I Bought a Short Term Rental Because of COVID

[Joe Splitrock]

Today we got a little house under contract and it will be our first short term rental. 

Over the last few months, I have read countless posts on BiggerPockets about how short term rentals have been struggling with cancellations. Any time an investment looks like it is struggling, I ask myself "is now the time to jump in?" The best investment opportunities always happen when a segment is in turmoil. There is an old saying, if everyone is selling, I am buying. It is contrarian investing.

Of course I know most seasoned short term rental owners are not selling. Most saw little impact or have a long term view, so understand any cancellations now are not a permanent trend. 

Up until this point, all our rental properties have been long term rentals. You may wonder why we are heading in a new direction? There is several reasons. First of all, COVID has left us really bored and we are looking for a new challenge. Second reason is higher cash flow. Based on the numbers, we can do much better versus long term. (We still have LTR as the backup plan if things go wrong). Third reason is we plan to run it as a family, using it as a teaching lesson in how to run a business for my 12 year old daughter. As we were home schooling her last year, we decided she needed to learn more than math, English, science, etc. I flat out believe my child should never be an employee and this is a step in teaching her how. 

The property itself is a two bedroom single level home. It is located less than a half mile from two universities and a major hospital. It is one mile from downtown and one mile from a newer regional 12,000 seat arena and convention center complex. The entire neighborhood has gone through renovation and value appreciation. 

The question I have for experienced STR operators is what do you wish you would have known starting out? 

[Neil Henderson]

1. Don't compete on price. Compete on value. Work to emulate what the highest priced listings in your area are doing rather than compete with the bargain listings. Go for quality over quantity. I'd rather have 50% occupancy at a high price point than 90% occupied at a low price point. Don't rely on AirBnB's smart pricing, their goal is more bookings (which they get a cut of) not quality bookings.

2. Spend the first 3-6 months doing most everything yourself. Cleaning, guest communication, price setting, etc. Spend that time writing down processes and procedures that you will eventually hand off to team members or automation. Turnoverbnb (cleaning) changed our lives, as did Smartbnb (communication), as did Pricelabs (pricing).