Short Term Rental Challenge
Earlier this year one of my goals was to try running short-term vacation rentals. You can say it was my 2021 short term rental challenge. I took two (2) of my long-term rental properties and changed them over to short-term rentals as their lease expired. I also leased a home that was a long-term rental from its owner for five(5) years and made it into a vacation rental.
I had never done short-term rentals before but I did a lot of research into what it took and all the different ways I could’ve approached it. I also paid for some training and joined a Facebook group focused on rental arbitrage. Needless to say, I did my homework before diving into this venture. I decided to focus on single-family homes and the traveler
I was prepared for the most part but nothing is better than going through the actual experience and doing the actual work. I started one property at a time and I did just about everything by myself which went against some of the training but I wanted to know all aspects of this new business model before handing things off to others.
I got into this mostly for the learning to see if I could make profits that exceeded what was traditionally made with long-term rentals which in my case was roughly $200 to $400 a month per property. I knew that I could always fall back to long-term renting so the risk or loss wasn’t that high. If the first short-term rental didn’t pan out I would learn something, lose some time, and lose about $6,000 on furniture and accessories.
But as I previously mentioned I have 3 properties that are now short-term vacation rentals so obviously things went well. Now let’s get into how this year went by the numbers.
This first chart is from OwnerRez, and it shows the “Net Profit” which is really Gross Profit minus Online Travel Agency (OTA) fees.
Bookings by Listing Platform
This chart shows the total number of reservations grouped by OTA. As you can see Airbnb provided the bulk of the reservations, roughly 75%, while the others combined are roughly 25%. This shows platform dominance but I am happy not to have all my eggs in one basket. I also did not focus much on optimizing the listings for the other platforms. That’s something I’ll have to look into this year.
As you can see I listed my properties on three(3) different OTAs and used OwnerRez as my property management system (PMS). Please use my affiliate links below if you’re looking to signup with any of the services.
Occupancy (Nights) Per Month by Property
The chart below shows the monthly occupancy for each property during the year. When I did my calculations to get a night rate I assumed 26 nights being occupied each month. As you can see there are wild fluctuations in monthly occupancy for p1124. You can also see when each property went online which was just about four(4) months apart from each other. [[occupancy in nights.png]] The reasons vary but in general for all properties, I need to stress that “I did all the work”. These included cleaning, handyman work, and lawn care. So I had to block off some days to get certain things fixed. And remember I also have a full-time job which luckily is remote and only requires internet that I have available at all my properties. I also put in place a one(1) day gap rule between reservations for p1124 and p5321 to give me time to clean or fix issues. The 24-hour gap safeguarded against me having to deal with multiple properties with guests checking out and in on the same day. One month after getting the third property online I made getting cleaners a priority. I did no cleanings in December for any of the three(3) properties and it was great. Paying someone else to do the cleaning does take away from the bottom line but this was factored in from the beginning. Once I have the cleaners trained up like I want I’ll remove the one(1) day gap which will make more days available to book on the calendar which in turn should increase occupancy.
Total 2021 Year STR Financials
Here are the financials for 2021. You can see when each property went online about four(4) months apart from each other starting in March. The first two properties I own and the last one to go online is one I leased for five(5) years at a fixed monthly rent. The financials show the income and expenses for each property. I broke the expenses out into the mortgage and bills which is basically everything else from electric, water, internet, and so on. I do not offer cable TV service since most people have a Netflix or other streaming service account that they can use on smart TVs.
The chart below shows the financials when there was only a single property. The average(AVG) cash flow for the first four months with a single property was well over $1,000 per month. Much better than my $800 target to make this all worth it.
The chart below shows the financials when there were two(2) properties online. The average cash flow is still well over $1,000 per month but you can see where in Oct it fell to $675. This is because my wife and I went on vacation to New Orleans and since I was doing all the work I had to block off those days that we were gone. Yes, it’s an obvious problem having my business solely dependent on me but again I knew about it and fixed it later. Still much better than my $800 target on average to make this all worth it.
The chart below shows the financials when there are three(3) properties online. The average cash flow dropped down to $706 per month. A little less than my $800 target but I was not worried. Things got slow in November so I had to drop rates a bit to get more bookings. I also got more longer-term stays twenty(20) days or more which are discounted more than shorter stays. And in December the wife and I took another vacation to Athens, Greece to bring in the New Year. So I blocked off the last week in December. In early December I hired a cleaner to outsource those duties. This was a training period and I did not feel comfortable having bookings while we were in another country. Well, that was until one of the guests wanted an extension into January. Since they were good guests I extended their stay so only two(2) properties were blocked now. Now that I’m back from vacation I can say that it all worked out fine. Maybe in hindsight, I should’ve opened up the other properties but better safe than sorry. Plus, I didn’t want to temp the gods while in Athens, Greece :).
Lastly, the chart below shows the totals. Cash flow for the year or ten(10) months ended up at a little over $20k.
Now that I have all three properties online I should start seeing more consistent occupancy and returns per month. There’s redundancy where if one property does less the others can pick up the slack. The chart below shows what’s currently booked. I can see that the winter months are looking very profitable as snowbirds are traveling to get away from the cold. The stays are longer and because I use dynamic pricing which takes demand into account the nightly rates are higher. It’s noticeable that the “Gross Total” is already roughly 50% of the previous year’s “Gross Total” with online three(3) months showing rental income. Not to mention, the month of March only shows a single property reserved. Now some of this could change if guests cancel their stay but January is pretty much locked in.
Taking on this challenge last has taught me a lot about the business of short-term vacation rentals. It’s been hard work and it’s not going to be for everyone. If this inspires you make sure to do your own research. I’m fortunate to be in Florida, specifically the Tampa/St. Petersburg area, which is a vacation hot spot year-round. For this new year, I’ve committed to optimizing what I already have in place with the three(3) properties. I may look into picking up at least one more property now that I have cleaners which greatly frees up my time. If you have questions reach out. I would love to help others who are interested in this subject.