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Episode 046 - Why You Shouldn't Treat Your Short Term Rental Like a Long Term Rental

 

  

SHOW NOTES & LESSONS

COMPARE INCOMES FROM A SHORT TERM RENTAL TO A LONG TERM RENTAL

2 Bed/1 Bath

Long Term Rental

1 Year Lease

$1200 month

 

2 Bed/1 Bath

Short Term Rental

Daily Rate

$87 per night

82% occupancy

$2140.20 month

 

2 Bed/1 Bath

Short Term Rental

Airbnb's Weekly

10% Discount

$609 for 7 days

-$60.90 discount

$548.10 per week

rent out 3 times

$1644.30 per month

A Loss of $495.90 mo

or $5950.80 per year

 

2 Bed/1 Bath

Short Term Rental

Airbnb's Monthly 

28% Discount

$2610 for 30 days

-$730.80 discount

$1879.20 per mo

 100% occupancy for

$1879.20 per month

A Loss of $261.00 mo

or $3132 per year

 

Use Vacancy Instead

Short Term Rental

Our Monthly 

18% Discount

$2610 for 30 days

-$469.80 discount

$2140.20 per mo

Same as your original Single Day!

 

WHERE DO I FIND MY PER DAY RATE AND OCCUPANCY RATE?

If you've been a host more than a year, use last year's numbers.

If you haven't been a host for a year yet, then use AirDNA's site...

It's totally worth the fee to specialize in your area. Start with 3 rentals

in the same neighborhood to get the best rates on services & AirDNA.

 

Occupancy Rate plus

Vacancy Rate = 100%

 

To Get Your Monthly Rate,

Multiply 30 days

Times Occupancy Rate

(Example: 82% is .82)

Times Daily Rate

 

WHAT SERVICES WERE MENTIONED...

Please use our Affiliate Links whenever possible and help support the show.  Thank you!

Get your Free Trial of Amazon Prime just-in-time for Prime Day just by clicking this link or copy and paste the link below!!

 http://amazon.com/primeday?tag=strrevenue-20

Get This Episode's Show Notes in a pdf form...

Go To Our Download Page 

Show Transcript

[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 podcast, 
we're going to be talking about why you should not treat your STR like a long term rental. This is so important you guys and I've got to tell you all about it, but first I wanted to remind you that our show today is brought to you by Audible. You can get your first book free by going to audible trial.com forward slash s t r revenue and you can get 30 days of a trial with the audible app. You will absolutely love this. You have over 180,000 titles to choose from. Not only that, tons and tons of channels that you can listen to. And when I say channels, what I mean is the channels on audible are things like mysteries and Ted talks and things like that. 

 Speaker 1: (01:13)
I mean they've got all kinds of subject matter for you to choose from and you can go and get your first book free and try audible for 30 days by going to audible, trial.com forward slash s t r revenue. Yay. Okay, so now we're getting back to not treating your short term rental like a longterm rental. And how do you do this? This is by offering those week long and a month long discounts guys, I know that it's so huge. Everybody talks about it. When you get into it, especially Airbnb, there's actually every single one of them has it on there. It's like, go ahead, offer a discount and you're really taking money out of your pocket. If you want to be a longterm rental landlord, then be a longterm rental landlord. Just go out there, buy a property, make it rental ready as we like to call it.

Speaker 1: (02:11)
It means, you know, making everything look nice, but it doesn't have to be upgraded to the hill. So you don't have to put granite countertops in just good enough, right? Everything looks good enough to rent it out. So we call it rental ready, get it rental ready, put it on Zillow or some other rental.com and rent it out. Find Longterm rentals who are come in and rent it from you for a year. That is a longterm rental. You are now a landlord. Anything goes wrong, toilets gotta be fixed or something. You're going to have to fix it or hire somebody to do that. It's okay. It's not a bad deal. I mean, a lot of us began as landlords and landlords are not bad things to be. As a matter of fact, you've got somebody every single month paying your mortgage for that property and at the endo, however many years your mortgages.

Speaker 1: (03:02)
So if it's 30 year mortgage at the end of 30 years, you own the property. If it's 15 year mortgage at the end of 15 years, you own that property. You can play with the equity that's inside of it. There's a lot of things you can do with a rental and having a longterm renter in there isn't necessarily a bad thing. But here's the bad thing about being a landlord and I'm going to tell you firsthand experience guys. You know what I hated? I hated going into a property every time somebody moved out and having to fix it up again. So yeah, a lot of times you had their deposit, but a lot of times it wasn't going to cover all the damage that had to be fixed or just having to redo everything every single time or having those people that you had to evict and then go through this whole process and then get the property back with $5,000 worth of damage and fixing it.

Speaker 1: (03:52)
So there were nightmares to the scenarios. Yes, the majority of people were great renters, paid their rent on time, but it's the ones that didn't, that actually ate into all your profit because there's not a lot of profit going on when you're a longterm rental landlord. And the reason why is you've got a ton of overhead. So let's say you've got a mortgage on the property, then you've got taxes, you've got insurance, right? And then you've got, you've got to put a little bit of money aside just in case that HVAC breaks or you have to replace something like a major appliance. There are huge expenses that come along. So you've got to put a little bit of money away. And there's not a lot of room. I mean, there's a lot more room now than there used to be when we were big landlords because we used to have large, large interest rates attached to our mortgages and we were still cashflowing pretty good.

Speaker 1: (04:49)
But nowadays people buy these properties for way too much money. Almost all the properties, in my opinion, are overpriced. So they're going to adjust themselves pretty soon. But not only there, they overpriced the mortgages on them. Don't leave you a lot of room for profit. So you're only making a few hundred dollars on each single family home. Or sometimes, you know, I've got friends who are making only 50 or a hundred dollars per unit on multiplexes. And to me that's sad. And I'm like, Dude, you've got to make more money than that to make it even worth your time. But a lot of people aren't. They still aren't because they so overpaid for these properties, even with the low interest rates. So you've got to remember a couple of different things. When you buy a property, you're making your money on the buy, your money is made when you buy a property, not when you sell a property that is Kiyosaki's key.

Speaker 1: (05:44)
Number one, when you're doing real estate investment, you have to remember you make your money on the buy. If you don't make enough money on the buy, then you're going to be hoping and praying on the sell. And that's really sad because you want to hold onto a property. If you're doing a cashflow property, if you're having it as a landlord, you want to hold onto it as long as you can, as long as you can depreciate all those other things, right? So now you've got your property, you put her a longterm rental in there, and when you get them out, you've got all these things to fix up. And it completely and totally sucks and not only does it suck, it sucks all the money out of your pocket and Boo-yah you've got to fix all that stuff and then do it all over again.

Speaker 1: (06:30)
It can be a real nightmare depending on where it is. Like I said, some of them are gonna work out really well for you and others will not. But when you decide to go to short term rentals, you're going to see a big difference. And so in this scenario, I wanted to give you some examples of some properties just in a little town in Mesa, Arizona. This property is pretty close to ASU, is pretty close to a freeway. It's a very close to a lot of places where they have big events that come into town. So hotels and things like that, something people would want to look at, but it's not as touristy as maybe Phoenix, but I just wanted to kind of do a middle of the road, not, not something that's super hot, but not something that's super cold. So I chose this property for a reason.

Speaker 1: (07:24)
So I'm going to give you an example. On this small little too too and on this too too. If we were to rent it out on a longterm rental basis, that means find somebody to sign a year lease on this property. On this little Tutu, we would probably get anywhere between 1,012 hundred a month for this property. And I would say that's pretty normal in that area. So I would say we could probably get 1200 because it's in pretty decent shape and the rents are really high around here right now and they are, they seem to be going down right now, but they've hit their peak so they're still pretty high. So $1,200 a month is what we could get. Now, if I go to air DNA and a lot of you are going to ask me where I'm getting, hey, where are you getting all your occupancy rates and your per diem rates and stuff.

Speaker 1: (08:15)
Most of my rates, I use air DNA to get them. And you can too. It's super easy. Go to air DNA, right? I think it's just that COO or something, but when you go to air DNA, you're going to love it because it's amazing. It's very interactive, very easy to read. It might be a little expensive for people who are just starting out and just doing one rental property, but if you plan on scaling your property within the next year, definitely, definitely invest in that. It's like 20 bucks a month for most locations. Some locations are about $39 a month. Just depends on where you're going, but pick your area of expertise and that's where you want your first three properties right there. Boom, boom, boom. One, two, three. You're going to really focus on one area first and then build it up. Okay, so pick your air, DNA property, get the registration for there.

Speaker 1: (09:10)
You can actually, if you had a property and you've had it for over a year, you can go back in to your website like a site like airbnb and you can take a look at what your monthly occupancy was. It will tell you, it will give you a percentage right there and it will tell you how much you made right there. So you can take that and multiply it, multiply it out, and you've already got your percentage rate and you've already got your monthly income average from last year. And you can also see, there's always kind of specs that say where this month, many percentage above last year or this many percentage below last year. It'll have all kinds of numbers and stuff in there. But those are where I'm getting all my numbers from. Okay. And if you're looking for, they're going to give you an occupancy rate. So which is really good cause it'll probably be in the 80s hopefully in the eighties or something.

Speaker 1: (10:07)
But if you see a lower number, your, you might be getting into trouble. So try to keep your number as high as possible. The place that you pick. Okay, so you don't want something with an occupancy rate of 50% that means that out of every 30 days you're only going to be renting 15 of those days. Not Good. Not Good. Because you might just be breaking even with that, you want to higher occupancy rate. All our properties are up in the 80s and above and some are even in the 90s and some are closer to 100% especially during peak seasons. So it just depends on where you're going. I would aim for 80s and 90s and a hundred I would never even look at anything under 70% but let me just add, do the math here guys, it's not so bad to have a 50% occupancy rate or a low occupancy rate if your per diem rate is high enough.

Speaker 1: (11:02)
So let's say your per diem rate is $167 a night, but you only get 50% occupancy. You're still going to make around $2,500 a month on that, so that will still make you enough money so you can still have just do the math before you do anything. Just multiply those days out and see what the income is. If you have a high daily rate and a low vacancy rate, you can still make money as long as it's not too low. Just do the math on things. So multiply your knights 30 times your occupancy rate 0.82 or let's, in this case, do 0.5 right? So that means we're going to have 15 days that we're doing and then we're going to multiply those 15 days times $160 a night. And what do we get about 5,000 or a $2,505 roughly. So make sure that you're doing the math and that the math covers what the rent is.

Speaker 1: (12:05)
If the rent was 1200 and you're making 25 Yay, that's pretty darn good. That's okay. Right? Shoot. Yeah, shoot yet. Good. That's why you want something like Air DNA because they know what properties have already rented and what they've rented for. They keep really accurate track of this stuff and they will tell you almost down to the penny. It feels like what you can expect to get for your property per day. Okay, so per diem, what's the income per diem each and every month? Because some months are going to be different, especially if you're in an area that has, you know, different seasons, high season, low seasons, whatever. And then it's also going to tell you what your occupancy rate is. Okay, so now we're talking about that two, two in Mesa. If we were to rent it out, we got 1200 a month, right? If I look at that on air DNA, I can see that my average per diem on that is $87 night.

Speaker 1: (13:08)
That's average. It's sometimes a little bit lower, sometimes a little bit more. And I use wheel house for most of my stuff. And then I'll tell you how I do that. I could use air DNA, but I use air DNA to find my properties but not necessarily price my properties. So once I've used Air DNA to do all my researching and then I go and hook it up to wheel house, now I could use air DNA to do that too. But I don't know why I just like wheelhouse. But it just depends on what you guys like. So I find it's easier to do wheelhouse for my prices. But I love Air DNA for my statistic finding ventures. You know, when I feel like I'm Indiana Jones and I have to go looking for something and get all the information, then I'm Air d and Amen.

Speaker 1: (13:56)
So I use them for two different things. I probably could only use one if I wanted to and I just haven't gotten used to it yet. It's probably what you're used to. It's kind of like when you get your iPhone and then everybody's going over and going, I've got the great new Samsung look, we can touch each other's phone and charge it. And you're like, that's cool. I like it, but I got this and I know how to use it. So that's Kinda how I feel about wheelhouse. I've got it. I know how to use it. I like it. I'm not going to change. So you can do what you want to do, feel whatever floats your boat. Right? So just go for it. Okay, so now I've got $87 and 82% occupancy for that property. So what I'm going to do is I'm going to take 30 days and I'm going to multiply the 30 days times 0.82 so what does that mean?

Speaker 1: (14:47)
It means that's my 82% occupancy. So out of 30 days, 82% of my days are full. And that's what I just did. So I took 30 times point a to 82.82 and then I multiplied it by 87 because that's how much per night I'm getting. So 87 and that gives me $2,140 and 20 cents so that's the income for that property at 82% occupancy. So do you see the difference right now? Right away, renting that out per day. Now I'm only renting it out 82% of the time, but I'm getting $87 on average. So instead of making 1200 a month, I'm making $2,140 actually it's almost an entire thousand dollars like it's almost a thousand dollars more month than I would make on a longterm rental. Do you see that? It's super close, but it's only, it's, it's, it's just super close, but it's only a fraction of a thousand dollars off. So I'm making almost a thousand dollars more a month having my property be a short term rental and it's really taking care of my property.

Speaker 1: (16:08)
There's less wear and tear on my appliances, on my carpeting, on everything. It's constantly cleaned by a professional cleaning company. I love it. It's awesome. So it's my favorite thing to do with a property now is turn it into a short term rental and just plug it in to the system that I've created, right? So now we're making like $1,000 a month more. Now here's where the rubber meets the road. So we're going to use airbnb as an example. But airbnb will say, hey guys, you know, if you really want to attract somebody, you're going to give them a weekly discount of at least 10% or if they have a month long stay, you want to give them a discount of 28% and you're like, oh, that sounds good. I don't mind giving them a discount if they stay the whole week or even bigger discount if they say the whole month.

Speaker 1: (17:02)
That's amazing. No, no, no, you do not want to do that. And let me tell you why you are now treating your short term rental like a longterm rental. Don't give them huge discounts, don't give them huge discounts. And let me tell you why. Okay, let's take airbnb's 10% that they recommend off a week stay and 28% that they recommend off a month long stay. And I'm going to show you what happens to that income when you do that. Okay, so let's take the weekly stay at a 10% discount. If we take $87 and we multiply it by seven and then we take 10% off because that's the discount we're giving them, right? We come up with $548 and 10 cents. Now remember this place only runs out 82% of the time, so more likely than not, you will only be able to run that three weeks.

Speaker 1: (18:10)
Three weekly stays a month and not four because if he rented it for weekly stays, that would be 100% occupancy and you're not going to get that. So let's be optimistic and say that we rented that out three weeks of that month at five 48 10 okay. With our discount, that means we would only pull in $1,644 and 30 cents guys, that's a huge difference from the 2140 that we were getting before. Yes, that's a $500 difference. $500 in losses you just created for yourself. You just lost out on 500 bucks giving that weekly discount. All right, now let's go for the monthly discount. Now, what's really cool about a monthly discount is when we are renting it out for the full month, we lose that 82% occupancy because we know for sure if we're renting out for the whole month that our occupancy's going to be 100% so we don't have to put in there any additional cutbacks.

Speaker 1: (19:17)
Cause we know all 30 days they've got at where to 100% occupancy. But let's take the $87 and multiply it by all 30 days, and then that's like 26 10 and then we're going to take out the 28% discount that airbnb says we should give them on our monthly rental. Give them a 28% that's what we suggest. So that's $730 and 80 cent discount. That brings our total that we would get for that month down to 1879 20 again, we were at 2140 when we were doing it nightly and only renting it at 82% occupancy. Now we're getting a hundred percent occupancy. Yeah, it's good, but guess what? Even that, that 100% occupancy, we're still making less money, still like $300 less a month at 100% occupancy. We would be better off renting it as a short term rental. Now here's a trick you can do. If you really want to give a month long discount, you can go ahead and do that, have at it, go ahead and do it, but use that same percentage rate, right?

Speaker 1: (20:29)
Use that occupancy rate that you had. So don't give them any more than your vacancy rate off. That's the discount that you'll use. Why? Because that means you'll make just as much money on that entire month as you would renting it out as a single rent do get it. So if I were renting it out per day at $87 and only 82% of the time it was occupied, that would bring me in 2140 and you know on 20 cents okay? But let's use that vacancy rate for our discount. The vacancy rate on 82% is 18% right? 82 from a hundred leaves us 18% that's our vacancy rate. That's the rate that the property is empty, okay? That's how often it is vacant. The opposite of our occupancy. Okay? So instead, let's take the $2,600 and instead of subtracting the 28% that airbnb suggests, we're just going to subtract our vacancy rate of 18% and when we do that, guess what?

Speaker 1: (21:46)
It brings us right back up to the 2140 20 because it's the same rate as our vacancy rate. Do you get it? So we've still got 2140 coming in a month. Don't have your discount for your monthly occupancy. Be any more, no more then your vacancy rate. Do you get it? Because then you're breaking even. You're only competing with yourself. If you cut it down less than that, you're cutting your own foot off. You really, really are. So yeah, you're getting your, you've got it full the whole hundred percent of the time, but you're still making the same amount of money and they still think they're getting some kind of discount because they are, they're getting the the 18% discount, right, and that's a good enough discount. That's all they need people, that's all I need. Now, playing with the weekly rates, that's going to be harder because first of all, you don't know how many of those you're going to get.

Speaker 1: (22:43)
And you don't know if you're only gonna have one weekly rate and then the rest of your occupancy filling in that 82% with single night stays. You have no idea how that's gonna play out, but when you're playing with the weekly rates, it's not as easy to do because you've still got the vacancy rate or the occupancy rate, whichever one you want to play with to contend with. You just don't know what it's going to be. You have no idea. At least when you're renting it out for the month long, you're like, okay, I'm at a hundred percent occupancy and you can tell, but when you're doing the weekly and playing with those week long discounts, you don't know. Now you can do half the vacancy rate, like a 9% or you can do a little bit less or you can divide it into thirds or whatever you want to do.

Speaker 1: (23:32)
Divide the, I'm talking about the vacancy rate into thirds. It's really depends on you, what you want to give. I don't give anything and less. I'm in Florida because I have a few that I have in Florida where I only rent them out by the week. You can do that. As a matter of fact, it's actually pretty big in Florida. There's a lot of properties where your Friday to Friday, Saturday to Saturday or Sunday to Sunday and you don't have a choice. If you want to stay less than the full seven days, you still pay for the full seven days. You can leave after four days or five days, but you still pay for the full seven days. Now that works great in a place like Florida because we have so many people coming there and when people come there, they almost always want to stay at least seven days. Almost every reservation we get, they want seven days, they look for seven days.

Speaker 1: (24:29)
So we know that that is like one of our bigger markets. There are a few people who come down for four days or five days, but the majority of people don't mind paying for seven days. And if you give them a rate that's still better than a hotel. And they're getting a kitchen and everything else, and they can have their entire family in a three or four bedroom place. They love it. They don't care. They don't care if they're paying seven or $800 a week, that's still saving them a ton of money off of $100 a night, you know? And that's a cheap night. If you're staying at a Disney property, holy cow. Disney properties, the cheapest you will ever find them almost any time of the year is about $85 a night. And that's for our hotel room. That doesn't even include a mini kitchen. Maybe a mini fridge, but that's it.

Speaker 1: (25:16)
That's all you'll get. And you'll have two beds in a shared bathroom with all of your kids. And believe me, I have five kids and that's like hell. Okay. It's like hills kitchen again, take it. Even the memory brings back some trauma. I can't do stuff like that. I've got to stay in a place where I can be like, this is my vacation too. I want my own bedroom and bathroom. Okay when I'm on vacation, I want a bathroom where I can go to the bathroom and there's no kids staring at me like when I'm at home. So that's how I think most parents are. They don't mind paying for a full week because they get three bedrooms and a kitchen and a dining room area and the living room and they can hook up the kids Xboxes and everything else, you know. So it's a great, great place to do that with.

Speaker 1: (26:02)
Not so much in every location, but definitely in locations like that. Beach houses, if you've got a beach house, holy cow, people don't mind paying for an entire week, especially if it's a location that is a high demand location. So if you've got a high demand location, you can actually make it where no one can stay less than seven days and you can actually make it where they have to rent Saturday to Saturdays or Sunday to Sunday or Friday to Friday. I like Friday to Fridays because I think most people get off of work on Friday or Saturday. Saturdays are kind of good too, but they'll get there and they've got like a whole week to play out. But definitely people will get there on a Friday or a Saturday and those are the best ones for me. And those are what we do in a lot of our places. But the discount there is already built in. Do you see like we don't have to play with our numbers.

Speaker 1: (26:57)
We know we'd go by full weeks because we know that during the summer months, during the spring break, during Christmas season, during new years, we know when everyone is going to be there. We know the peak times and actually we've got a couple of times that are building up year after year. The Halloween season is really getting big now and it used to not be so big in Florida, but it used to be like one of the slower times of year and now as Halloween horror nights gets more and more popular in Disney, has their Mickey's not so scary and the food and wine festival has always gone on at that time. Those are like my favorite things to be. But man, we used to go there and there'd be no lines. Now there's a lot of lines on the weekends. It's really, really busy and there's a lot of people coming in just for the weekends and we'll see that, that traffic that way.

Speaker 1: (27:48)
But if you make them pay for a week, guess what? They'll take the whole damn week. They don't care because they want to get there. And most of the time we can rent our properties out for several hundred dollars and make a lot of money and we know it's going to be filled up every single week of those months. And we know when our dead months are too. We're like, oh, here it comes man. Right? And it's usually right around the time as the kids go back to school. I mean, it only makes sense, right? So the thing is, when you're playing these games, I don't want you to treat your short term rental like a longterm rental, unless I want you to keep all of these things in mind because they're extremely important. They're extremely important. Otherwise you're cutting off your foot. So I want to remind you one more time, that little property in Mesa Little Tutu, if I were to longterm rent it out, it was 1200 a month that was coming into my pocket, but if I rented it out at 82% occupancy for $87 a night, that meant I'm bringing 2140 into my pocket, so almost a thousand dollars more a month.

Speaker 1: (28:57)
I was making turning it into a short term rental. That's a lot of money. That's a huge difference. What is that a year if I wanted to take that and put the whole thing towards the principle of the property, holy crap or what if you were buying that property from the owner? What if you are renting the property out and you were to give them an extra five or 600 a month over and beyond what you would as a regular renter and say, Hey, put this towards me buying the property or put it in a bank account so that at the end of a year or two years you would have what, $24,000 to put down on that property and you can buy it from them if it was doing well enough, right? So there's a lot of things you can do with that money.

Speaker 1: (29:41)
So now you've got that property. But if you were to discount it using just the 10% discount that airbnb recommends on a weekly basis, you would take it from 2140 down to 1640 1644 so guys, you'd lose 500 bucks a month. That's a lot of money. That's what does that $6,000 a year. That's a lot. A lot of money. Way Too much money for me to lose. I don't like losing money. I like making money. So I'll, I mean, think about it, right? 6,000 what can you do with an extra $6,000 this year? What could you do with an extra $6,000 this year? Think about that. So discounting that their 10% just took that 6,000 dream and poof made it disappear. Poof, up in smoke, poof, it's gone. You don't have it anymore poop. You don't want to hear that. Poof, okay? You don't want to hear the Poof, okay?

Speaker 1: (30:38)
Now let's use airbnb's 28% discount for the monthly rate. We're going to take it from 2140 and we're not going to get nearly as hurt, but we're still going to get hurt and we're gonna take it down to 1879 still guys, we're still not making as much as we could make. So instead of taking it at the 28% add another 10% back in, use the 18% that is your vacancy rate and take that off and that 18% vacancy rate takes you right back up to the 2140 that way at least you're making the same amount as you would if you are renting it out night by night. Okay? So people go, well that's weird because how could you be making the exact same amount if you're not, you know, if you're charging a discount, if it's $87 a night here and you discounted it, the 18% and you made the same amount because you're using the same rate, instead of having the 82% occupancy rate, you're using the difference at as the discount and that's the 18% vacancy rate to get in.

Speaker 1: (31:50)
So I'm going to have this written out for you in the show notes that you can see it a little easier, especially if you're driving. If you're driving, you're probably going, what the hell is she talking about? So sorry. I know numbers. Some people are very visual. I am one of those people. I need to see it on paper. I've got to write everything down. I'm like, once I see it then I'm like, oh now I get it. But I don't like people giving me things in my head cause I've got to literally draw it out. I'm like, let me draw this out. Give me a moment in my mind, you know like your mind's eye is like writing, writing, writing and you're like, oh now I see it. I'm so, it just depends on if you're a visual learner, an auditory learner, kinesthetic, right.

Speaker 1: (32:28)
This is definitely for all you auditory learners, all the kinesthetic guys, the people who have to see it, the visual people go onto the website, it's short term rental revenue. Com Click on this episode and there'll be a show notes part and you'll be able to click and download the pdf that has this and that way you can see it in front of you what I'm talking about. But this is why you don't want to treat your short term rental like a longterm rental. Okay. Because it's not, you're not running it the same. It's not the same, so don't treat it the same as a completely different type of business and actually it's tax different as well. You're going to be tax differently in a short term rental business because you're going to be taxed more like a hotel, right than you are when you have a long term rental, when you have a longterm rental business.

Speaker 1: (33:19)
Now that's not to say that that property that you own, let's say you did buy that property, the property ownership is not the same as the B and B that's in it running. Those can be two different companies and they should be two different companies. Why? Because if you are buying and holding a property that as a real estate investor that's going to be in your holding LLC and then your business that is a, B and B business is in another LLC. The only other type of business you want to do in a, in your B and B LLC is maybe renting out a property. So if you are renting out a property, yes you can do that in your hotel bnb business LLC. But if you're buying and holding a property and running a, B and B out of it, your property is going to be held in one LLC, the holding LLC that's specifically made just for real estate investments.

Speaker 1: (34:23)
And then you're going to have your B and B business in another LLC and that's going to be running out of that. That business is going to be renting from you as a landlord. So it's going to be kind of cool because you're going to get a little bit of, can come on one side on your holding and that will pay for that. And then your BMB is going to have the income over there and that's going to help disperse and lower your taxes too. So you're going to love, love, love that. And if you don't understand that, it's okay. It's kind of confusing at first. Please don't be embarrassed that you don't get that. And if you need me to clarify it for you, I will. I can help you go to our Facebook page because we're constantly going over stuff like that. I'll probably do Facebook live and you know, put something in there that will help write it all out for you guys so that you can see it more clearly with the, with using the two LLCs.

Speaker 1: (35:14)
But you definitely want to do that because it will help lower your taxes and anything that legally helps lower your taxes. Yes, amen to that. Right? So you want to do that. So anyways, that's what we were doing. We're making sure that we're not losing money or not treating that, but not, it's basically just not shooting yourself in the foot. Correct. You just don't want to shoot yourself the foot. You want that nice occupancy rate. So now remember your occupancy rate is anytime you multiply a percentage, it's just turned that percentage just use to, you move your decimal point over two and you're going to go to over to the left. So if you're at 82% so 82% when you're multiplying it is 0.82 okay. 2% would be 0.02 all right. So just move it over to and if there's a pretend zero in front of it, that's fine, just move it over like that.

Speaker 1: (36:13)
But when you want to find your vacancy rate, it's the opposite of your occupancy rate. So if your occupancy rate is 82% then your vacancy rate is 18% because 82 plus 18 is a hundred okay, so if your occupancy rate is 80 then your vacancy rate will be 20 because 80 plus 20 is a hundred right? Just make sure that they're, if you know one, you can easily get the other just by taking it and subtracting it from a hundred that's all you have to do. If you know your vacancy rate, then you know your occupancy rate by just subtracting it from a hundred so it'll be the opposite. Let's say your vacancy rate is 25 25% then your occupancy rate will be 75 got it. And it should be very easy. They just add up to 100% and remember, where do you get all those percentages and stuff?

Speaker 1: (37:08)
Now you can use airbnb or whatever site you're using because if you've had your property over a year, you can go into last year's and you can check out all your numbers from there month to month. You just want to use those from last year's same month because December is usually the same as last December, but you're not going to check December against July because they're going to be completely and totally different. So if you've only been doing this for six months, don't use last months unless they're consistently the same. Overall, I would definitely use air DNA to find my occupancy rates and to find my per diem rates because those are, I mean air DNA is absolutely amazing for that kind of stuff and I love using them. Like I said, it's going to cost you a little bit of money but who cares? You can write it off and it needs to be done. You have to do it right.

Speaker 1: (38:00)
You have to know your numbers before you go in. Guys, remember, you always make your money on the buy, and that includes when you're renting a property out, if you are using air DNA correctly, you can know exactly what you're going to make on that property before you go and rent a property. So if I didn't own that property and I wanted to rent a property, I could go into that area, put in my zip code, I can even put in an address or two in the same neighborhood and I could pull up that same per diem and that same occupancy rate. And so when I took the $87 right, I would take first, I would take the 30 days of the month, multiply it by the occupancy rate of 82% and then multiply that by the $87 a night. And that would give me my 2140 so I knew right away going in, that's how much I'm gonna make.

Speaker 1: (38:55)
So could I afford, if I were renting that property, could I afford $1,000 a month rent? Heck yeah. I pretty much could because I would be making another $1,100 above and beyond that. And let's say I was doing a co hosting with that guy. What if he said, okay, tell you what, you just pay my expenses and then we'll split the rest 50 50 and you found out his expenses were seven or $800 would you do it? Would it be worth it for you? Heck yeah, of course it would because you'd have $1,400 a split two ways and you would each get around $700 right. So knowing those numbers when you go in, that's very important. It's very important when you're going in to sign a lease that you know what you can offer. And the only way to get that information beforehand is using a company like air DNA.

Speaker 1: (39:44)
I mean obviously you can try to guess your way around it, but I don't like to guess. I would rather pay somebody 20 bucks to get the information and then know for sure what my numbers were and it's totally worth it for me. Even if you only wanted you one property than just keep an air DNA for one month and pay the one month fee instead of the year fee. Some, even if it costs you 40 bucks to do it for one month, who cares? Right? That 40 bucks was totally worth it because you would know going in exactly what you are going to make per month. And that's imperative. Now just be careful because that month is for that month, that month isn't across the board. You have to go and go click over and go through all those statistics and look at it month per month, per month, per month because it changes during seasons, especially in different locations.

Speaker 1: (40:39)
So make sure you go across the board and find out each and every month what you can expect to pay average at all out and see what you should be paying per month if you're renting the property out. Okay, so that's a little bit of a numbers game and that's why I don't want you to treat your short term rental like a longterm rental. It just doesn't make sense. It just doesn't make sense. Guys. Just don't do it. Just don't, just don't do it. Like just don't, it's not that easy Michelle. Yes it is. Just some do it. Okay. Just don't do it. All right. I love you guys. Hey, I wanted to tell you there's some really cool ways that you can support our show by going to Amazon and clicking on the Amazon links. They're within our short term rental revenue.com our website, if you use any of those links, we get a certain percentage and that's how it's a great way to help us support our show.

Speaker 1: (41:29)
That's how we make money. So right now Amazon is having their prime day on July 15th and 16th this year and they've given us special links for you guys to use. So if you don't have an Amazon prime membership, you can get a 30 day trial using our link on our website and I'm going to put that on there and if you guys could use that to sign up and get your free Amazon prime membership so that you can be ready when Amazon prime day hits. If you're an Amazon prime member, you get free shipping. And all these amazing special deals on Amazon Prime Day and I'm talking about like TV sets for 170 bucks that are huge every year. Literally it's Amazon Prime Day when we buy all our biggest and bestest stuff for our short term rentals. So any of the links and stuff that you click when you're in there, I mean there's, there's going to be a ton of stuff and if you're an Amazon prime member, you also get to take a sneak peek and look at the things that are going on sale and you can set up an app to remind you that you know, this item goes on sale at this time and this item goes on sale at this time, you're going to get a million boxes sent to you though.

Speaker 1: (42:37)
I'm going to let you know that because they all click down, the time runs out on all of them. So how do I say this? Like for instance, you might want a mattress and that mattress is usually listed for 800 right now it's going to be listed for 400 but only at this specific time. And it will tell you the exact time that it's going to go on sale and it's only until it sells out because they only have so many of them or until whatever it's a half hour goes by or whatever. The timing is on it, so you want to get it as soon as it comes up and a lot of items, believe it or not, they're gone almost instantaneously. If it's a really great deal, like by the time you click on it, a lot of times it's gone. I mean it's crazy crazy what goes on an Amazon prime day.

Speaker 1: (43:25)
So you have to also buy it within that time. Once you put it in your cart, the cart starts clicking down, says you have 10 minutes to complete this purchase, and if you don't, boom, it's gone and it's no longer years. It goes onto the people who are on the waiting list for that item. So you're going to have, yeah, you're going to close on a bunch of different items at all different times throughout the day. So like the day after Amazon Prime Day, the next two days because it's too David Shipping, right? There were so many boxes. Every year there's so many boxes at our house. It's like they just keep coming. It's like 40 boxes, you know, have this and that and that. The other thing, warning too, there's usually only one of every item that you can get. So get your friends together. It's like, that's like black Friday shopping.

Speaker 1: (44:11)
We're here like, okay, you go to the women's section and you go to the children's shoes section and you go here. Literally we get together like that because I'm always like, okay, these earwax are going on sale. I'm going to save 150 bucks a piece. I'm going to buy one. My son's gonna buy one, his girlfriend's going to buy one. We're all going to buy one on each of our Amazon prime. I will pay you for them later. Everybody is doing it for everybody else. So you can do stuff like that, but please, please, please use our links because it does help support the show and I really would appreciate it. So go to our website and remember the downloads are going to be there for the show notes so that you guys can see all these numbers. I want to thank you guys for listening. Thank you for the awesome, awesome reviews and stuff that you're leaving, and I'm want to remind you to leave more reviews. If you know how have a great day, God bless you, go and grow


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