Don’t Panic, Pivot - Short Term Rental Turned 30+ Day Stays

[Mel Volland]

Hey Team! Mel here ready to share lessons learned and pivot strategies that saved our Short Term Rental business and made it even better! 

We purchased a 4-plex in 2019 as our second investment property with our initial goal to renovate and shift to vacation rentals. The property is one block off the beach in Ocean View Norfolk and the area is seeing killer growth and attraction to local investors. Each unit is 2B1B about 850 sq/ft. 

Purchased: $345,000 

Investment: $62,000 

2019 cash flow positive $100 with rental income as follows: 

Unit 1: $725/mo

Unit 2: $625/mo 

Unit 3: $800/mo 

Unit 4: Eviction and first renovated unit 

This felt overwhelming and to say I had buyers remorse was an understatement, but I know with my husband and I’s plan of action would bring us to a place we wanted to be! We took a few months to completely renovate unit #4. We ran into some challenges with our contractor at the time (didn’t properly vet him out) and left us with subpar efforts and a drawn out renovation period. Lack of responses and asking for more money. We’ve all heard the horror stories before. Luckily, we knew enough NOT to pay him more until we were satisfied. He ghosted us and we brought someone new in, who is now our go to! 

Anyway! I digress, we furnished the unit and listed it on Airbnb. SUCCESS! Hit 5 star reviews consistently and we’re getting bookings at least 80% occupancy per month or more and realized it was time to up the prices! In the summer we asked about $120+ per night and we were ready for more. Our tenants in #3 broke their lease and WALLAH! Time to renovate and furnish our next unit. In the off season we began listing on Furnished Finder, a niche that works incredibly well in our area. They specialize in travel healthcare workers and has now expanded beyond. We never had a full month of vacancy. 

However, much of our costs were going straight to our cleaning fees. Turnover after turnover and paying utilities and internet and repairs and on and on. Working full time and juggling check ins and check outs, cleaners and complaints it was getting a bit tired. 

We then did a cash for keys deal with our tenant in #1 who was a slight hoarder and had a legit HOLE in the bathroom floor with rotting subfloor that we didn’t know about, she needed to go. Renovation #3!!! BOOM! Third furnished unit. 

We were blissfully unaware of certain code and zoning violations in our area for short term rentals. We received a violation notice. Oops! We rushed to apply for permitting and get on track the right way with our city. DECLINED. Now, what the heck! We built this business and making upward of $3,000-$7,000 a month and we have to shut down? 

OR

We pivot. Don’t panic, pivot. 

We made nice with all our city officials to confirm that we could in fact, still keep our listings up and advertise 30+ day stays. “Furnished long term rentals.” Loophole? I’m not sure, but this was the direction of our business. We learned that our due diligence was not complete at the time of purchase. There were several missteps and oversights. But we kept moving forward. 

Turns out, it has been the BEST thing for us. I was pulling my hair out dealing with check ins and outs, cleaners and more! We were making great money, but 50% would go to our cleaners each month for the 6-8 turnovers they were doing. Supplies were coming in and out quicker and it was challenging to manage. This strategy was not aligned with our passive income dream. 

Fast forward to today, 2021 we have 3 of the units furnished and one long term...I mean 21 years long term tenant. the rental income is as follows:

Unit 1: $1600/mo 9 month contract through Furnished Finder 

Unit 2: $825/mo long term tenant month to month lease 

Unit 3: $1700/mo 4 month contract through Furnished Finder 

Unit 4: $2700/month 3 month booking through Airbnb 

Cash flow positive $3,500-$5,000 per month. Our cleaning fees are wayyyy down. We aren’t burning through supplies and my time can be focused elsewhere in our business rather than focusing on check ins and outs every. single. day. Whew! I am a much happier lady and our business is thriving. 

I would love to connect with all my fellow short/long term rental folks! Let’s keep making it happen fam! Get out there, get moving, keep pivoting when necessary! 

[Mel Volland]

@D. Mark Miller thanks for commenting! I love that we can connect on this. The market is definitely competitive and in the seller’s favors. However, there are deals out there it’s just a different mindset and game. It’s fantastic that you’re putting yourself out there and making offers, because another offer declined or not accepted brings you closer to the next deal that is a yes! It can be disheartening for sure, but my recommendation wouldn’t be to wait it out. Nobody knows for sure how the market is going to change and it’s about the long term (depending on your investment strategy). I would keep doing what you’re doing! Set the expectation that it might take some time, but stay active and an opportunity will keep presenting itself. If you’re making offers, my suggestion would be to offer full asking (if it makes sense of course) then do your negotiating on the backend upon acceptance and contingencies and see what happens! You’ll likely not find a deal under asking because of the competition. There’s usually a opportunity to exit the deal if you want to based on contingencies, and that’s how we approach it. Plus, it’s another opportunity to learn. Are you hooked up with any of the investor groups in the area on FB? Would love to get you in there with us!