All Forum Posts by: Craig Jones

My STR is covered by a commercial hotel/motel policy from State Farm. It's a SFH and I don't rent it by the room, but I bet State Farm wouldn't have a problem with it on this type of policy.

I ended up with this policy after searching almost 6 months for someone who would cover an STR in a high wildfire risk area.

Don't let your State Farm agent push you into a homeowners policy with STR rider. Tell them it's an investment property with no owner use and you want a commercial policy with $1M/$2M liability coverage. If they give you pushback, call a different agent. Some State Farm agents might not know that they do commercial hotel/motel policies for SFH STRs but their underwriters definitely do.

Kitchenettes are a great idea, but zoning won't allow it.  Current zoning would prohibit the whole setup actually, but the building and commercial use are allowed to continue as-is because they predate the town's incorporation in 1993.  It can't have any more guest rooms than it already does and the commercial use loses its legal non-conforming status if the main residence isn't occupied by the property owner or an onsite manager.  So in theory it can't be a LTR if we move out someday, but a lease naming a tenant as "manager" probably gets around that.

I've thought a bunch about how to improve the property's cash flow, and there's lots of marketing and operational low-hanging fruit before we get to capital improvements.  One idea we want to test out is a room setup that can accommodate families who would need two rooms at any other hotel.  Like families with three kids or two teens who refuse to share a full/queen.  Theme park hotels and places like Great Wolf Lodge who have rooms like that charge big bucks for them.

We could possibly add an ADU, but as LTR only.

There are a set of destinations in northern Wisconsin and Michigan that I think are potentially untapped STR markets. The lakeland area around Minocqua and Eagle River, WI. Door County near Green Bay. Northern MI around Traverse City.

These are not nationally known locations, but still pretty popular drive-to vacation spots for Minneapolis, Chicago, Milwaukee and Detroit metros.  Lake time in the summer, leaf peeping in the fall, and snowmobile / ski season in the winter.  

The skiing pales in comparison to Colorado or the Sierra Nevada of course, but I still thought it was pretty great as a kid growing up in the midwest 😃

Yes, it's BP buzzword bingo -- but also a real deal. We're closing in a couple weeks on a 5-room motel in the Tahoe area that also has a 4 bed / 2.5 bath / 3000 sqft SFR "manager's unit" that will be our primary residence. Year round tourist demand in Tahoe creates lots of opportunity for the guest rooms. The town treats it as a commercial lodging property so it's exempt from heavy-handed local STR restrictions.

The sellers have been open for biz only part time in their retirement.  Which created historical financials that made commercial financing pretty much impossible.  And no lender was willing to look at financing it as a residential property.  In the end we pitched seller financing, which I thought they'd never go for, but we ended up working something out on pretty favorable terms.

I'm interested to connect with others who are doing boutique hotels / STR hotels, whatever you want to call it. Especially on the software stack you are using. We use OwnerRez + PriceLabs for a traditional STR we own which I've been very happy with. But not sure it's the right fit for this property. And wondering if I should be looking at platforms like CloudBeds, ReservationKey, ResNexus, etc.

I'm in contract on kind of a unique property. It's essentially a 4 bed / 2.5 ba SFR semi-attached to a five room motel. It's in a popular year-round tourist destination with a shortage of hotels and heavy restrictions on STRs. Property is exempt from STR permitting because the jurisdiction considers it to be a commercial lodging establishment.

We've been pursuing an SBA 504 loan for it, which was going well until we discovered that the sellers have operated it only part-time the last 12 years -- intentionally blocking 60% of available room-nights because they just weren't up for running it full time in their retirement.  They've also used no rev management whatsoever, just a fixed nightly rate.  So their historical financials suck.  

Because of that, we are getting a lot of "no's" from SBA partner banks.  Even with a solid biz plan showing we can 3X their revenue just by switching to full-time operation and using modern rev management.  Backed up by market RevPAR data.

Looking for lenders who might be more open to looking at an easy turnaround.  As an SBA 504 partner lender or not.

I think it's a hard question for others to answer for you, because it's entirely dependent on the nature of the project and your own interests and aptitude.

I was my own GC (while working a full-time W2 job) on a 6-month remodel of a big house where we reconfigured the interior space, including relocating a staircase, converting part of the garage into an additional bed + bath and replacing the kitchen.  I really enjoyed the process and solving all the problems that came up along the way.  There was a lot of skillset overlap with my W2 job though.  It turns out that coordinating engineers, marketing and sales to launch a software product is not crazy different from coordinating vendors and subs to "launch" a construction project.

I will disagree with everyone who says that hiring subs yourself puts you at a pricing disadvantage vs. prices GCs get.  You can get great prices from young and scrappy subs if you're willing to put in the legwork to find them and get multiple bids.  Most GCs I know have only one or two go-to subs per trade whose pricing may or may not be favorable.  

I'll also mention that both Incline Village (NV) and the Placer County (CA) part of Tahoe have basically the same thing going on with permissive STR permitting. Both are unincorporated places without local control and STR rules set by the county. And both have county governments that are elected mostly by population centers that are pretty far away — Reno for Washoe County and Sacramento suburbs for Placer County. I suspect that preserving the occupancy tax cash cow weighs on county officials more than the concerns of their constituents up at the lake.

Don't get me wrong, I'm not complaining. The year round demand with two peaks (ski season and lake / beach season) combined with a lower regulation threat make them pretty good places to own an STR.

The west side of the lake from Homewood all the way up to the Nevada state line is all unincorporated Placer County on the California side. They have a cap of 3900 STR permits with about 500 still available. All the housing that's around the Palisades and Northstar ski resorts is also unincorporated Placer County.

There have to be thousands of experienced operators scouring the planet for opportunities to buy low and create an outsized cash flow the STR biz. In any location where that's possible, it's quickly reflected in the market price of properties there.

if I had a secret that allowed my STRs to get cash flows that others couldn’t replicate with a similar nearby property, I’d definitely be keeping that to myself 😀

I have a strict cancellation policy and put this language in my house rules:

"Please read and understand AirBnB's cancellation and extenuating circumstances policies. We recommend purchasing travel insurance to protect your funds from the uncertainties of mountain travel, including the possibility of snow storms, road closures, and poor air quality due to wildfires. These are foreseeable events for our area, not extenuating circumstances."

I keep an eye on the forecast and warn guests about inbound weather, even offering that they can come a day early if the house is available.  But I do not refund, even if the interstate is shut down for snow.  We are open for business unless there is some kind of evacuation order.

This past winter there was a big snow event that the media turned into an even bigger, scarier thing.  Which caused lots of guests to pursue extenuating circumstances claims, and a bunch of local hosts had cancellations forced on them by AirBnB.  I pointed out my house rules to support and wasn't subjected to that.  I think this event actually caused AirBnB to update their extenuating circumstances policy a month or two later to explicitly state that road closures elsewhere are not an extenuating circumstance.

Also, if a guest tries to cancel and then no-shows, I contact AirBnB support after the guest hasn't checked in for 24 hours.  Support will reach out to the guest and then process it as a guest cancellation if they confirm they aren't coming.  Aside from opening the remaining days on your calendar, it also prevents the guest from leaving a negative review for sticking to your cancellation policy.