You still haven’t actually said what you are asking your property manager to do for their 20% and what that equates to in terms of an hourly rate, so hard for any here to advise you @Liface2
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I think 20% is market. I have seen higher. If you could do a lot of leg work yourself maybe ask for less.
For my listing , my Co-host is really just there for emergencies, if something goes wrong. I pay less, but coordinate everything remotely.
And they went zooming up, up, up.
Look for a MASSIVE crash in 2024 (of all markets) … or before, if the petrodollar that is propping up the economy gets its props kicked out by the yuan/ruble.
If you are looking to increase your profits, you can communicate with guests, communicate with and schedule cleaners and ask your cleaners to keep the house stocked with suppliers @Liface2
What you need is for some-one to be on call if something goes wrong with the property (higher hourly rate) and then a pay one off cost for someone to do things like install a lock box and air conditioners.
You don’t need to pay someone 20% of your turnover (not profit) to do this.
What sort of things are going wrong 1-2 times a month that he has had to go to the house for?
You have self check-in and instant-book, so communication with guests and cleaners combined can’t be more than 15 minutes per reservation. It appears he charges extra for EVERYTHING else. It would be interesting to see how these duties compare to other PMs that get 20%.
Oh, and not that this is a lot of money based on your expenses, but why does he get +20% on supplies if he’s already getting 20% of your gross? That’s like having a corporate purchaser making money off what they purchase with the corporation’s money.
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I agree with helsi. You can do all the communication with the guests, approval, etc, have a mean to get the guests in via a lock you can operate remotely on your phone. Have all supplies delivered periodically via Amazon. All you need is a cleaner and a repair man. 20% should include cleaning.
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The 5% down is part of what’s eating your lunch. Your mortgage payment is pretty high and you probably have PMI on top of that. If you can, you should look at self-management to keep costs low.
Your pricing looks a bit off. Are taxes and fees really $47/night? Does it cost $100 each time the house is turned between guests? Why is the service fee $38? For only one person to book one night, they will have paid $185 in fees before they even pay for your $85/night house stay. If any of these fees are inflated by you on purpose, get rid of anything that is not necessary and raise your rates instead. Guests don’t like the bait and switch of advertising a low rate only to get hit with huge fees when they start looking to book.
Your decorating needs some help. It has no personality and looks like a bachelor pad, or one of those extended stay motels. If you want to get top dollar, guests want an experience, not just a place to put their head. You have nothing interesting on your walls, if they even have something hanging on them. The beds look kind of sad and uninviting, get some colorful throw pillows, and there are no curtains. Try Goodwill or the Habitat Restore for nice knick-knacks, art and conversation pieces, in high end neighborhoods before shopping retail. There are no flowers or color, little silk flowers in a $1 vase from IKEA can make huge pop of color. The back yard also looks sad. The deck and yard need some flower pots and landscaping. These will be an extra expense, but well worth it. Also, if you didn’t already do this, splurge on 450 thread count sheets from Sam’s club ($30/queen size. DON’T get the more expensive 650 count, they’re scratchy). We get super positive comments from guests on this ALL the time.
I’m a Superhost and have guests stay in my house, but I’m also a Realtor and I have investor clients who buy houses just to Airbnb. This was the first one they did and it is very successful.
You may want to revisit paying your manager 20% of gross, if you’re not going to self manage. My clients pay a business partner of mine to manage their Airbnbs for them. For this one, a 3BR 3BA townhouse, based on what the average rent the house would get if they just put a tenant in it is $1600 - that’s the base for what it HAS to gross each month BEFORE the manager gets paid a dime. That covers the mortgage and utilities. They paid, all in, $275,000, including a professional decorator and furnishings. If you paid a photographer more than $200, you overpaid. That’s top dollar for a good real estate photographer who can give you a 24-48 hr turnaround on the HD photos. Any income over the rental rate in a month gets split 50/50 between the owners and the manager, so the manager has an incentive to keep it rented all the time because they don’t get paid until they reach this mark. This Airbnb has made a profit since the 2nd month up and running over a year ago and, during peak months, May-September, it grosses over $5,000/month. But the manager is always tweaking the listing, and NEVER uses smart pricing. The algorithms are usually way off.
If it IS costing you $100 each time you have the house turned, you need to shop for a cleaning company that will make you a deal on volume. $60 is a great price to do a basic cleaning 3, 4, 5 times a week and a deep cleaning every 2 weeks.
Airbnb as an investment is a great source of income, but just like any other real estate investment you have to do your homework ahead of time, and the numbers have to work. This one can be turned around, but it’s gonna take some time, effort and, unfortunately, a minimal of more investment to make it shine.
Also, you can look into long term rentals through Airbnb for corporate rentals, like when a company sends a manager off for weeks of training, or nurses who are in town for 6 months of training, temporary military assignments, attorney’s who are in town for a big case, relocation of managers who want a temporary place to live while they look for a house to buy. For these types of rentals you don’t have to turn the house, just maybe send the cleaning crew in once a week or every couple of weeks, and you’re not tied to a tenant with a lease. Think outside the box.
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Your place is lovely, and Squirrel Hill is a desirable location for those in the know.
What is your most successful competition doing differently?
One quick tip, add “CMU” and not just Carnegie Mellon in the description, since so many people refer to it that way and might use it as a search term. Think about what you can do to market to parents who come to town for things like parents’ weekend, graduation, move-in and move-out, homecoming, etc.
How can you search for homes with a term?
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I think your biggest 3 issues are LOCATION, ENTIRE PLACE MODEL, NOT BEING ABLE TO MANAGE YOURSELF.
I live in Princeton, NJ now and after living in Southern Europe and knowing first-hand ROIs in STR markets there I can say that even in 2019 US STR investment is a goldmine.
People making a killing on:
- Renting out rooms (entire place won’t cut it)
- Managing property themselves
Compared to Southern Europe rates are higher here, occupancy is way higher, property prices are lower (not in Princeton of course) but in 50 miles radius.
I did some research in the area and it’s possible to make 25% ROI here even with insanely high property taxes.
If you expect SIGNIFICANT capital appreciation in your area of Pittsburgh in the next 2 years then it’s worth to keep the property. Otherwise, sell it and invest somewhere else in the states.
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Seasonal fluctuations are normal. People travel in the summer. My winter guests are more business, family and university oriented vs outright tourists and there are far fewer.
Location is important. For example, I’m 6-7 miles from the city center so that makes my place less competitive.
That said, unless I had a place near a year round resort or entertainment destination I would expect swings in bookings.
Keep an eye on other local prices too. Some may drop winter rates to well below your profit level. The actual number of available units can vary during the year too.
I would never advise buying a home to make a profit on Airbnb unless it was a good buy and in a very high demand location. Even then it could be a borderline operation. A traditional rental will certainly be more consistent. Hopefully there is enough appreciation in your market to make any of these options a good investment for you.
I’m a live in host with no mortgage and renting out my “empty nest” rooms. I can set my prices at whatever I want as my overhead is low. I do my own cleaning and management so there’s no overhead there. I’m perfectly happy to have the Airbnb pay my taxes and utilities and anything over that is play money. Hosts with my overhead can price you right out of the market. I dropped my rates about 20% this winter to stay competitive.
If you buy a house near me and try to just break even, there’s no way to do that with a mortgage, management fees, cleaning costs, insurance, utilities, repairs and set up costs. With a venue near the sports, entertainment and tourist spots you may get a better fill rate, but the purchase price will be higher too. Condo associations are outlawing short term rentals more frequently too.
In fact my city just passed regulations on short term rentals that limit them to an owner occupied home plus one additional unit and all must be owned vs leased/rented. The days of running multiple units in leased housing or even multiple owner operated homes are gone.
Exactly what I came here to say. Find a good cleaner, that can keep an eye on the state of the house in between guests, and do everything else yourself. Also, STRs aren’t great in every city. For our 2nd Airbnb (first was a house we live in 1/2 the year and rent 1/2 the year) I spent hours and hours (created a spreadsheet) of all of the VRBO and AirBNB listings in our area. I broke them out by average cost, guestimate on booking %, cleaning costs, etc. and broke down the average cost per guest to figure out what I thought we could make. There are also companies like AirDNA that claim they can sell you this information.
Also, real estate is always an investment. Sure there might be some that turn a profit quickly (if you’re lucky) but most are a long-term play - STRs are no different. You may want to consider using your AirBNB income to pay down your mortgage and/or up your down pmt to 20% to get rid of the PMI payment.
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You did a nice job decorating the place, but I can see that it was not decorated by a professional.
I think I wrote this blog post just for you. Please read it and take into consideration the part about making beds, ceiling fans, and photography.
But above all, please consider re-writing your ad. Make me picture myself staying there, the fun I will have with my kids going to the Carnegie or a Pirates game. Is the property near enough to a hospital for visiting nurses to stay?
Pittsburgh has magnificent summers, so also highlight great activities a family can do and how they will love being so close to (insert fun place here.) You may even want to hire a professional copywriter. Have you ever considered giving the property a cute name?
Sadly, although you have a gourmet kitchen, I don’t want to be spending all my time in the kitchen slaving over a gourmet meal. I just need the basics.
And I think you should definitely charge more. Just my two cents.
Sorry to be harsh, but the place is devoid of personality. I do like the kitchen, but that’s it. Needs some pop, some color, some art work that is with the tone of your description. Also your pricing seems a bit low for the number of guests it sleeps. (I didn’t check competitors)
I get 20% of all bookings for the home I manage. But we charge $245 a night for a 2600 sq ft 4 bed/2.5 bath home on a golf course. I do all the bookwork (monthly and year end for taxes), manage the communications, order the supplies (no mark up, for goodness sake) and have them shipped to the home where the housekeeper puts them away. Our cleaning fee is $140, which never seems to bother the guests. The owner lives two hours away and is there every other week. I live 10 hours away from the home. The owner and I understand each of our needs and he trusts me on handling the guests. At $602K purchase price, this home is a very slight money maker for the owner, but the tax write offs are significant.
Maybe I’m weird, but I think your minimalist decor is fine. You’ve invested a lot in furnishings and decor and I wouldn’t throw any more money down that chute.
I think folks who have a business or tourist reason to be in your area don’t need extra description from you, as you are not in a resort area. Your ratings are great and that is what they will read to make a decision.
How are the bookings going? Report back on what’s going on and what you decide to do!!
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My 2 cents:
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Going back to Airbnb’s original concept: turning an unused/idle space (bedroom, basement, entire house/apartment/condo) into an income-generating space. I kept true to this concept and I have been OK so far. I will NOT buy a property with the thought of making it an Airbnb cashcow. Too risky for my appetite; too much of a gamble; too many uncertain variables.
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All my properties, except 1 holiday villa, is within 1 hour from my house. I manage to handle everything myself, while still having a demanding full time job. I have a lockbox for the keys that my guests could access themselves, so I don’t need to meet them in person, unless I have to. I have a reliable cleaner who can let herself in and out.
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I kept my expenses low and things very simple. I don’t buy expensive furniture or unnecessary decor; I buy good quality but functional ones. I don’t offer anything above and beyond, and avoid customising my properties to each incoming guests. I politely turn down various requests, and it never hurt my ratings. What I provide, I list on the descriptions, with pictures. What I don’t provide, I don’t feel obligated to give at all. For me, keeping things at arm’s length works.
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The way I see it: your mortgage payment is not a cost; it is an investment that you will (hopefully) recoup when one day you sell the property, with appreciation in value. Your costs are furnishings (1time cost), utility bills, the property manager, the cleaning fees and any supplies (soap, shampoo, etc). Separate them. All of your costs (except for utility bills and supplies, which are a function of guest usage) are within YOUR control, so control it. Negotiate property management fees, the cleaning fee, etc.
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Lastly, have patience. 85% occupancy is already quite good. Some people are not that lucky.
Good luck!
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I disagree. Most people looking on AirBnB have already decided to visit the area/town the property is in. For a holiday, work, event or visiting friends and family. They already know what the local attractions are. What I want on an Airbnb listing is a straightforward and honest description of the facilities and, if relevant, closeness to attractions, transport or the center of town. I would be put off by someone telling me how much fun I’ll have, that’s what tourism websites are for. I would assume the property itself doesn’t have much to offer so they are padding out the listing. The exception would be if the property offers something other properties don’t in terms of facilities or closeness to an attraction or event. Perhaps it’s a cultural thing.
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I agree and the tourist websites and visitors’ bureaux are staffed by people who are paid to do it and do a great job. Airbnb listings shouldn’t look slick and ‘professional’. For example, we’ve never used professional photography - we prefer to under-promise and over-deliver.
One bee I have in my bonnet is that of the hosts who add loads of ‘local attractions’ photographs to their listing. As you say, it always seems to me that they are simply padding out the listing because they think they their own property isn’t attractive enough to guests without showing what’s in the area. They have usually nicked the photographs from local websites - infringing copyright laws too.
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I would add here that I doubly hate it when they highlight those attractions and locations in their listing when they are not even that close!
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Hey Liam,
It seems you have just been going through the less busy season and like others said, maybe got the wrong information to start… Last spring we got into the short term rental business in Canmore, AB. We quickly learned that there are a lot of expenses involved in these rentals and it can be very seasonal. Luckily we started off in the high season. The fall and spring have been a challenge though. I would say don’t give up based on only half a year returns and the first year is the most educational. I do all the pricing and bookings myself and we live 2 hours away with just a cleaning crew to rely on. Find yourself a reliable cleaning company and do the online work yourself. 20% seems like a lot of money, unless they are also your cleaners. Answering and approving bookings takes very little effort with the rental apps and online spread sheets. Get in touch with some of the nearby Airbnb owners and see if they have any insights.
From a traveler point of view, your cleaning fee is pretty high and nightly rate pretty low. I can’t say for sure but I would think people would rather pay a higher nightly rate than have a large amount of extra cost… Maybe just me though. We are listed on a vacation rental site also, so if you can identify the things that would bring families for vacations and maximize that, it may help.
Lastly, your nightly rate is all over the place… If summer is busy then set a nightly rate for the whole summer, rather than weekend vs weekday…
Oh, I guess one more thing! I read an article about how to get more business in the off season that talked about the feeling of Hygge (hue-ga), which is that feeling of utter coziness and contentment. Your pictures are great but try to get a few that inspire that feeling.
Good luck!
Ivory