All Forum Posts by: Sean Taylor

I started running an STR in Bowling Green, KY May. My Monthly expenses are about $1400. I self manage and I turn it over if I'm in town. From May til now the house was 80% occupied and I have grossed about $28k. About $4k of that is cleaning fees. I charge significantly less than you do and I don't have problems with parties. There are several tweaks you need to make to improve your gross. I'd be happy to discuss my experience with you, but for now here are a few.

1. Research the pricing of other successful STRs in the area, You don't need to be the cheapest to get booked, but you need to be competitive.

2. Lower your weekday price. You should be aiming to fill as many weekdays as possible to increase your occupancy rate. Of your 40% occupied I bet most of that is weekend only stays. 40% occupied at $250 gets beat by 80% occupied at $160. These are just example numbers, but I am sure you get the point.

3. Add in discounts for longer stays. 15% off of a 1 week stay can make a huge difference in how many 1 week stays you get. I also give a discount for 5+ days. Longer stays are less likely to be partiers. And cleaners will be charging the same whether they were there 2 days or 10.

This is my listing

www.airbnb.com/h/bgky

I have had 2 STRs/MTRs for many years (since 1999) that have always performed except for the Covid year and last year due to a rehab gone bad.  

So we decided to start 2 addition STRs last year.   Neither of them have the gross that they would have as a LTR and both have negative cash flow.

This year, one of the 2 long time STRs did not get selected in the STR lottery in spite of being an STR under same ownership since 1999. It was converted to MTR at the same time as ~200 other units in the small community (Mission Beach) that also did not get selected in the STR lottery. I rented it as a furnished rental for less than I would have got as an unfurnished rental.

The other unit that has always performed also has reduced occupancy and gross compared to normal.   The occupancy numbers are high for most areas but in 2019 this unit had 95% occupancy.  This year it is ~75% occupancy and was taken off market 3 times (2 sewer pipe leaks and a new roof) so the occupancy is artificially reduced from the 3 times taken off market.   I suspect without being removed from market it would have occupancy in the low to mid 80s and may have had some small positive cash flow.

None of the 4 units have positive cash flow, but this is in large part to extracting equity via refinances in Dec 2021 (so they are all near 80% LTV).

I point out these struggles to show that even a long time successful STR owner can struggle. I am unsure that the 2 new STR units are good STR units (not special enough location and very high LTR rents - market LTR rent in these units is ~$4.5k).

I possibly would let these ride indefinitely as I have rentals to offset these, but the wife probably will want to use the resource/units to optimize profit and it is unclear that the STR/MTR option is optimal on 3 of the units.

If I were you I would try to ride out the government attempt to slow the economy and hope this results in both higher rates and higher occupancy.

Good luck

 You always want to underwrite things as a LTR. Same revenue but 8k less in expenses, seems great. Can you weather that?

Even if you want it to pursue opportunity #2 as a STR or MTR, or whatever. Always underwrite it as a LTR, so you can pivot. It's not just the revenue that'll deter you from keeping it as a STR or MTR, it could be regulation. Need to plan for those obstacles too.

 Your property is lovely and your guests had nothing but great things to say about it. I'm curious why value and location were given lower scores overall since no one mentioned either in the reviews, but guests can be fickle and it's not hurting your overall ratings that much. The only recommendations I could think of to make your property stand out more (and these are pretty minor things) is to add a really nice coffee bar setup and to better outfit your kitchen. Guests love a good coffee bar and you've got the room in your kitchen to do it. It doesn't have to break the bank but it does add a lot of charm and convenience and photographs well. Put in a couple of different coffee making options (drip, pour over, french press, grinder, maybe an inexpensive milk foamer). Sometimes it's little features like this that make you stand out from every other property when guests get scroll fatigue looking at listings. And then I'd beef up the kitchen supplies. Your assortment of dishware, cutlery, utensils and small appliances looks pretty sparse for such a big home. I'm happy to share a link to one of my kitchens for you so you can get an idea of what I mean by well stocked. Maybe you DO have more and it's just not showing in your pictures. Let me know if you'd like to see some photos. Other than that, your property looks great. If you're not going to switch to self managing have you considered finding a co-host? They can typically save you considerably on management fees. I know people who co-host for 15% of revenues. This might help you close the gap a bit and co-hosts often are very motivated to do the job well. Hope this helps!

Real estate has never really been a quick money maker. It usually takes 3-5 years to start making sustainable positive cashflow.

The last 5+ years of low interest rates and the new STR industry have attracted a lot of new investors that really have no clue what they are doing.

Rates are up and the STR industry is maturing and dealing with more regulation.

As Warren Buffet has said, “Only when the tide goes out do you learn who has been swimming naked.”

Suggest you really ask yourselves if you have what it takes to be investors and how committed you are to see the inevitable challenges through.

@Sean Taylor

Your property manager is killing your profits.

Take over the management as this is likely costing 20% to 30%.

The tools that Vrbo and Airbnb provide make it pretty easy to self manage.

Get a great cleaning crew and a handyman and you'll be set.

Mistakes happen to every investor, but it seems like you still have some options and that's the beauty of real estate. Selling at a loss would be my option of last resort at that interest rate. Especially since it sounds like you must have some resources that are allowing you to currently manage negative cash flow and potentiallyhold out until 2025 as you mentioned in a reply. The things that jump out at me are : when you say you had "rental income" of $24k is this net or gross? I'm assuming it's gross since you're operating at a loss. If it's gross, that's not great. I'd start by firing your property manager and taking over property management yourself. It's not hard and you're most likely giving away a substantial amount of your income and it's rare that a PM will manage your property with more attention to detail and dedication to a healthy bottom than you could muster up yourself - particularly since most of them get paid right off the top, not off the bottom line. If your numbers are up YOY, it indicates your have a good and desirable property so it's likely not the property itself that is the problem. You might post a link to the property here so people can give you some constructive suggestions about how it could be better. 

You might also look at the MTR strategy and market your property to insurance placement agencies that are helping to provide temporary accommodations for families that have had some type of damage claims to their own properties. Not sure how viable this is in your area, but a 4/2 is the type of property that tends to be in high demand and low inventory for insurance placements.  

@Sean Taylor

I think a little more information would help us be able to give you advice. What is your occupancy rate at this property? What is your monthly revenue when you using an STR model vs if you switch to a LTR or MTR model? What is your expect profit/is there any profit to be made if you switch from STR to LTR? If your occupancy rate is not too high at the moment and you believe you can attract more visitors than sticking with an STR model and attempting to improve your marketing would be a good strategy to try. If you think that travel demand to that area is waning or the market is becoming saturated; leading to more competition then you likely have two options. Switch to LTR as you have suggested or find a way to out compete the other STRs in your area. Various things such as offering additional amenities, having better photographs, better marketing, or competition based on price can help you become more competitive compared with the other properties. I would look into those ideas prior to selling if you anticipate selling at that large a loss.