13 minute read
INSPIRE
The Short-Term Rental QUESTION By Michelle Gamble
Short-term rentals (STRs) have become big business. Corporations like Airbnb and Vacation Rentals by Owner (VRBO) along with other smaller agencies and services have taken over the shortterm rental market. It’s forecast that 33.9 million people will use Airbnb in 2022, making this one of the most successful short-term rental services in the country.
“STRs are typically rented out by the day or week and are commonly found on vacation destinations,” said Suzanne Bucknam, CEO of The Connecticut Explorer. “A standard vacation rental is an entire home that’s rented out by the week. However, there are many other types of STRs.”
Short-term rentals tend to offer travelers a more homey experience versus a less personal and often sterile hotel room. The same is true for people who come to a city to work and don’t want to be stuck in a hotel for sometimes weeks at a time. “Short-term rentals are the best alternative to a home-like environment,” said Chad Price, owner and CEO at ChadPrice.com. “They can provide all the comfort and bring the home-like vibe we are all used to experiencing. I make most of my visits and cook, lie down on the couch for no reason, and even bring my video game console to make it an immersive home-like experience.”
FINANCIAL BENEFITS
What makes these services especially attractive is that the average property owner can sign up and provide hosting services. Property owners considering doing short-term rentals need to be aware of the pros and cons. “The first advice I have for anyone wanting to turn their vacation home into an Airbnb is to ask yourself, ‘Do I have what it takes to become an Airbnb host?’” said Daniel Rusteen, author of Optimize YOUR BnB.
It’s important to realize that income generation isn’t always as consistent as leased or monthly properties. While property providers can count on more income stability with long-term rentals, STRs offer overall financial perks. “The amount of income will be wildly different from month to month,” explained Rusteen. “You will be susceptible to slow and busy seasons. In slow seasons, you will charge 50 percent of the nightly rate you would in busy seasons and your occupancy will be somewhere between 50 to 70 percent. In slow seasons you may make less than you would on a traditional rental, but in busy months, you will make 200 to 300 percent more than you would on a long-term rental. I’ve even seen 500 percent variances from traditional rentals.”
For individual property owners who do STRs, the added advantage of extra income can add more money to coffers. In one case, a host lost her job and unemployment didn’t cover her mortgage. She signed up for AirBnB and enjoyed the flexibility of renting her rooms versus taking in long-term room rentals. Using short-term services also gives rental providers more control over when their rooms or houses are available versus the long-term commitment of a typical rental situation.
“The risk of STRs is that you’re more dependent on the economy and market conditions,” said Marina Vaamonde, real estate investor and founder of HouseCashin.com. “This is especially the case with STRs that appeal to tourists, though less so if your target market is digital nomads. STRs are more vulnerable to economic swings because as the economy tightens, people don’t travel as much anymore. This is in contrast to regular rentals where your lease tends to be locked in for at least a year.”
PRACTICALITIES
While the financial promise of STRs may offer many individual renters great opportunities to supplement or create income, the practical realities rival that of long-term rentals. You can’t view these issues as necessarily a downside since these are the same types of challenges you would face as a property provider only with slight twists.
“The disadvantage of running a short-term rental is the increased maintenance required,” said David Bitton, co-founder and CMO at DoorLoop.com. “Multiple shortterm tenants will arrive and depart at small intervals, requiring more time and effort to oversee each. This is especially true during peak season when there are more bookings. You will also need to clean the property after each departure to ensure it is ready for future arrivals, which can be expensive and time-consuming. Further, there are logistical issues to consider while running a STR. To be competitive, you must regularly market your property to customers and ensure that your rates match the current market.”
Short-term rental providers need to realize that it’s not a matter of signing up for a service like Airbnb and then it’s business as usual. The property still needs the usual preparation that any hotel or traditional bed and breakfast might require. “You have to spend money to make money is no truer than here,” said Rusteen. “Along with the two to five times more income are more expenses. You will have linens expenses when the guest damages a towel, if you have a faulty water heater it must be repaired, consumables (paper towels, soaps, etc.) need to be replenished, a monthly Netflix subscription to increase guest satisfaction, amenities like bed lamps with USB plugs to charge your guests' phone.”
When it comes to customer service, welcome to the world of 24-hour reaction times. You have to be prepared to provide excellent communication and someone on standby to answer questions, concerns or maintenance problems. Customer service is especially important when working with services where guests will rate your STR. “Your FPG (future potential guest) needs someone to get a hold of at all times. This includes at 2:00 a.m. on Saturday,” explained Rusteen. “If you are doing things right, this should very rarely if ever happen. If the electricity goes out, you need to get that fixed asap. Same with the Internet, hot water, heat, anything. When the guest leaves and forgets their favorite T-shirt, you’ll have to ship it to them.
“When a guest calls you to tell you the Internet doesn’t work and you get the Internet company over there asap only for them to tell you that it just needed to be plugged in,” continued Rusteen. “When the guest tells you the electronic door pad doesn’t work so you rush over only to find out the guest typed the code incorrectly. When the guest says the shower drain is totally clogged and the plumber tells you that the drain was simply covered in hair, probably from one of the guests shaving in the shower. These situations occur on a regular basis. You will have to know how to troubleshoot (Is the power on for the router? Tell me what code you typed in? Can you check the drain for anything visible sticking up?)”
On the upside STRs often don’t require as much maintenance in some cases where guests are more transient.
“That’s right,” adds Rusteen. “While long-term tenants probably use the kitchen and spend more time inside, a short-term renter is only in your city for a few days and is likely to eat out and spend a lot of time outside, thus only using your bathroom and bedrooms. Yes, some guests cook, but overall, there will be fewer footsteps in your house and fewer amenities used. Additionally, you will be cleaning 3 to 4 times per month. Your home will permanently be in sellable condition.”
Rusteen also provided a valuable list of other considerations, which are as follows:
OTHER THINGS TO CONSIDER:
Legalities: What if the guest breaks their arm on your property, does your current insurance cover that? Should you create a separate company for your hosting activities to protect your assets?
Digital Locks: You will want to install a digital lock after the guest loses the keys on a Friday night at 11 pm and can’t get back in. Ultimately, this makes your life easier and improves the guest experience.
Taxes: Taxes are different based on different sources of income. Talk with your accountant about any potential effects and how to optimize them.
HOA (Home Owner Association): While your city may allow you to rent on a short-term basis, your building may prevent it. They may even fine you for this activity.
Security: Theft and robbery occur regardless of who you’re renting to. In fact, a thief may even target your home more than a longer-term renter. Your guest could be a thief, but of course, there are ways to filter out bad Airbnb guests. What about your cleaners? Have you vetted them? After all, they have access to your home.
Security and the liability of inviting strangers into your space needs to be thought out. According to Shawn Richards, master adventurer who works for ConnectQube, a UK-based company. “When renting out your home for short periods of time, you’re inviting strangers into your space — strangers who could potentially damage it or harm themselves while on your property, which means they could sue you if they get injured while staying in your home. It’s unlikely that this would happen, but it’s something to consider when making this decision.”
Airbnb has an excellent reputation for handling errant guests. You will want to work with a service like Airbnb that proactively has developed policies and procedures designed to protect your security and safety.
One thing for certain, though, you will definitely have an opportunity to meet a variety of interesting people from all walks of life. If you like a houseful of visitors and enjoy hosting, STRs offer an excellent social and financial opportunity.
Michelle Gamble is the editor of Rental Housing magazine.
EV Chargers:
Why and How Your Community Should Install Them
By Ellen Ryan
Electric vehicles (EVs) pose a chicken-or-theegg problem: Drivers need to live where they can plug in, but apartment buildings don’t want to install charging systems before they know there’s demand.
Guess what? There’s demand. The time is now.
WHY INSTALL EVC?
With 1.5 million EVs on the road, J.P. Morgan has predicted that hybrid and EV sales will grow from 8.3 percent of North American vehicle sales in 2019 to over 38 percent in 2025. EV prices are falling into the range of their internal combustion counterparts, and a far greater range is being made, including pickup trucks. Charging times are dropping, too, making EVs all the more appealing.
The federal and state governments have encouraged EV sales in several ways – mainly free access to HOV/toll lanes for EVs, low-emission vehicles (LEVs), and zero-emission vehicles (ZEVs) (depending on location) and purchase rebates.
On the residential side, encouragement also takes several forms. Government and utility incentives help developers reduce capital costs of installation; New York state is a standout here. Several states already require charging spots; California requires that three percent or more of all new parking places be “make-ready” equipped for EVC in new multifamily buildings. Some municipalities mandate even more. Having EVC in two percent of parking spaces gains a building an extra point toward LEED certification.
Multifamily owners and managers benefit from the investment. “Electric vehicles have been a growing consumer trend, and it was important to LMC to find ways to service that trend at our communities,” says Chris Acker, vice president, Community Technology Services at Charlotte, N.C.based LMC.
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EV chargers help fulfill sustainability goals, too. ChargePoint, an EVC provider, offers its clients data on emissions offset, which Greenbelt, Md.-based real estate company Bozzuto has used in its sustainability program. EVC also helps with compliance; as federal, state and city regulations arise, early adopting rental companies will have the infrastructure in place to meet them.
WHEN TO INSTALL EVC?
Determining when to install EVC is easy: Ideally, during construction. “Owners who neglect to deploy EVC during construction if the opportunity is available will incur significantly higher installation costs post-development,” according to an RCLCO Real Estate Consulting whitepaper, “Electric Vehicle Charging Strategy for Real Estate Implementation in the United States.”
“It can be very expensive to upgrade electrical power in an apartment building – easily over $100,000,” says Steve Atwater, president of Low Power EV Charging (LPEVC). He’s referring to new transformers and conduits, drilling, trenching, and more. But most owners will, he guesses, as residents turn to electric cars over the coming decade.
“Costs vary based on the number of EV chargers, the need to upgrade power or not, the distance of EVC stations from the power source and more,” he adds. “Costs could be $1,800 for one L1 to more than $100,000 for multiple L2s. Every situation is different.”
LEVEL PROS AND CONS
EVC rebates and incentives center on L2 charging. “Level 1 is too slow; people want faster” is conventional wisdom. But if charging overnight in your own space, does speed matter?
“L2 adds more range per hour – a benefit to residents. L1 might be more cost-effective and less intense on the building energy system,” notes Cassandra McFadden, Bozzuto Vice President of Sustainability. “It’s a case-by-case evaluation.”
Instead of scattering L2 chargers around a garage, engineers cluster them on one end or out near the clubhouse or athletic area – rarely at or near where residents live or park. “We found that the standard L2 EV charging stations around Napa weren’t particularly convenient” for multifamily, says Charles Shinnamon, Co-Owner of California’s Quail Run Apartments.
Result: Residents get an untimely message to come unplug and move for the next person, who also has to dress and go out to drive into place. Residents have to walk farther than usual. Complaints about this system go to the property manager.
So, when Quail Run leaders chose EVC, they went with L1, which “minimizes the impact on energy demand at Quail Run and will allow many of our residents to charge their vehicles.”
“Many” is important. Installing L1 costs less, space for space, and Atwater of LPEVC says he can install 16 L1 stations for every three L2s. Though L1 is a slower charge, when residents plug in for the night, they gain more “miles” than what the average commuter needs in a day. Those driving farther will have to plug in again.
“Guess what? RECOUPING COSTS EVC could be an amenity, part of commonThere’s demand. area maintenance. But most management companies utilize a network app that tracks The time is now.” usage by resident and may attach a monthly service fee to the electricity cost. Networking also allows for pricing control and limits on energy use; residents can check their charging status and add cash to their account. Pricing may be by time, session or kilowatt hour. Bozzuto residents typically pay for hourly usage directly through their ChargePoint or similar account, McFadden says. However it works, the trend is here to stay. “In addition to Tesla, we are seeing an increase of other electric vehicles and are experiencing higher demand for our charging stations,” says Acker at LMC. He appears to be speaking for many. Reprinted with permission by the National Apartment Association.
