionate Vacation Rental guru in the area I am looking.

What questions would you suggest asking these people when it comes to your first vacation rental - I have a list started but I know I am not covering everything important. Any information would help. I know I need to come up with a lease agreement and figure out insurance costs to make sure the numbers work prior to purchasing but what else.

This will be our first investment purchase but we will have reserves to get another quickly provided all works out unless someone convinces me putting reserves all at a larger property makes more sense.

Thank you!

Josh

[Gord Stevenson]

I have a vacation rental that I manage as well as a few long term rental homes. For the STR, all the same questions around investment, expenses, tax planning etc apply. But for the STR there are a number of additional questions around operating model. It is important to get those nailed before you start having renters show up and you have to scramble. Some examples:

How will you market and attract renters?  I use VRBO and AirBnB.

If you have multiple channels, how will you maintain an availability calendar and keep the channels current?  I have calendars on both VRBO and AirBnB and have them synching.  

How will you collect and receive revenue?  I use VRBO and AirBnB’s systems (not mandatory)  I leave the credit card management, collection of money etc to them, and have them deposit the money directly to my bank account.  I also configured both to only pay me when the renter checks in so that I don’t have to worry about managing refunds if someone cancels.

So...then how do you handle it for the small number of times someone contacts you directly to rent, or decides to stay an extra day after they are there...those transactions that aren't captured by the channels? I maintain a spreadsheet based system that tracks revenue coming from the channels, and those additional transactions. And also expenses: property tax, utilities, maintenance, yada. I have an earlier post on this site where I described the accounting spreadsheet. I built it for the LTR properties, and expanded it for the STR. I like it. It works for me. It to be frank the STR stresses it a little. If I had multiple STRs I would probably have to go to a more professional accounting system.

How do you communicate with the renters?  Only through the channels?  Or directly?  If directly, how do you capture and track email addresses, phone numbers etc?  I have a tab in my accounting spreadsheet.  And then over time I am not dependent on the channels for my customer list.  I also maintain an information document that answers all frequently asked questions and I proactively send it to every renter to avoid a lot of email traffic answering the same questions.

How do you maintain and communicate schedules to cleaning staff, and apartment or resort security if applicable?  Monthly I cut/paste the schedule into an email and send it to both, and correct it if it changes.

How do you manage arrivals?  Key management?  I dislike keys.  I use a wifi connected door lock and I send it personal door codes for each renter that activates and deactivates according to their arrival and departure dates.

Maintenance contacts?  Sounds like in your case you are close enough to handle that.

Cleaning contract.  What is the scope of cleaning?  What will the6 provide?  What will you provide?  If you are providing supplies, how will the inventory be managed?  I get the cleaners to provide all supplies...which means a more expensive cleaning bill...but reduces other costs and hassle.

What inventory do you need?  Dishes, utensils, bed/bath linens, soaps, garbage bags, etc.  Wi-Fi (the SSID and code goes in the info document).  Furnishings.

Are you going to take security deposits and manage refunds?  Or use damage insurance?  Or take some risk?  For me, a $200 damage deposit is not worth managing...so I don’t collect one.  That is a risk but my theory is that I may get a couple of extra rental stays per year because I don’t insist on one...and that would more than pay for one or two small damage issues.  And a damage deposit won’t handle the possibility of a major trashing anyway.

I am sure there are a lot more.  Those just came to mind off the top.  Basically do a walk through of every step from the moment a potential renter searches for a property to the time they depart, and think about how it will work.  That will provide the question list.

Good luck!  It’s all doable.