Month: November 2019

First Airbnb Superhost tip and trick! Here we go.

The length of stay requirements you have on your listing is critical to drive higher occupancy rates. There are a few different tips and tricks I would recommend when setting this for your Airbnb.

Pro Tips For Why The Length of Stay is Important

First, understanding how often your listing will be displayed is critical. The lower your minimum stay rule, the higher likelihood you are to show in a search. Think about it, if someone is looking for a three night stay and you have the min stay at four nights, your listing won’t show up. The more often your listing shows up, the more often you will have opportunities for the guests to book! More bookings is more revenue!

Second, did you know you can edit the min night requirement by specific date ranges!? I didn’t either, until yesterday when I was doing a bit deeper of a dive. Airbnb actually doesn’t do the best job letting you know this is an option.

Providing an example will help illustrate this in the best manner. Let’s say your min night stay is set to 3 nights. You have someone book Monday to Wednesday of a certain week. Another guest books Saturday to Tuesday of the same week. This would leave you with Thursday and Friday night unbooked. You might be okay with that, but why not try to increase your bookings and get those two nights booked.

You might be thinking, well if I have a 3 night min stay, there is no way I can have someone book. Luckily, that is not a correct statement and you can alter those dates specifically! Here is how:

Go to your listing and click on the Availability tab as shown below

Next, scroll down to the ‘Trip details portion of the page and click ‘Edit’

Next, scroll down and click ‘Add another requirement’ as shown below

Now, you can go in and choose to edit specific min stay requirements for specific date ranges as shown below. Ensure you select ‘Specific dates’ as shown below

You will now be able to input the Start Date, End Date and min stay for that time period as shown below:

Ensure you click save, and then you will see something like the below edit I made to my Airbnb listing recently:

This is an incredible way to have a higher min night stay but still allow yourself to fill smaller gaps in vacancy.

Third, understanding your market is very important. There are many areas where a couple night stays are more the norm. Many areas where you are targeting business travelers staying during the week. In my area, Orlando,Fl, there are many families that come to Disney. The typical stay is dependent on the time of year. Off season, it is much more common for weekend only bookings. With that in mind, I set my min to ensure at least three nights are booked. Early on, it is important to offer one night mins. This will allow your listing to get a higher amount of views. As you get more and more experienced you will figure out for your area what the right min is.

Key Takeaways:

• The minimum length of stay you have for your Airbnb is critical! The lower the min is, the higher chances are of more people seeing your property.
• You can alter the length of stay requirements for different time periods following the step by step process outlined above!
• Figure out the most optimized length of stay requirements to have for your property in your area! I don’t believe it is a one size fits all equation.

Addendums are one of the most critical components of an effective negotiation!

What is an addendum? When purchasing a property, you are making a legal agreement with another individual(s). When you go through this process, everything is negotiable. Once you agree upon a purchase price of the property, the negotiation is just beginning. Addendums are used as a legal document that both parties agree to changing the terms of the deal. The document must clearly state the new agreement and both parties are required to sign.

Once both parties sign the document, the addendum will be attached to the contract. The underwriter will then use that to do run the final closing statement.

How I used Addendums on This Deal?

You can either be a good negotiator or a bad one. In real estate, you’re not the one that is doing the direct negotiation as your real estate agent does. This could be a good or bad thing. I like to negotiate and negotiate at my job on a daily basis so I prefer to be the actual one doing the negotiation.

In this particular deal there were a few things that were critical for me to negotiate on. In the first addendum I received $2k at closing to cover repairs identified during the inspection. This was a big win as I was able to take care of the repairs for around $1,200.

Here is where the true magic came in. The appraisal for the property ended up coming in low. There are a few reasons why I believe this happened. New legislature was passed not too long ago that now bids out appraisals. This means when someone requests an appraisal, the first person who responds wins. With that being said, you can get someone who does a good job or poor job. Unluckily, or maybe luckily, the appraiser for my property was bad.

What Having A Bad Appraiser Means?

Having an appraiser who does a bad job can be a very good thing for you! If used in the right way.

The appraiser ended up coming back with an appraisal price below the price we agreed to on the contract. This meant I had a few different options.

Option 1: I could pay the difference, in cash, between the appraisal amount and the agreed upon contract amount. This would require extra capital on my end at closing. Not the best option, but I have a strong cash position so it wouldn’t hurt too bad.

Option 2: I could go back to the seller and ask for them to lower the price to the appraised amount or I would walk. I have good grounds to stand on here because I don’t want to pay more for the property than the appraised value.

Option 3: I could dispute the appraisal with factual data. The appraiser would review the data and determine whether they agree or disagree. They would then proceed to make the change and I would be back at Options 1 or 2. I knew the appraisal was low by $7-10k.

Final Decision

I decided to send an additional addendum asking the seller to reduce the price. I had never done this before, but the worst thing they could say is no, so what the heck.

The seller came back and dropped the overall price by $5,000 based off the appraisal I sent them! Boom! Money in the bank!

That is not all, it gets better!

Why Addendum Verbiage Is Critical!

This is where things begin to get interesting. When asking my agent about the second addendum, I made sure I was clear to her that I wanted Addendum 1 to remain. This would mean I would still be getting the $2k in closing costs and the $5k decrease in price. My agent called the other agent and the agent said the seller would not give both. Here is the trick on the second addendum, shown below:

In Addendum 2, the only thing stated is an agreement to drop the price to $210k. There is no mention of Addendum 1. So from a legal standpoint, if no mention of nullifying Addendum 1 is agreed to, then Addendum 1 stands. The seller signed the document agreeing to the the drop in price. What they also signed though is agreeing to both addendum 1 and 2.

This is something the sellers agent should have made clear in Addendum 2. Addendum 1 would only be nullified if a clause in Addendum 2 clearly stated that.

Legally, we were now in an agreement for both Addendum 1 and 2 to be attached to the final contract at signing. This mistake is 100% on the sellers agent. Since the seller did not want to give the $2k at closing, the sellers agent ended up giving up $2k of their commission to the seller.

Unfortunate for the sellers agent, but part of doing business. You have to understand how to cross your t’s and dot your i’s.

Key Takeaways:

• When you get a property under contract, the negotiation has just begun!
• Understand that if you have many addendums as part of the contract, you must explicitly state the status of each if you want any changes.
• Taking a bad appraisal back to the seller can end up saving you even more money! Don’t necessarily fight a bad appraisal. If you are confident the property is worth more, then use the bad appraisal to your advantage in getting the price even lower!

It is official! Finally! I was able to get rid of my $95 per month PMI (Private Mortgage Insurance) payment on my 3.5% down home loan.

I couldn’t be happier with eliminating an expense that adds no value to my life. PMI is definitely one of those.

What is PMI?

For some of those who might not know, let me first explain what Private Mortgage Insurance (PMI) is. Private Mortgage Insurance is something you pay on top of your mortgage when you put less than 20% down. This extra payment helps “protect” the lender as you have a higher rate of defaulting on the loan. To be clear, this money doesn’t go towards the pay down of your principal payment. This is an additional payment you don’t recoop. I don’t believe this statement to be true, but this world isn’t fair!

How I Got Rid Of PMI In 3 Years?

Now comes the fun part. Six months ago, I didn’t have a great understanding of what PMI was. Once I finally learned what it was I went on a quest to try and better understand what my options were to get rid of PMI.

There is no better way to do this than call your loan provider. So that is exactly what I did. My home loan provider is Mr. Cooper. I was shortly after transferred to the PMI department. Yes, that is right, they have a separate department entirely for PMI.

I explained my situation to the PMI person (like I knew what I was talking about) and asked what options were available to remove the PMI. This is where things got interesting.

The individual on the other end of the phone told me there were three different ways to get PMI removed:

1. I would have to have my principal balance owed to be at a 80% Loan to Purchase Price. This means, for simplicity, if I bought the home for $100k, my principal balance would have to $80k or less.
2. If number one wasn’t true, then I could pay, in cash, the difference to get to a 80% loan to purchase price. To keep numbers simple, if I put 3.5% down on a $100k property, my loan principal would be $96,500. To get to an 80% LTP I would need to pay $16,500 in cash on my principal balance.
3. I could get the home appraised based off a BPO and if my principal balance was less than 78% of the new appraisal price then the PMI would be removed. This would mean if I owed $78k in principal but the home appraised for $100k then the PMI would be removed.

Perfect. I know knew the different options I had for PMI removal. When analyzing the different options, I wanted to figure out what would have the largest ROI (return on investment).

Analyzing the 3 options

Option 1: This isn’t really an option but more of a binary yes no. Since I put down 3.5% and I was 3 years into my debt payoff, I was far away from this being true. Option 1 is officially axed.

Option 2: In my particular scenario I put down 3.5%. I purchased the property at $292,000 meaning I paid $10,220 towards principal. That means my remaining principal balance started at $281,780. Three years into the loan and my balance was roughly $270,000. To have an 80 percent loan to sale value, my principal balance would need to be $233,600. Well….way off there. This would cost me $36,400 to get rid of PMI in cash. The return on investment would be almost 32 years!!!! That is insane and there is no reason to pay that amount of money to get rid of a $95/month payment.

Option 3: Down to the last and final option! I could get an appraisal to see what my homes current value is. Based off the principal balance being roughly $270,000, I would need the home to appraise at $346,153 to have a 78% loan to value (LTV). To get this number, I divided my principal balance ($270,000) by .78.

Now that I knew where my appraisal needed to come in at, I started looking at prices for similar homes in my area. I started seeing my home should come in around that price so I decided to move forward with getting an appraisal!

A few weeks later, I had the appraisal done and before I knew it, I got a notification from my lender that my payment price would drop by $95 per month.

I am all for spending on things you enjoy in life, but paying $95/month and never seeing it again was a waste. Not bad to be able to end this expense with little effort put in on my side.

Key Takeaways:

• PMI is a big part of how lenders protect themselves when taking on loans where the individual taking out the loan puts low money down.
• If you are paying PMI, call your lender to find out what options you have to get rid of it. They are very open to having the conversation. Especially if you always pay on time!
• Cut expenses that you are wasting money on and don’t bring you any happiness! This expense was exactly that! I would never see this money ever again as it is not added to your principal payment.