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I’ve started to wonder if I shouldn’t switch to long-term rentals. I’m struggling to book my listing for what I thought I could when I started. There is still a premium, but I think it’s at best $300-500 more per month than I could get if I rented it out monthly for for a year. And of course, there’s a lot more work involved in short-term rentals, more expenses, and I’ve heard that I likely won’t be able to do as well as I have been in the winter months.
Meanwhile, as an aside, but smartpricing seems to be the least sophisticated analysis tool on the planet. It just sent me an email that my prices in January were too high- switch to smartpricing and be 4x more likely to get bookings! All days but one in January are booked, and have been for two weeks.
I feel it’s not a fair calculation. There are also peak time when you will charge more. It’s hard to tell in Theory based on different factors. You should give it 3 months at least and see. What if Airbnb will decide to feature you suddenly on their Instagram page? The odds will work towards short rental… bottom line, you should give it some time.
My Airbnb income is approximately double what my income from a long term renter would be. Also, with Airbnb I don’t risk having a renter become a squatter.
I have not calculated this out but one thing we like is the flexibility of holding our space open for friends and family as needed. Obviously not possible if we rented it out long term.
In NYC, in my neighborhood, I can charge almost exactly twice what I could get if I was renting our spare room long term.
However, that’s assuming I rented it every night. Because we have slow seasons and take time off, I make much less than that. (We charge 65/night plus cleaning fees, we could get 900 to 1k/month for a lodger) … at the moment, we’re considering a long term lodger. Squatters are a fear, but we’ve also got 3 kids to put through college so we are still assessing the risk/ reward of it all.
Not too much more, but I think the lack of wear and tear from long term tenants, preservation of kitchen (I do not allow cooking), safety from squatters, daily or weekly inspection for problems and breakage, payment on the day of and not perhaps months later if the tenant stops paying, control over access, all are great pluses and probably are worth twice what I receive monthly.
Next to nothing if you factor in my occupancy rate and imputed wage for my cleaning time. But I want the flexibility to block for my family and guests and to be secure in the knowledge that whoever they are they will be gone in 10 days max. Maybe my insurance would go down a bit with long term.
I’ve had multiple inquiries from potential long term renters. Just not interested at this point.
Double to triple the income I would have earned had I continued renting. Right now it’s a slow season for me but I’m still getting 1.5 x the revenue. I don’t have to do showings, and I don’t get time wasters - this alone was worth it!
If you are not getting the revenue, there may be a number of contributing factors. A search can turn up a number of excellent ideas. I gain most of my insight on this Forum (yay!)
And get as many reviews in as you can to gain credibility.
I’m sure that in general you’ll make more at Airbnb (if your location is half useful) compared to renting. It will be more effort though, which is fair enough.
I wouldn’t ‘factor in wage for cleaning time’ though, but I’m not sure why! I can’t think of a metaphor.
Edit: perhaps it’s like getting a massive promotion but the work is harder, you wouldn’t say “it’s more money, but bearing in mind I have to work harder, I’m no better off.”
So this inspiredme to do some better calculations to validate my “it’s a wash” estimate. My average rate is $83 per night (factoring in price variations, and cleaning fee over average length of stay). So $83 x 30 days is $2,497, compared to $950 per month I could get with LTR. So STR is 2.6 times LTR whoo hoo. But my actual gross is $1,300 per month, given occupancy rate, including the fact that I block a day between bookings for turnover because I work full time. Still lookin’ good, right? However, I provide snacks and breakfast items, about $32 per month. 5 turnovers average per month, $50 imputed cleaning fee per, that’s minus $250. $500 per year additional insurance costs, that’s minus $42. So $976 net per month. So STR = LTR. Pros: I have use of the suite when I want it, essential for elderly parents visiting (no stairs), holidays or backyard parties when I have a dozen or more guests and want the property to myself. My options to increase net revenue: Am I priced too low? I’m competing with over 300 other Airbnbs in the locale plus extremely good hotel deals on the weekends. Drop the snacks? My chosen niche is “the host who thinks of everything,” Nobody has to run to the store for a toothbrush or tampons. Reviews confirm that guests feel well taken care of. This attracts stable couples, business travelers and special occasion (birthday, wedding attendees) guests. And allows me to charge $5-$10 more per night than similar properties. Hire a co-host and cleaner to up my booked nights? I’ve already taken the cleaning into account, but a co-host increasing my bookings by 50% and taking a 30% fee would increase my net by a whopping $50 after additional snack inventory.
Any suggestions from you experienced hosts on how I could increase net revenue? And for a brutal assessment of the sharing economy, see the latest Mr. Money Mustache blog on his Uber driving experiment.
Works out the same, bugger!
Would you be paying $500 a year for insurance on LTR? And do you get holiday pay when you take time off work, or you lose that income in order to do the turnaround?
And should you impute the cleaning fee? Some people don’t charge a cleaning fee, some people overcharge - it’s quite a grey value. I call the cleaning fee ‘extra income’, and consider it part of the profit (it cheers me up whilst I’m doing the cleaning and laundry!)
Just trying to make your STR seem more profitable!
I can give you an actual analysis for one of our properties.
We did STR for 1 year and Code Enforcement continued to fine us so I said screw it, we are converting to LTR. We were doing $12,000/month STR and now $4000/month LTR. So, yes totally sucks money-wise. However, WAY WAY WAY less hassle, and our LTRs are great.
**Numbers are pre-expenses for both
***DH just made the point that I should mention we were paying $1000/month for cleaning while we were STRing that we obviously do not pay for LTR. Our LTR is inclusive of utilities so other expenses are essentially the same
I have an economics degree so of course I have to include the opportunity cost of cleaning time! I’m using market rate, but I could ise my hourly wage or my hourly accounting client rate, which would make the calc come out even worse, The $500 is the differential between homeowners with some LTR landlord insurance and my current commercial STR coverage policy. One can argue about the rate you use to value your personal time (burger flipper or something higher), but small business entrepreneurs should include a wage rate for themselves to get a better picture of their net profitability. I know a lot of people who are killing themselves doing multi level marketing, hawking cookware or jewelry at home parties, and they never seem to take into account the massive amount of time they are expending for relatively low return.
I checked Craigslist to see what my condo is renting at on the LTR market…there are hundreds of condos identical to mine in the building.
The rent for units that are being advertised as LTR’s range from $1300-$1500 month furnished. That’s about $48/day.
My nightly rate as a STR is around $165/ni., and I don’t discount. Even if I booked as few as 9-10 days, it meets or surpasses the LTR.
This year has been the lowest in bookings that I’ve ever experienced - only about 200 rentals as opposed to the 300+ in previous years. I’m priced higher than most but the market is glutted with new owners who come in at rock bottom rates to fill their calendars, and that’s where the business is going.
Ah well…the point is, the money is there in STR’s but you gotta stay on top the game.
Yeah the market saturation is killer.
Of course all investment-type analysis is out the window if you must increase cash flow to pay the mortgage and STR is your most (or only) do-able option.
