I would be honored to review your book! I would certainly buy a few! Great advice on the chairs, I purchased a cute little bistro set for the next apartment but after reading your post, it certainly couldn’t hold a person 200 lbs and over. I’ll have to replace it. Makes sense to consider functionality over style.
Do you have dishwashers in your units? What kind of heating and air do you have in your studios? Do you have your clients use a p.o. box or do you allow them to use the mailing address? Do you have inspections? Do you allow pets? How do you handle items that are missing or damaged when your tenants leave?
Glass and readers…I have been in SPAIN so that is why no postings. I am still waking up at 3 or 4 AM; trying to get my brain in this time zone.
We only have a couple of dishwashers. The water here is heavily mineralized and leaves a white powder residue on the glasses and silverware. We have to instruct the tenants about this or they complain that the dishwasher is not working. We also supply a starter pack of “LemiShine”. That is great stuff for removing minerals.
Our tenants are Worker Bees and they eat mostly take-out, pizzas, and in restaurants. Often the oven and stove top are not used at all. Our units are older and we would not bother to install a dishwasher.
Heat is central heating in bigger homes, and wall natural gas heaters in smaller units. We also have some with electric baseboard heating, those utility bills are higher. Here I like wall gas heaters best of all for economy.
Almost all units now have air conditioning, either central or window units. We even have one largish 1-bedroom with 3 window AC units. I would prefer central AC but it is expensive to add. We are in the desert Southwest and have very low humidity, but even so our Swamp Coolers (evaporative coolers) only brought complaints. We also add big rotating fans if a unit seems too hot. I can’t sleep in a hot room so I don’t want my tenants to suffer either.
All units have their own mailbox. We provide removable stickers so the tenant can put their name on the box. A mailbox is pretty important, tenants are always getting UPS or regular mail or cookies from Grandma.
We don’t do inspections except we eyeball the place twice a year when we do the Fall and Spring Safety Checks to change smoke detector batteries, turn on or off heaters, etc. This is documented and important for possible liability.
Very rarely is stuff missing. If it happens then I figure the guest loved it more than me. We did lose a cool Wiley Post picture once and a couple of fake pistols from the unit that has a gun rack in lieu of a coat rack. Lots of times tenants ADD stuff. I will find new sofa pillows, potted plants, and knick-nacks. To me that means that the tenant has loved the unit and really felt at home there. They couldn’t help themselves. After all, they wouldn’t buy sofa pillows for a room at Motel Six would they?
Furnishedowner, wow! Spain? That’s so nice! I need a vacation like that. I thought I was asking too many questions and ran you away :0) Ok, just a few more questions. I would like for you to critique my business and tell me what you’d change. Should I spell it out here on the forum or in a private email?
No, there is no license that I am aware of. You should maybe make a phone call to your state Real Estate Commissioner to make sure that leasing/sub-leasing is not a licensed activity, and must only be done by a real estate broker.
We had an attorney research it in our state when we started.
Having 3 units, with 4-5-6 on the way is great. Word will start getting around in your town and you will fill a need.
Warning—you must find out what constitutes a service for gross receipts tax. Here we can not rent for LESS than 30-days or we have to pay the state gross receipts tax just like a hotel or business does. You CANNOT GROW without knowing those rules. Trust me on this! Contact your state taxing office or get that info. somewhere. If you grow, sooner or later you end up on the state taxing entity’s radar.
Our first investment property is a short-term rental, we offer a minimum 2-nights most of the time and have specific high ticket 3-night minimum weekend events in the area (SEC game weekend, graduations, etc.). We offer monthly discounts to executives transitioning to our area where we’re priced right about the local Residence Inn for the same time period. Everything is included - the house (3 bedroom + loft, 3 bath, sleeps 12), utilities, and maintenance. As a perk for an additional fee, I have a housekeeper on call to do cleaning daily or weekly, as well as a local personal chef who’ll go in and do meals for whomever is renting, again for a fee.
Before we started renting it as a short-term (vacation) rental, I calculated our costs for utilities, mortgage, insurance, etc. and then figured out how many nights we could reasonably expect someone there. Thus far things are good, we’re well above the conservative nights I’d planned we needed. We live only a mile from that house, so we’re able to keep tabs on things as needed when we have someone there and the bonus is when we have family visiting, we can just have them stay there if it’s not booked.
You do need to know regulations in your state. Here, if we were to convert one of the rooms to a bedroom and make it 4 + loft, we’d need to register as a B&B since our state defines professional lodging providers as 5 sleeping rooms or more. We keep it at 4 so we don’t have to go through the hoops for that license.
RahRah,
Does your state/city/county require you to pay short-term sales or gross receipts tax? Do hotels in your area charge lodging tax? Hotel taxes here are 13%+ so we didn’t want to get hit with that.
I’m outside out city’s taxing authority for lodging, so I only have county sales tax which I build into our nightly rate and include a statement that it’s included so anyone renting knows it’s included. I do have an advantage because I’m in the county - my rate is 5.25%, where anyone inside city limits has 11.5% (state, county, city + lodging in city) which is harder to build in because their nightly rate goes up more than mine has to.
I had to research to find out - since I don’t have 5 or more sleeping rooms in the house, I don’t fall under the regulations as a hotel or B&B - check your state and local ordinances to see if you’d be viewed as a hotel/B&B.
RahRah,
Do you charge for cleaning with those 2-day rentals?
Do the tenants contract with your cleaning staff for their move-out cleaning?
Cleaning a whole 3-bedroom house is a big deal and takes a lot of time.
How is your profit/month now that you have been doing this a while and do you like furnished better than regular rentals? I have often wondered how high-end luxury furnished owners do renting to the affluent. It sounds like your home falls more into that category.
I package everything into the nightly rate, which is why I can discount longer stays since my housekeeper is the same for a 2-night rental or after someone has been there a week. On monthly rentals I include weekly cleaning - gets her in to make sure all is well for me, and keeps the house clean so it never gets to a point where cleaning it takes more than 5 hours. My housekeeper gets $100 if it’s 3 hours or less, $150 for 5 hours when turning the house, $50 a week to keep it maintained when empty (vacuum & dust) so she’s paid all the time and likes the gig. My two night minimum rate is significantly higher than our 3 or more night rate. I don’t make as much on a two-night though, which is why I really push for a week or longer and have three night minimum on weekends where those staying may be less than careful with things.
It is a high end home which is why we do it as a short-term rental - I can’t pay the mortgage and expenses on a monthly rental basis on a one year lease, it just doesn’t work because in this area the highest monthly rental rate is around $1,800. If I got that, I’d make nothing at the end of the year - but for game weekends, three night minimum, I get $2,850 - I get the same for the three different college graduations in the area - so nine 3-night min weekends pays all the bills, everything else is gravy and the gravy is good - so far for 2013, I’ve been booked all but two weeks…had a 2 month exec in mid-Jan to mid-Mar, then a new one in all of April, all other weekends had someone in for a weekend or few days mid-week for work.
There are only 8 houses in our area that rent like this, none are high end or as large as ours is, so we’re ideal for groups or friends coming together and sharing the cost. The furnishings are high end (Bernhardt), along wtih things like all-clad pots/pans, Egyptian cotton sheets, etc. Our renters are paying top dollar for this area, actually well above it, so we’re impeccable about the house and what’s in it and go beyond expectations where we can - like having a Kuerig and enough coffee for the weekend, little touches like that matter I’ve learned - each bedroom has a welcome basket with sample size organic bath products, there is a computer, roku, 50" flat screen, etc. - things those who are spending that kind of money expect when they’re spending what they are to stay at our place.
RahRah,
Very cool and interesting! This is what it’s all about…making your rentals work for you in your area.
Here my market niche is traveling worker housing. We don’t have any luxury units in town that I know about. But we have lots of traveling workers of all kinds who would rather have their own place with washer, dryer, dog yard, and kitchen with dishes.
We just had a bunch of Navy pilots for a few weeks, now mostly a company building an electric sub-station. We always have traveling medical staffers.
Many of our customers tell us, “Yeah, we were just in a small town in Texas and couldn’t find any furnished rentals. We all had to stay in hotels and that sucked.”
So you small landlords, try going furnished to test your market. If it works here in our little burg it will work most anywhere.
We’ve got an influx of traveling workers in my area because of a nearby power plant under construction. All the apartment complexes in town are full. There have been lots of little RV parks popping up all over the area as is seems many of the workers coming here just stay in travel trailers. I just talked to one of my bankers this morning and he was telling me about one of his other clients who spent 240k developing several acres for RV hook-ups. He expected to make back his money in about a year and a half. The only problem long term is that there won’t be much of a need for all of these RV parks after the plant is finished next year.
We’re actually looking at adding another house into our portfolio, same type of rental, but more mid-level for furnishings since we get a lot of inquiries from people who are price sensitive and I’d like to be able to say, “okay this one doesn’t work for you, but we have this one that does.” Still working out the numbers on it since we’d have to fully furnish in addition to buying it to see how long it will take to hit break-even and then profit.
In case of long term rentals a minimum of 6 months is required where as 1 day onward in case of short term rentals.I think short term period doesn’t seem to be useful because this properties are not available for a long time and somehow it is more expensive. Other aspects in short term rentals includes signing of original agreement which says that the person who is on a short term rental is responsible for late payments, damage in parking area or in any place of the home,cleaning of side walks and the most important thing is security deposit(how much you have to pay) and many more criterion’s which is somehow very irritating. I also think the whole short term procedure also depend on the quality of the landlord.
Our business is not set up for 1-day rentals. That is a hotel. We require a minimal stay of 30-days.
We do not require a security deposit as long as we have a credit card or corporate letter of responsibility on file.
We don’t worry about cleaning sidewalks or damage to parking areas. We are not in a crowded urban area.
We just try to keep it simple. Keep the units full and clean. Furnished rentals give about 3 times the amount of rental profit. But then they are also 3 times the amount of work. It is the way to get maximum dollars from a unit, for you landlords who want to increase your cash flow.