Pricing STRs for people with a set budget?

[Paul Sandhu]

I've got about a dozen 2-bedroom STRs.  My only competition is motels.  A motel room with 2 beds is $400 a week (no pool, gym or free breakfast).  My tenants all have a per diem, and $200-$250 a week is their budget for accommodations.  So I charge $400 a week for a 2 bedroom place.  The situation I encounter is nobody wants to share a 2-bedroom place with a co-worker.  So I charge $250 a week for a single person to stay in a 2 bedroom place.  Eventually all the 2 bedroom places are rented out, and I end up putting a single person in a 3 bedroom place for $250 a week.  I'd normally get 3 people in a 3 bedroom place and get $600 a week.

So most of my properties are rented, but they are not filled.  1 person in a 3 bedroom house paying $250 when I would expect 3 people paying $200 each.  When I do get 2 people that would share a house, I end up putting them in a 4 bedroom place for $400 a week.  I'd normally get 4 people in there for $200 a person.

What if I eliminated the 1 person rate and had a standard non-flexible price for houses?  The 2 bedroom is $400, regardless if there is 1 or 2 or more people in there.  The 3 bedroom is $600 regardless of the number of people.

It's a catch-22 for me.  The places might be unoccupied if I had non-flexible pricing.  Or the people will butch up and share places with their co-workers and I would get the full rent on the places.  I'm expecting more potential tenants in 2021 than there have been in the last 6 months of 2020.

It's as easy to rent out a place to a single person as it is to pour water out of a boot with the instructions written on the bottom of the heel.  Renting out a place to multiple people is like juggling bowling pins while walking a tightrope over a pit of crocodiles while blindfolded in the wind.

What would you do?

[Paul Sandhu]

Originally posted by @Lauren Kormylo:

Well, if the motels are charging $400 a week for a regular room, I don't see why you'd drop your price to $250 for one person in your 2 bedroom house. Their only alternative is that $400 motel room, with no kitchen etc. So why shouldn't they pay $400 for your house?  Make it their choice whether they want a roommate or not to save money.  Make it their job to find the roommate, as long as you can approve them.  You get your $400 every week from the original renter, and it's their responsibility to get the rent from the roommate.  That way you're not the one juggling different arrival and departure times of renters.  
$250 a week works out to $1070 a month for that 2 bedroom house, which isn't much at all.  Especially since it's by the week, with no long term lease.  And it's furnished and utilities are included, right?  That's cheap.  You should be getting the $400.

I thought your renters rented in groups, why all the loners now?

 The motels also charge $250 a week for a room with one bed.  This group of 8 guys all work together. They are in their 50's and 60's.  They'll all have dinner with each other at one guys place, but they all would rather pay a little more and have a place to themself.  If these places were LTRs, they'd bring in about $450 a month.

When the new year comes and new tenants arrive, I'm not going to have individual pricing.  It'll be $400 for a 2 bedroom place, whether there is 1 or 2 persons in it.  They'll figure out that they can save $200 a week by getting a room mate.