Our rental market is down this quarter. It seems like the economic downturn hit us later. Also there have been more hotels built, they are direct competition to our “30-day minimal stay” method of renting homes.
We have had several calls from traveling worker agencies looking for housing. Now they all want the most budget studio or 1-bedroom homes.
But all our studios and 1’s are full. The agencies don’t want to pay for 2-bedrooms for a traveler–“All we need is a 1-bedroom”. “Our budget doesn’t allow for 2-bedrooms for a single person.”
So we have now converted our 2-bedrooms to ONE BEDROOM PLUS DEN. The den just happens to have a bed in there as well.
We had to adjust our rates downward too, but the big killer is vacancy. Any day that we rent a 1-bedroom plus den is a good day.
The agency housing people don’t get in trouble for exceeding their budget on bedrooms. The traveler gets an extra bedroom (whoops, DEN) for visitors. We get a 24-hour FedEx delivery of the rent check. Like the one that just came in the door this morning.
javipa,
Yes, you are right. Give the customer what they want. If it’s a 1-bedroom, then we’ll give 'em a 1-bedroom.
More and more we are asking our potential customers “What is your budget?” “Is there anything else that you would need?” “How can we get you to stay with us?”
We are offering discounts, weekly or bi-weekly rent payment with their paycheck, a fence so they don’t have to be barked at by the neighbor’s pit bull. We do check-ins on the weekends and evenings. We do extra pest spraying. Now we are about to remove a driveway stump because one tenant feels that it is a security issue, someone could hide behind it. We do what we gotta do in order to keep our occupancy at 90-100%. That is the level we need in order to turn a profit.
This is great info and makes perfect sense. Please the customer at all cost, especially the good ones. Are you willing to accommodate senior citizens? If so, how do you deal with those on a fixed income?
glass,
We have rented to senior citizen snowbirds, down here from North Dakota and Michigan for the Winter. Otherwise we do not provide senior citizen housing. Usually they are on a more limited budget.
We are in a niche market here–more expensive than regular unfurnished rentals but more budget than the nicer hotels.
We decided that we could not provide special senior housing and stay in business. We quote our rent by the day, even though we charge by the month. Our daily rates are $33-$75 depending on the size of the unit. Still very affordable compared to a hotel.
That is very clever. Life is all about perception and not reality. It is like the reality of 3/2-3 bedrooms with 2 bathrooms. That is what rents and sells the best so we make certain that all of the properties are 3 bedrooms with 2 baths and do what has to be done to get this in the advertisements.
You do what you have to do. It works.
I always like reading your posts and keeping up to date with how things are going with your business. I often think that I should take my rentals in a similar direction, but have not yet had the ambition to do it.
I understand that vacancy is a very large expense, however it surprises me that your margins are tight enough that you need 90%+ occupancy to be profitable. What are you major overhead items?
Speaking of perception, have you ever tried marketing your homes at the same price or more than comparable hotels and billing them as a premium product in comparison? After all, we all know it is best is you can avoid competing on price.
Another thing that comes to mind. I have stayed in several vacation homes that are designed with multiple “exterior” doors that can be closed and locked to change the configuration of the home to range from one large 4br home to 4 1br units or anywhere in between.
Steve,
Major overhead is the continuing on-going renovation of a vacant unit. It all gets paid out of revenue. The purpose is to decrease the taxable income as much as possible. I just pull out enough each month to pay my personal living expenses.
The reason for that is that our large mortgage payments are now about one-half principal. As we all know, principal is not a tax deduction! So until these mortgages start getting paid off we continue to renovate. Once they are paid off we will have enough money to pay a bigger tax bite, and do it happily.
Your idea of competing head-to-head with the high-end hotels in town is not feasible, in my opinion, because we just don’t have the funding behind us that the Marriott does. We can’t compete with swimming pools, granite sink counters, and the scheduled 5-year stem-to-stern rehab that hotels plan for.
What we can offer is great personal service–we can pick up guests at the airport, receive their packages, and even do emergency pet/child sitting. Our units are clean, clean, clean. Bug-free, and we will drive right over and show you how to work your TV remote. Again.
Your multiple usage vacation home sounds ideal. But pricey. I have needed to learn how to buy, renovate, furnish and rent out really budget units in our low-income small town. And make a profit doing it. I think this plan is transferable to other locations. I just try to give charm, coziness and uniqueness while working within a $30,000-$60,000 budget per unit.
@ FurnishedOwner- Your comments are so helpful! Before renting out our place, I actually have tried that short-term rental option. I got a couple tenant with a child who stayed for a month for a vacation/business. They paid a month’s rent even though they’ve stayed for only a couple of weeks as they’ve been traveling/touring and the dad was also on a business trip. The experience was great. It’s just that I prefer a long term rental because I didn’t have any idea on more specifics with regards to short term rentals. But upon reading your comments, I’m now contemplating to give it a try for a second time after the long term contract has ended. Thanks again!
My friend leaves his luxury 1-bed apartment with a private management company, and all they do is short term rental. they pay my friend $1800 flat rate per month and the fair market rent is about $1900 per month.
$100 is not enough room for them to make a profit doing long term rental. I am curious as how they operate, but it seems it’s very profitable renting out apartment on short terms.