Episode 002 - What is a STR and Why should You want to Have a Few?Sep 04, 2018
Show Notes & Lessons
WHAT IS AN STR (SHORT TERM RENTAL)?
Most Rentals have lengthy leases, 1-2 years, where you move your stuff in.
Short Term Rentals are usually less than 30 days, most around 2-3 days to a week where you just bring a bag with some clothes.
Boarding Houses preceded hotels and BNBs have always been around in various forms.
Hotels: bed, bath, mini-fridge, same look.
STRs: can be a room or entire home, experience the culture of the entire city, travel with entire family as one but split costs to save money, homey feel.
Basically, an STR can be less expensive than a hotel with way more room for larger families and even some great amenities, like pools.
WHY YOU SHOULD CONSIDER AN STR
* A very popular & growing trend
* Locations all around the world
* The US makes up only 20% of all Airbnb's
* It's a great way to control real estate
* It can be quite lucrative
What if I don't own Properties?
You don't need to. You can run your business out of a property that you rent or co-host. Michelle is waiting to see if there's another RE adjustment but she loves the cash flow of rental properties, so she's investing in Short Term Rentals that she doesn't always own.
What will you need?
* Good credit/clean record
* First, Last, & Security Deposit (if renting)
* About $3,000-$5,000 to stage & stock
*Deposits on Utilities
Think outside the box!
Necessity is the mother of invention.
Start by creating a business entity, like an LLC.
Get an EIN from the IRS.
Open a bank account. Never Co mingle funds.
Get business cards printed.
Get a smart phone so you can use Airbnb's app and messaging.
A computer helps, too.
Having a UPS Box or physical address for your business works well.
Purchase insurance specifically for Short Term Rentals. Regular Renters Insurance will not work.
What you don't need is a property of your own. You don't need a website. You don't need a GED, degree, certificate, or doctorate. You got this!
REMEMBER THERE'S A LEARNING CURVE WITH MONEY
Michelle reminds you to handle your income and expenses very carefully, never mixing your business and personal expenses. Also, make certain the person who is GOOD with money handles the money. If no one is, time to hire a bookkeeper who is.
Get This Episode's Show Notes in a pdf form...
[00:01] Over the last two centuries, nearly 90 percent of the world's millionaires have created their wealth through real estate. Here to tell you how you can ride this wave with less risk and less capital while creating greater income, is your host, best selling author and Speaker, Michelle Russell.
[00:21] Hi, this is Michelle, the Master of Money Mindset, and you are listening to the Short Term Rental Revenue Podcast...
and in today's episode, we are going to talk about: Why we want to invest in short term rentals, why we want short term rentals and what short term rentals are. So actually this is the second time that I've done this episode because the first time right beforehand, my dogs were going crazy because the Amazon guy had come to the door and they were barking! Barking! Barking! And so I put them in my office and when I did I shut off the mic. Then we went into the whole thing recorded the whole episode, was a maze ball and we were ready to put it out there and there were no little lines and were like wondering why there weren't any little lines and the reason was because I turned off the mike and forgot to turn it back on. So now the mic is on and we are ready to get rocking and rolling. ARE YOU READY? ARE YOU READY? I know you're laughing. Okay stop laughing because now we've got to get into the meat and potatoes of the whole STR thing.
Okay. So S.T.R. stands for short term rentals and what are short term rentals? Short term rentals are the mere image of a long term rental. And what is the long term rental? Okay. So, if you don't own your house and you live somewhere most likely you are renting that place or you're living with your mom and dad and you shouldn't be listening to this episode until you pay them some money and get on your own. Okay get out on your own. Anyways but if you're renting you're paying somebody else for a long term lease usually. Most people it's an average of a year or two. Okay, so that's a long term agreement. And what happens when people are renting your house as they go in there and they move stuff in and they live there and they wear and tear on your house. Okay, so then when they move out you get to fix it up, replace the carpet, paint the walls and do it all over again. Find somebody else with good credit who's going to pay on time and you put them back in there. And that's what a long term renter is. now a short term renter is somebody who only rents out that property from you for a couple of days. I mean it could be one day two, three, four, it could be a week could be a month. But usually it's not a year or definitely I've never had a short term renter for a year yet but it could happen I guess. But the fact is these people are usually on vacation or a business trip. They're usually going someplace that they don't live. Sometimes they do - It could be like say somebody who just wants to get away where they can write a book or something. I've had that happen where they're staying in the same city but they just want to be away from home in a place where they can just concentrate. But basically most of the time most of our rentals are short term rentals got started in Orlando. And the reason why, because we've had STRs there for decades because it's a great place to go. People go to Universal Studios and Walt Disney World and it's a huge huge tourist destination. It's a Big! Big! Mecca for that. And a lot of times they're going with many generations of people or a lot of people, a lot of friends and family right.
So when you go to a hotel you're stuck in a room. So you've got a bed and you've got the bathroom and the shower and maybe you've got a little tiny baby fridge or something but that's fine and well if you're going for a day but if you want to stay for any length of time. Most people are going to want some kind of place where they can you know, make a meal or sit down and relax Instead of laying on a bed if they want to watch TV. They want to a little bit of separation. So somebody else can take a nap while they're doing something else or whatever it is they just want a bigger space. And so we've had vacation rentals for a long time or they were a vacation by owners is VRBO was a huge site and yet it is a huge site. It was actually I'm pretty damn sure it's been around since way before AirBnB. But I don't know because Airbnb now we make up about 20… The United States makes up about 20 percent of Airbnb. But short term rentals have been around for a long time there because people would just rent out houses. You would have Grandma and Grandpa want to go mom and dad and then all the kiddies right. So you got like three generations of people. So it was pretty smart to just rent a house and you know you get the entire house with three bedrooms you put the kids in one bedroom Mom and Dad get the other bedroom and Grandma and Grandpa get the other bedroom. Everybody's got you know private bathrooms you've got a big kitchen and living room where everybody can join together. Sometimes you've got a pool in the backyard and it's a really great place and honestly instead of renting a whole bunch of hotel rooms it saves you a little bit of money sometimes and it's way more comfortable way more convenient and a lot more fun because if there's a rainy day and you decide you don't want to go to the parks or something you're not stuck in a hotel room. It's actually a better option for most people and a lot of people come in big groups too. Like we have properties that have five and six bedrooms and we'll get tons of people in those. and they'll just you know it might seem like it's an expensive place to stay but when you split it up per couple it's still less expensive than a hotel and way more fun because you know our places have pool tables and foosball and pools and you know workout centers. And I mean all kinds of really fun things to do inside the house. So the house is like a destination all by itself. So if there's somebody who's not really into the amusement park thing, a lot of times they just say: hey, you know you guys go ahead and I'm just going to stay here and read a book and do whatever I want to do or watch TV or whatever.
And so big big and small short term rental places are really a cool place for people to go. It’s also great because when you go - let's say you're going you're traveling for business or you're traveling to a place outside of your city. It's a great place to go to get to know the community and the diversity and the culture of that place and that location you're going to. And a couple of places where I really love the culture. Are a couple of cities, well actually there's like there's a bunch. Okay. But let's just say I love going down to Tucson. Tucson is so different from Phoenix and it's only like a 100 mile difference. And it's like night and day when you go down there. But the culture in Tucson is so amazing. And they have the best restaurants ever. I don't even know, like they even have their own like chain restaurants that they don't have up in Phoenix. So even that short distance, you know, you'll find Eegee’s down in Tucson or you know someplace like that. But they don't have them up in Phoenix so there are there are places down in Tucson that you just can't get in Phoenix and the restaurants are really really amazing. And if you ever get a chance to come to Tucson go because just the restaurants alone. And the city that is different but the houses and the neighborhoods are they just have a culture to them. San Antonio is that way when you go to San Antonio. I love the culture of the city in San Antonio and the restaurants again. I should I should weigh like 400 pounds because I love restaurants and I love eating out. So almost every almost every town is like: Oh yeah! Back to that restaurant that's in that city if anybody mentions the place. I just know places by the food.
Same with culture. Oh my gosh! New Orleans or New Orleans. However you want to pronounce it. I don't care. Still amazing food and culture when you're walking around the city. So amazing. So if you're going to those places those cities and you're just staying in a hotel room boring. I mean you get the same bed and honestly there are cookie cutter which is great. I mean because you get, you know, the stability of knowing that you're staying in a chain. So let's say you're staying at the Hilton or Sheraton or whatever, Marriott. Right. You always know that you're getting a clean bed, you know, and your TV and your little fridge - your mini fridge and your nice clean bathroom and that's great. But literally if you're working out or you know you're just stuck in that same thing and it could be anywhere. It could be - you could pick it up and you could put it anywhere and it's the same thing. So when you go to these cities it's so cool to just stay in a nice, you know, short term rental someplace. Somebody is Airbnb or a vacation rental by owner. Something like that and really get a touch and a feel and the flavor of that culture.
And I just wanted to touch on it real quick too that I took my kids to Australia for an entire month. And I'm telling you when you visit a country for an entire month and you live like they do you shop at the places they shop and you see the kind of things that they're buying. You talk to the people and you're not just living out of a suitcase in a hotel. You're actually living there and it feels so different. You feel like you're a part of the neighborhood. And the people are so amazing and so wonderful and so - like everywhere you go. Honestly I mean it doesn't really matter. I mean people all want the same things. They just want to live and be happy. You know they just want to make a living be happy. And you start to realize that some things aren't as important as you think they are. And when you live in amongst the people. Right, if you live amongst the people, if you live with them you start to see that. You start to see that you know you go some places and not everybody is on their cell phones and you're like: Wow! That’s new weird and different. The kids aren't texting each other and their heads aren't down while they walk through the streets. Or it's like this is new and different but you'll start to see like the things that we think are important; the, you know, the shoes and the purses and the lifestyle and the Starbucks on the corner. Like they're not everywhere else you go and you start to see how other people live and you start to see that it's good. I mean it's different but it's awesome it's amazing. And you feel like a connection to the world that you never feel anywhere else or any other time. Because when you're living out of a suitcase in a hotel you are still separated from these people. You're just visiting. But when you stay in a place you're living there and it's so cool. I think it's amazing. I think that the lifestyle of you know this short term rentals are amazing because you can stay for long lengths of time and really get into the cultures. So there's the reasons - those are what a short term rental is. Okay. So that's what it is. It's just staying for shorter amounts of time.
The reasons for short term rentals I'm going to give you now. Okay, so now here's the deal if you if you are a property owner this is for you. Now if you're not just hold on because some day you will be. Because ultimately that's going to be our goals for almost all of this and you'll get that in the later episodes. Okay. But listen, let it kind of go in and out at your ear but don't ignore it totally, ready. Okay. So now those of you who have rental properties. Why do you want to have a short term renter as opposed to a long term renter in your property? And there are a couple of really good reasons. I mean, the fact that they pay on time every single month is reason number one that you get that the money paid on time. If you're doing it right obviously you're doing the background checks. But you're not going to get the wear and tear on your properties that you get when you have a long term renter in there. Your short term renters are completely different. So I'm going to tell you a story and believe me I know that if you have rental properties You've probably lived this over and over and over again because it's a living nightmare that all of us rental property owners have had.
You take a property and you buy it and you clean it and you paint it with love and you fixed it up and it's adorable; Adorbs, right. You walk and you're like all so happy you're like: Oh my gosh! Look at these cute little blinds and see how this paint is and look I painted you know the trim is all white and it just pumps and boom it's beautiful. Bathrooms are clean. Put a nice new sink in and maybe you surface the tub resurface the tub. And now they've got the elongated toilets in and so you don't have the little round ones where you feel fat when you sit on them. And like everything looks great and you rent it out. And you get this great renter. And of course they pay on time every month because it's our dreams and they're never late because again it's our dream. And okay, so now all this has happened and then they move out. It’s a year or two later or whatever and they move out. And you walk in that property and holy crab cakes what the heck happened to this property. The property is just like somebody just took a grenade pulled the pin with her teeth, threw it in there, shut the door and walked the f away. Right. I mean that's what it feels like because you walk in there and you're like: holy heck what happened. And here's what happened. They lived there. That's what happens. So now you got to replace the carpet and the flooring and the paint and oh my gosh! What did they do the blinds? The blinds I mean, did a cat get stuck in there. I mean it's just all crappy and torn apart. I mean the place just looks like you know what. And I mean dust of cheese balls right. It looks terrible. It's beyond repair it feels like. So you go in there and you spend thousands of dollars fixing it up again because you know what, this scenario just keeps playing out the same old way - you fix it up, you put somebody in there, they move out, you’ve got to fix it up again. And then they move you know they're in there for a while and then they move out and they walk out and you walk in and you've got to fix it up again. And it just feels like it's going that same way. And here's the deal on most rental properties you're only making so much money anyway. It almost feels as if everything you made for that year or two or whatever that they've been in that property that you're just handing back to your maintenance guys to fix it all up again. Or you know you're spending it to fix it all up again yourself. And it just feels like this revolving door where they just there's a big wooden foot sticking out of the door that kicks you in the butt after it runs round you know, e