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March Airbnb Financial Update – Ol’ Faithful

Time for a long overdue set of Financial Updates for each of my properties! I have been investing in short term rental properties for the past almost year now (along with house hacking) and I have tried to document my journey on my Instagram account. It has been a wild time with everything going on, but it is finally time to put all the numbers out there for everyone and anyone who cares to follow.

If you want to check out the update from February, click the link here.

Ol’ Faithful Financial March Update

Now time to dig into the numbers to see how March went for Ol’ Faithful. If you aren’t already familiar with Ol’ Faithful, checkout this link to read more about the property. March was an interesting month to say the least. A lot of information was just beginning to come out about the current pandemic we are in and how it would begin impacting travel was very intriguing.

Disney announced they would be closing on March 15th, 2020. This meant in the middle of the month, all of my guests would no longer be able to come to the area for the parks. The target audience for my short term rental business is people who are coming to the area for Disney. The month of March was impacted significantly. I had three guests cancel towards the end of the month and then I ended up dropping my prices by over 50%. That is when I had a fun guest book. If you don’t remember the whole cops being called to my Airbnb, you can read everything that happened at this link!

Anyways, here are the final numbers for March:

March Airbnb Financials

Income Stats

Overall, the income was pretty solid in March. This was mainly driven on a high occupancy for the month at 84%. I was able to get 26 of the 31 nights of March, but as you can see, the average nightly rate ($106) was much lower than previous months.

The main driver behind the lower average nightly rates was the decrease in prices I made due to COVID. It has been an interesting time for the hospitality industry. Especially in Orlando where the majority of our economy is driven based off the amusement parks. Once Disney announced they were closing on March 15th, that was a big hit to our industry as a whole. At the time of writing this post, Disney has yet to set out a path forward to reopen. Only time will tell.

Expense Stats

No crazy expenses to report out on this months total breakdown. There are two things I have added to the overall expense column. Taxes and Cap Ex account.

Taxes

The county takes 6% tax of your total gross income where I operate. Pretty simple calculation, but need to make sure you add it for properly calculating out your expenses.

Capital Expenditures

For now, I am putting this off to the side to handle any capital expenses that could come up throughout each month. The other month I was hit with a big $2.3k bill for replacing the pool pump. This capital expenditures account will essentially accrue and I will “pull” from it as expenses like that come up. This will help level load some of the capital expenses from understanding cash flow versus one month taking a big hit and then other months cash flow looking normal.

In future months, it will be more clear as to how exactly this will work.

Overall Cash Flow

Overall, the numbers for the month of March were okay for my property. Nothing spectacular, but all things considered, I am extremely grateful for being able to cash flow. All things considered you have to be happy with an up month during the midst of Corona.

Cash flow for the month ended at $579. Typically March is the beginning of the high season in Orlando for the parks. You have a lot of the people who are coming for Spring Break with the family to enjoy some vacation. Further updates coming to see the full impact of COVID on my short term rental business at Ol’ Faithful. It gets ugly…just wait.

 

 

 

 

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Four Ways To Become An Airbnb Superhost

Becoming a superhost helps your Airbnb SEO ranking significantly!

Have you been thinking about hosting on Airbnb and want to know how you earn superhost status?

I have been an Airbnb Superhost now for over two years and I get excited each quarter I continue to maintain my status. Maintaining superhost status can sometimes not be as easy as one would think.

Here are the four things you need to become an Airbnb superhost:

1. Completed at least 10 trips OR completed 3 reservations that total at least 100 nights

2. Maintained a 90% response rate or higher

3. Maintained a 1% percent cancellation rate (1 cancellation per 100 reservations) or lower, with exceptions made for those that fall under our Extenuating Circumstances policy

4. Maintained a 4.8 overall rating (this rating looks at the past 365 days of reviews, based on the date the guest left a review, not the date the guest checked out)

It is pretty simple process of becoming a superhost as far as the guidelines go. What is not so simple is actually hitting each of the four pillars.

I have developed processes and standards within my Airbnb business to help hit each of these four points every quarter.

Want to learn more about how to become a superhost?

Link in bio for full details!

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@TheYoungRetireeBy33

Always remember @TheYoungRetireeBy33 3 Core Principles:
1 – Your money should make money for you
2 – Start early to realize the power of compound interest
3 – Eliminate your largest expense by house hacking

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Real Estate Investing Strategy – Ol’ Faithful Breakdown

Time to do a full real estate investing strategy breakdown for each of my properties. I started giving a few teasers in my Highlights on instagram, but thought giving a more detailed breakdown on my real estate investing strategy is critical. I want to provide my real world experience with actual numbers for each of my real estate investment properties. I have a variety of real estate investment strategies ranging from house hacking to long term rent by the room to short term rental properties.

Time to dive into my rental properties in the order in which they were purchased!

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When I Purchased The Property

I purchased this property in August of 2019 so a little over 8 months ago. This property was going to be the first ever standalone real estate investment property I would be buying.

Was I afraid? Hell yeah I was.

Was I nervous that I was making a bad decision? Hell yeah I was.

Did I second guess myself? Hell yeah I did.

Here is the reality. It was the week of my 27th birthday and I was continuing on down a path to be financially independent through having a high savings rate and investing in the market. Nothing wrong with that. But I was comfortable. I wasn’t taking any risks. I was playing things safe and I hadn’t yet stepped up and made some big money moves in my life.

I decided there was no more time for playing it safe. It was time to take some calculated risks. It was time to start investing in my future and creating what is going to be my legacy! I woke up at 4am every morning for a full week off from work with one goal in mind. Figure out where I was going to buy my first ever short term rental property investment!

Was it easy? Absolutely not. But nothing in life that is worth pursuing is easy.

Did I do everything right? Absolutely not. But if you expect to do everything right the first go around, you are dreaming. The goal is to try to learn from others mistakes as much as you can and not make those same mistakes. There are certain things you won’t be able to account for. There are certain things you will have to learn on your own as you go through this process.

Within a week, I had 10 offers out on different properties and finalized the negotiation on Ol’ Faithful! More blog posts will come in the near future talking about how I ironed out the location I wanted to purchase in.

Strategy For Property

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The strategy for Ol’ Faithful was pretty cut and dry.

Ol’ Faithful would be a dedicated short term rental property investment. This was a pivot in the business model that I did with my first house hack at The OG. To find out more about how I use The OG, read the article where I talk through my investment strategy there.

Staging the property would be focused entirely around creating a Disney theme inside the home. This was a critical piece to the puzzle and adding Disney flare throughout the home would create that much more excitement for my guests. Knowing your core customer is extremely important with the short term rental market.

Automating many of the processes people do manually is critical to creating a great and personalized guest experience. Automating sounds like it would create a less personalized guest experience, but you would be shocked at how personalized I can still make the experience feel for guests.

Ideal guests, were people tourists (or locals) coming into town who wanted to stay at an awesome home near the Disney parks and Universal!

The nightly rate ranged drastically depending on the time of the year. Like any common destination, there are high and low seasons. The goal was to get the property operating between $110-160 per night. This was an exceptional rate to be renting at for such an awesome vacation to Orlando!

Breakdown Of The Numbers

Time to break down the numbers for Ol’ Faithful!

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Let’s first look at the purchase of the property.

I purchased this home for $210,000 on a conventional 20% down payment loan. Why conventional? This is one of the ways to finance a loan on an investment property. I did look to classify this home as a vacation second home, but the property wasn’t far enough away from my personal residence to qualify. This left me with a 20% down payment of $61,253.

You may look at the numbers and immediately question how the down payment was $61k when the homes price was $210k. Here is what happened with that.

I originally got the home under contract at $215,000. The appraisal came back at $200,000. There are a hundred things I could point out on the appraisal on why they were off by over $20,000. This was the beauty though. I didn’t fight the appraisal. I knew what the value of the home was based off comps in the area.

Instead of challenging the appraisal, I used the appraisal to negotiate the price of the home down even further. The crappy appraiser actually ended up saving me another $5k on the purchase price of the home.

There was a catch though. Since the appraisal came in at $200,000 that means the bank won’t loan me more than the appraised value. This then meant that I had to come to the closing table with an additional $10k at closing in cash. This would get the price of the loan to exactly what the bank would feel comfortable lending on.

Breaking Down Income And Expenses

Now time to breakdown the income and expenses for this real estate investment property.

Starting with the expenses, as most I am sure are aware, the expenses of a short term rental are much higher than long term renting. This is mainly due to paying for utilities, HOA fees, cleaning fees and pool maintenance. Those are my main expenses at the property outside of some other capital expense money I put to the side for a new AC, new water pump for the pool , etc.

Now for the income breakdown. My target occupancy rate was 80% when I first analyzed the deal. I felt like this was a very realistic number once I got up and rolling. The average nightly rate (although I don’t analyze properties on averages necessarily) is $125. The nightly rate varies drastically depending on the time of the year and the night we are talking about. I leverage softwares that are able to understand dynamic pricing and help to generate more cashflow for the future!

After all income and expenses were paid, I project to make between $600-1000 per month. Again, this isn’t a long term rental where the monthly cashflow is more or less consistent. Good months for short term rentals will look a lot different than long term rentals. This is even more reason why you have to really take advantage of the high season and set prices accordingly!

So that is a breakdown of my expected income for Ol’ Faithful! If you want to see the latest month breakdown of income and expenses detailed out for Ol’ Faithful, checkout this post!

If you aren’t already, don’t forget to follow me on Instagram!

Thanks again for all the support and continuing to come back each day for new updates in this saga!

Enjoy this article? My goal is to continue posting about my real estate investing journey and path to financial independence through investing! I want to share my journey with real numbers to people can see exactly what I am doing. Are there other ways to get to financial independence? Absolutely, this is not the only way. But this is the fun of personal finance, it is personal! Checkout more of my content here!