The Cost of Being Unprepared: A hypothetical Cost Analysis

An example of an investor (Tim) who entered the hot tub game unprepared, as a self managed investment property Owner.

Tim wanted to install a hot tub in his Airbnb in Tobyhanna, PA to stay competitive with the other airbnbs he sees online in the area. Tim finds an online deal- he can buy a hot tub for around 7k at a local hot tub store, and he googled the average installation price and finds it is around $500. He budgets $7,500 for the project, calls a contractor and gets started.

The contractor isn’t too familiar with the area, so he asks Tim where he would like the hot tub situated. Tim says he wants it on the deck, about 4 feet from the house, and about 5 feet from the right side property line. Tim thinks this is fine because it is within his property. So the contractor gets to work. Upon seeking the electrical breaker box, the contractor sees that in order to set up electrical for the hot tub there needs to be an additional panel added. The contractor says no problem and he gest the panel added.

The hot tub is set up, getting hot and is ready to go for guests! Tim is excited about his upgrade and adds new photos of the tub to his airbnb profile. When Tim goes to pay the contractor for setting up the tub, the contractor gives him an additional bill. It is for his electrician who worked with him on the additional panel, and extended an electrical circuit to reach the tub at the deck, this costs Tim an additional $650.

After a couple of stays, guests complain that the water in the hot tub Tim has is green and smells fishy. Airbnb refunds the cleaning fee for their stay, and Tim loses the $200 cleaning fee. Tim gets a hot tub technician to checkout the water, and he finds there was no filter in the hot tub when it came, and no bromine float to insert tablets to introduce chemicals to the water.

Tim gets someone from the hot tub store to come out and recommend products to him for all of the above. He also gets a pack of testing strips for his cleaning team to test the water at each clean, and he even shows the manager how to test and add chemicals to the water to keep it clean. He sets a calendar reminder to check the filter every 2 months. The products Tim bought cost him around $300.

Everything is going well, and Tim is happy with the traction he has gotten with his new tub. Tim applies to renew his STR permit; he is surprised to see it has been denied, because he has an “unpermitted structure” on his premises. He realizes the addition of the hot tub (an R2 structure) requires permits.

Tim applies to the township for the permits for the hot tub, and writes down the contractors information on the application. When he submits it the office asks him if it is on a concrete or gravel pad, he replies with “ it is on a deck”, and the receptionist hands him a zoning application, and asks him to give it to his contractor.

Tim calls his contractor, and asks about the zoning permit. The zoning permit requires an explanation of architectural integrity for the potential of another 2 tons of weights on the deck structure. The contractor has never filled this paperwork out before, and tells Tim he doesn’t really know what to do.

Tim hires another contractor to fill out the paperwork. The contractor goes to the house, inspects the deck, and he says that the deck needs to be reinforced due to the excess weight, and he even sees damage already from the weight over time on the deck without reinforcement. Fixing the damage and reinforcing the deck is going to be a $1000 project.

Tim is frustrated, but currently has no other option, as he received a $1000 fine from Tobyhanna for renting without his STR permit (which he couldn’t get due to his hot tub issues), and currently has his unit stuck open for 4 weeks, between the contractors schedules, permits and bad weather.

Once the deck is reinforced, he applies for the zoning permit and receives it, only to find his hot tub permit was denied for not hitting set backs for being so close to the right side boundary of the property. The whole hot tub must be moved, Tim finds out, or he can remove it. If he moves the tub to hit setbacks, it will incur an additional $500 in electrical work, not to mention it may now sit awkwardly on the deck.

Money Spent

$7000 Hot Tub

$1150 Install And electrical updates

$200 Airbnb Refund

$300 PM Supplies

$1000 deck reinforcement

$1000 TWP Fine

$500 Electrical Hot Tub Move

$150 Permits

$2000 One month lost revenue during peak

Total $13,300

Tom: Wants to install a hot tub in his airbnb, enters the hot tub game prepared, with advice from his property management company.

Tom tells his property manager he wants to get a hot tub for his property as an upgrade to help him keep occupancy in the winter time.

Tom’s property management company recommends that he prepare to spend about 10k on the project, to prepare for anything unexpected, and to leave a cushion for PM supplies. Tom puts aside 10k over the course of 4 months to prepare for the project reinvesting money made over summer peak, and he decided to schedule it for October, a slower month where blocking the unit offline won’t make him lose much income, and he set the schedule down for 2 weeks, only about $700 in projected lost income.

Tom’s Property management company recommended their contractor, who has often gone through the process, and applied for permits as he created the plans for the hot tub. He checks with Tom to ask about his location preference based off of the setbacks he has. Tom selects a location, and agrees upon the installment price of $900, including electrical work, and a gravel pad for the hot tub, which is more affordable than concrete. Thankfully, he has been watching hot tub deals for months, and found a great deal on a new hot tub for $5000 for Labor day.

Tom pays $150 for the hot tub permits, and has his contractor take care of the installation and electrical work, then he pays $300 to pay for PM needs for the tub, and asks the company he purchased from for materials on proper upkeep. He shares these materials with his cleaning crew so they understand how to test and treat the water, as well as change the filter when needed.

Once he gets his permits approved, and the tub inspected, he adds photos to his listing and changes his rate slightly to match the new feature. He sees an increase in occupancy due to having the hot tub, and even started adding custom flip flops for the tub to his welcome basket. Tom had an easy experience, and feels confident in his investment.

Money Spent:

$5000 Hot Tub

$900 Installation

$150 Permits

$300 PM Needs

$700 Lost income

Total $7050

These hypothetical examples aren’t so hypothetical. These are based on real life scenarios, of actuals I have seen in my experience as a property manager. The cost of coming into an upgrade unprepared can be intense, especially when unexpected costs come out of the woodwork. You need to understand how to play the local game. Half the battle of a successful hot tub install is getting the proper permits, hitting setbacks, finding a great contractor who knows their way around your township (and better yet HOA) and properly planning cleaning and PM. They may seem like little details, but each one overlooked is a costly mistake.