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Updated over 3 years ago, 07/15/2021
STR start up considerations
Hello BP friends, I found a deal that would be great for short term rentals, this would be my first time analyzing the deal and I do not want to over think it as well as leave anything out.
I have checked the air dna web page and have a general idea on what to expect from an established rental.
I also have gotten an insurance quote. I have read on the Airbnb page about their insurance but will I need to insure the property in addition to the provided coverage from Airbnb?
Ive seen on other discussions to expect to pay around 5% of the booking on fees, how accurate is this?
How much would you estimate to furnish the apartment/house? What is the middle and high end costs? Themes or neutral?
Thanks in advance
- Investor
- Greer, SC
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Yes you need commercial rental insurance. Check CBIZ, Proper and Foremost insurance companies.
What size is the house. That will determine your range to furnish it.
I'd estimate 10k to 30k depending on bedrooms an baths you have.
Air DNA is not very accurate. Check out your competition for a better idea of revenue and occupancy rates.
Originally posted by @John Underwood:
Yes you need commercial rental insurance. Check CBIZ, Proper and Foremost insurance companies.
What size is the house. That will determine your range to furnish it.
I'd estimate 10k to 30k depending on bedrooms an baths you have.
Air DNA is not very accurate. Check out your competition for a better idea of revenue and occupancy rates.
@John I'm trying to wrap my head around furnishing a STR properly, cost wise. Looks like people use king size beds, so a two bedroom STR with each having a king size bed, 2 king frames, 2 king matresses, night stands, clock/radio/phone chargers, 4 sets sheets, blankets, comforters, pillows, 8 set towels, wall hangings, rugs, TVs, sleeper sofa, chairs, kitchen table & chairs, refrigerator, stove, microwave, dishwasher, washer & dryer, etc.
Am I on the right track? Seems like you are setting up a household.
Is it best to just bite the bullet and put in all brand new furnishings and appliances or start off with "slightly used" but still good condition and each season replace items with new?
To @John Underwood's point, Airdna isn't entirely accurate but they usually come in on the low end so you can always use this as a baseline.Also go with any one of the vacation rental insurance providers he mentioned.
Airbnb charges you 3% if you're a small-time host, or 15% if you're a bigger player. See here for more details.
If you want an easy to know what furnishing could cost, sign up for Furnishr and tell them what you need in your house. That will give you the high end if you buy everything from them and let them install all the furnishings. Another way is to take all of their suggestions and go find secondhand items on craigslist and facebook marketplace to save money. Don't skimp on beds though, because poor bedding ruins the entire experience.
Themes add an extra flair, so if you can afford it go for it. Your goal is to stand out from the competition and themes is one of many ways to do so.
If you have any other questions, feel free to DM me!
- Contractor/Investor/Consultant
- West Valley Phoenix
- 13,181
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Originally posted by @Stephen Girard:
I also have gotten an insurance quote. I have read on the Airbnb page about their insurance but will I need to insure the property in addition to the provided coverage from Airbnb?
Ive seen on other discussions to expect to pay around 5% of the booking on fees, how accurate is this?
How much would you estimate to furnish the apartment/house? What is the middle and high end costs? Themes or neutral?
Thanks in advance
I just got commercial coverage from my existing home insurer State Farm. I told them it was a STR. A little over $100 mo
When you add up your nightly fee and the cleaning fee, then deduct the AIR fees and TOT fees, you should get about what you charge per night in the end. At least this is my unsophisticated model...
We furnished both of our relatively high end STRs from second hand and antique stores. Don't go cheap on the furniture, go nice, but I would not go with new furniture....no charm, looks like a hotel room. Think outside the box. Same with decor, go with a theme, you need to stand out. Ask yourself as you go through the process " Do I look like a Hotel".....
Definitely buy your cooking stuff at a Goodwill or similar plates, glasses, silverware, Etc can cost a ton brand new and there is zero difference between new and used...it's metal and glass.
- Olympia, WA
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Hey @Stephen Girard, we had to start from scratch when furnishing our lake house. I bought a ton of used, made in the USA furniture. Everything from beds to tables, chairs etc. You can get great stuff for pennies on the dollar. Also, don't discount the free section on Facebook and Craiglist. You can find great dining sets that need a minor refinish. I got a 6 place pine set that needed a quick coat of Minwax Poly stain. Looks like new!
I agree with @Jimmy Woodard on the mattresses and linens. You don't need to go crazy on the mattresses. We are using the Zinus Green Tea mattresses and they are awesome! We paid about $200 each. The best deal around on a mattress. We use 70/30 Cotton/poly blend sheets in a PERCALE weave, not sateen. Crisp and cool sleeping. Durable and long lasting. Easy to use straight bleach on a tough stain after washing. We have had the same Big One's sheets from Kohl's for 4 years now and they are still in great shape. Just don't use bleach on a used sheets as it binds with the oils and causes them to yellow.
I don't agree with Jimmy on the AirDNA under pricing. It has always over estimated for me.
Here's an example of my analysis of a rental arbitrage property:
Bedrooms | Bathrooms | Guests | Rent | Nightly Average | Percent Occupancy | Profitability | Monthly Net | Yearly Net | Profit/Bedroom |
3 | 3 | 8 | 1995 | 282 | 71 | 176.11% | $3,513.32 | $42,159.89 | $1,171.11 |
I use AirDNA to get the % Occupancy and Nightly Average, and factor 20% of rent for utilities and insurance, and take out 3% for Airbnb fees. This doesn't factor in cost to furnish. For a nice looking, but minimalist home, you can plan to spend the following:
- -$2000 per bedroom (furniture, linens, mattress, etc.)
- -$250 per bathroom
- -$1500 per living area (including outdoor spaces)
- -$1200 for a Kitchen + Dining
- -$500 miscellaneous
That's buying everything new, so if you have the time and energy to shop around for some gently used furniture, you COULD do it cheaper, but I've found that the financial savings is seldom worth the time and effort it requires. You could also go crazy in any of those areas with high-end furniture, arcade games, hot tubs, etc. These numbers have held true for my 5 units so far (1, 2, and 4 bedrooms)
@Stephen Girard I would just comment that you should furnish in line with the location. If people come to the southwest they want a little local feel, same with the beach. I am not saying go overboard but you don't want to look like a generic hotel room. Also include the recreational items needed. Nothing like going to a beach house for 8 with 2 beach chairs.
Where is the potential STR located? I agree with Colleen, these numbers will depend a lot on your market, competition, and how many guests you can sleep. For example, if you are buying a property near Disney you will want to spend much more for updated/upgraded decor and likely items to make the house a theme.