Furnished rental net versus unfurnished--Analyze this please

General Real Estate Investing
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Bookkeeper/office help: 40 hrs. wk. inputs everything into RentRight, does end-of-month statements, sends out checks to lease owners, pays bills, answers phone, takes in rent, orders repairs

30 Hr. wk office help: Same as above but only helps with statements, books people, delivers stuff, checks people in (we go to units and show how stuff works), meets repair people, basics shopping, phone, e-mail queries

me:trouble shoot (I go to all leaks or damage problems},contract out rehab and inspect work, inspect units, buy stuff for work to be done (2 bathroom ceiling exhaust fans today), advertising, decor/furnishings shopping, P.R.,planning, insurance, loans, purchases, leases, interact with lessors, tenants

handyman: maintenance and routine safety checks, repairs, renovation

cleaning ladies:clean, shop for supplies, maintain inventory (clean boss’ house-whoops) go home early if no cleaning or contracted out to guests

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I just wonder with all the payroll, paying the utilities, providing the furnishings, all the hours of work, paying for maintenance, and all the hassle, if you’re really making any more money (or even as much money) as you would if you just had 45 unfurnished rentals. I could see where the rents must be 3X the normal rent just to keep up.

I still think that you could be a LOT more efficient. With the exception of having more cleaning due to the furnishings and putting in the furnishings in the first place, I do every single thing you’ve listed, by myself, in 12-16 hours per week, with more units. I’m not trying to give you a hard time, but rather to challenge you to re-examine your procedures.

Mike

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I really appreciate your input. I have been totally isolated here from any expertise. I tried to buy your book on-line but was stymied at every turn. I have always read the How-To books, especially since the older ones were still valid in my area!
A big efficiency problem has been my lack of computer skills. I love financial stuff but I have no natural computer skills nor patience. Literally I could not add up rents anymore on my hand-held calculator so I hired a bookeeper.
Would I make more money unfurnished? My accountant and banker both said I was doing great but all extra money gets rolled into rehab for more units so I don’t know. My mattress is not lumpy with dollars.
There comes a time in any business where you either quit growing or hire. And you may earn less until you take the next leap forward.

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Mike,

I am clear you have found your calling, but I think you are a special guy. I don’t want to do the labor of fixing plumbing or painting. I don’t mind trouble shooting, cheking credit, and collectiing money. Someone would need to keep the books for me.

I understand where furnished is coming from. You do what you can do and what you can’t do you hire someone smarter, better than you. If he DID the work it would be less efficient than the way he is doing it.

Furnished thanks for the idea, I now know how I can rent my home out and make some money.

Jay

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Jay,

That wasn’t my point. My point was that he might want to consider the efficiency of his business. For example, here is what just one of his employees does: “Bookkeeper/office help: 40 hrs. wk. inputs everything into RentRight, does end-of-month statements, sends out checks to lease owners, pays bills, answers phone, takes in rent, orders repairs”

I can’t fathom why it would take one person 40 hours per week to do this work for only 45 rentals. I do all that is listed there, do all the management, all the maintenance, all the rehabbing on MORE rentals and it only takes me 12-16 hours a week. In addition, he lists at least 4 other people that are working for him.

My point is that he’s paying at least 5 people probably 100 or more hours a week to do something that should take FAR fewer hours. The point was not that he should do everything himself. If he wants to hire out the work, that’s obviously fine by me (it’s not my money).

Mike

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Mike,

I hear you. But since you don’t pay utilities, betcha we pay more bills than you do. We have learned to “bundle” utilities just recently. There is a learning curve in that I have never run a business. Before I hired the bookkeeper I was up at 4 AM writing massive amounts of checks just to keep up. I had no time to affect change, I could only react.

Now I have time to mull things over, shed unprofitable leases and houses, go on-line and learn stuff with you all. How do I get your book? I am going to order Sidoti’s as well, thanks for the tip. I need more efficiency, yes, but my down time is for dreaming and planning.

FurnishedOwner

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You may indeed pay more bills. All the more reason, IMO, to re-evaluate your business in order to cut expenses.

From your post, I too agree that you are paying 2 people working a total of 70 hours a week what 1 person should be doing in 40 or less hours a week.

Don’t know what you’re paying an hour, but seems that 30 of them could be eliminated fairly easily.

Raj

28

Thanks for your advice.

Because there has been enough money coming in, I think I quit analyzing what was actually being spent.

I am now evaluating and making some goals for office/staff function. I am going to cut some overhead as soon as possible.

I still wish there were some of your readers who were also doing furnished rentals. I need advice like:

Are you getting holding fees? What is your refund policy?
Do you charge for pets? Do you charge a cleaning/re-stocking fee? How do tenants react to your fees? How are you getting Canadian and other snowbirds? Do you have a Dec.-Jan. slump? New Newsgroup Forum topic?

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As a newbie, I have questions for you Furnished. How do you get into the pool of rentals agencies send nurses to? I’m just about to close on a four-plex in suburb of a major city and think it would be an interesting thing to try this in one or two units if the numbers and rental termed could work out. I just it looked up travel nurse accommodations and there’s several companies out there.

From the more experienced set, it sounds like you could be making more money. But it sounds like you’re trying to provide quality accommodations which ensures repeat business and pass on some of the headache. You’ve created jobs for others…isn’t this a good thing :biggrin ?

Congrats on your success.

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You've created jobs for others....isn't this a good thing ?

NO! The purpose of running a business is to make money, not create jobs!

Mike

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Happy lil story with furnished rentals, not related to the current discussion:

My 9-5 sales job gave me temporary corporate housing when I first started my job. The location was perfect in NJ about 10 minute commute to NY. It was an amazing high-rise building, fully furnished, with new construction going on everywhere and a waiting list just to get a place to rent.

Anyhow, I lived only 20 minutes from there so I didn’t need the place. So I rented it out. It was costing my company about $3600/month. So I put ads on craigslist and within a few hours I got replies and was able to rent the apartment out for $900/WEEK! This went on for about 3 months. Best part was that I wasn’t responsible for any expenses at all and anyone who could afford $900/week surely wasn’t going to trash the place. :biggrin

I wanted to pursue this again afterwards, by furnishing an unfurnished apartment, but I didn’t, because the numbers didn’t work out when there was a $1800/mo rent to be paid.

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[[[[[…You’ve created jobs for others…isn’t this a good thing?..]]]]

It’s a great thing, as long as you understand that the only justification for having an employee is if they genenrate a lot more income for you than they cost you.

It’s not a good thing to have an employee just so you can have an employee.

Landlords who work other jobs quickly reach a point where they have to delegate some of the work. Some of the landlording stuff is time sensitive, and if you have large blocks of time where you absolutely can not be doing landlord stuff, then you have to have someone who can deal with time sensitive issues that won’t wait for the weekend.

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Sunnyskyinvestor,

It takes some marketing to keep furnished rentals full. You can’t just put up a “For Rent” sign. You don’t want locals.

Best Source of tenants:
Get your units to pop up on the computer when someone googles “furnished home, your town” or “Extended Stay,” or “Corporate Rentals”. Internet has saved our necks.

Go to your nearby hospital (or call) and talk to HR (human resources). Ask if they use travelers, and tell them you have good traveler housing. Good traveler housing is hard to find, and they will be happy to talk to you!

Most of the agencies we deal with are in Omaha, Cleveland, Florida, etc. so it doesn’t matter where they are located. Their nurses come from all over.

I would be interested to hear if your experience mirrors ours. Also, if there is a new company coming to town, restaurant being built, anything like that they may have out-of-town designers, contractors, etc. The market is huge.

Yes, you can make money. Double or triple the rent, but same principal, interest, taxes, insurance. You pay utilities and furnishings, which is pretty much a 1-time deal if you buy quality vintage wood dressers,etc. A fun project and lucrative.

Thanks to the mentors here I am watching things more closely. Now we are farming out our under-utilized cleaners into another business–private house cleaning for our tenants. Cutting the overhead, Mike.