January 11, 2023

Episode 165: Do You Have the Right Number of Bedrooms?

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General Real Estate

How to build an Airbnb Business: Do You Have the Right Number of Bedrooms?

It’s quite possible that your short term rental is not the right size. I don’t necessarily mean the square footage, but more specifically the number of bedrooms.

For example, when it comes to size, I have found little difference in the performance of an STR based on overall size. For example, I have studios as small as 250 square feet and then one bedroom in the same city up to 800 square feet and the performance is essentially the same. One isn’t noticeably outperforming the other.

When you look at the number of bedrooms however, and not the size that is when things change.

If you take that same 800 square foot one bedroom and compare it with a two bedroom of the same size the performance could be drastically different! Even though the size has not changed.

So how do we figure this out? Good news, we have several ways.

Let’s discuss this week if you are missing out on some opportunity by not having the right number of bedrooms and what you can do about it. We will discuss:

What’s the ideal number of bedrooms in your market?
Should you add another bedroom?
Alternative ways to “add” a bedroom
Finding the data that tells you yes or no
Potential increased return

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So, what is the ideal size for your Airbnb? For your short-term rental. How many bedrooms should have? Should you add another bedroom? Is that worth it? That’s what we’re going to talk about this week. There are ways to find this out. Make sure we’re not overspending to make sure we’re earning maximum Revenue. Stay tuned.

Welcome to short-term rental riches will discuss investing in real estate but with a specific focus on short-term rentals quick actionable items to acquire manage and scale your portfolio. I’m your host Tim Hubbard.

Welcome back to the short-term rental riches podcast. I’m happy you’re here again. We’re talking a little bit more this week about analyzing our short-term rentals. Analyzing our Airbnb’s to know if they are earning top dollar. If they’re the correct size if they have the right number of bedrooms, this is pretty relevant to me right now because I’m working on this new construction project down here, medine, excited to be starting that we’re going through. A textual plan right now and because we’re building from the ground up. Well, we have the option to build Studios one bedroom, two-bedroom, three bedrooms for five bedrooms, and it’s important that we know which size and which bedroom count makes the most amount of money and that comes down to an estimated occupancy and an estimated average daily rate and that changes in every market based on the property size.

So, let’s just dive right into it here. The first thing is contrary to popular belief where you know sighs always matters. It doesn’t actually matter as much with short-term rentals. What am I talking about? We can have a one bedroom that’s 250 square feet or we can have a one bedroom that’s 800 square feet but that is still a one-bedroom apartment, right? Or a house or whatever happens to be and it’s still very likely only going to sleep, two people. So, do you think that it’s going to make a whole bunch more? Any because it has a little extra space, probably not, at least in my experience, because I have properties with, you know, one-bedroom properties, for example, that are across the board, I have two bedroom properties that are different sizes and I have larger properties that are different sizes, but still have the same amount of bedrooms in them.

So at least in my personal experience, I can tell you that the actual size does not quite matter as much, but the number of bedrooms does and that can really, we bump your Revenue, if you happen to be in that fine spot in your Market that has higher demand for a certain type of bedroom size. So, the idea for this podcast came along, not just because I’m happy to be doing this right now on my own construction project. But I had a call with a friend recently who said I’m considering adding another bedroom to this home.

It’s going to cost me about a hundred thousand dollars but I think it might be worth it and so we dug into the numbers a little bit and this is pretty easy to do. Remember Again, there’s lots of data out there. Now, you can use are DNA dot Co, you can look directly on the listing sites, like Airbnb or VRBO pull up neighboring properties near where yours is or where your potential property is and see what they’re charging. So, I recommend that you at least compared with a few different data sources to make sure that you’re not catching some strange outlier, but assuming you have good data and you’re pulling the averages, it’s pretty easy to see what a two-bedroom charges. Has average daily rate and what their average occupancy is versus a three bedroom.

For example, that’s something that we can easily see what these data sources. And now, if the three-bedroom rent happens to be twice as much as the two-bedroom rent, and you can acquire one of those properties for pretty much the same cost. Well, then, I would definitely acquire the three-bedroom property right now. How do we decide if we already have that two-bedroom property? We want to add that third bedroom.

We covered a lot of topics on this podcast and a quick Bitesize format. So, you have the tools to acquired improve your short-term rentals on your own. But if you want to go deeper, I’ve special invite for you. Join us once a month that are rested investor Clubhouse, where we go in-depth on an individual topic, everything from analyzing properties to improving operations and our bottom line, we cover it all the clubhouse members and myself are sharing best practices to earn the most Revenue with the least amount of headache and I would love to have you there as well. That’s rest methods.com forward slash Rich. Our lives are shaped by those we spend the most time with. So, if you want to take your STR to the next level, come join us. I hope to see you on the inside.

Let’s say, it does cost a hundred thousand dollars. How do we make this decision to determine whether that’s worth it? Well, what you’re going to want to do is just simply calculate the estimated occupancy of the three-bedroom versus the two and the estimated average daily rate of the three-bedroom Versa to And take the difference over a year for example, and it’s say the three bedrooms earning 30,000 dollars more per year and it’s going to cost you a hundred thousand dollars. Well, then you’re going to get that money back in about three years again. Remember that? These are estimates, right? So, we got to make sure we’re managing our property really well, because management and reviews can really make or break your short-term rental.

But assuming we’re taking averages, and assuming you’re doing a good job at managing than, that’s a pretty pretty good return. But remember we also have to account for the time that it might take for that addition. Let’s say you bought that property and you spend six months doing that addition you got to calculate that time where you’re actually not making any money, right? So, with those things considered, hopefully that gives you a little insight and how you can determine what is the best bedroom mix for your short-term rental or for your Airbnb in your particular market?

Now remember you want to look a little further than that, right? So, markets are really big so you want to actually look in your neighbors? Hood. I recommend your ZIP code. So, let’s say you have that two-bedroom and you ran your data and you found out that oh my gosh, I can earn way more money if this was a three bedroom while there’s ways to add another bedroom without actually doing the construction. So, I want to talk about a couple of those ways that you might be able to get that third bedroom in there without spending those hundred thousand dollars or whatever it costs you.

Now, one way is, if you have a sleeper sofa you can add that in but make sure that you are setting the right expectations, right? If that’s sleeper sofa is not in another bedroom, then you can’t call it a bedroom. But sometimes, you know, I have some older properties that they used to have a lot of rooms, right? So, a living room, for example, maybe you can add some French doors or maybe you can add some doors to separate that space off so that it actually does become a bedroom.

Well, then you already have that space, you can now call it a bedroom and you can earn that additional income. We don’t necessarily need a closet too. Call a room, a bedroom with Airbnb or short-term rental, right? We do when we’re talking about traditional real estate most time, we can’t sell a three-bedroom home if that third bedroom doesn’t have a closet but with Airbnb in with short-term rentals lot of times our guests, don’t even need a lot of closet space. Sometimes we can just put up a small clothes rack and the corner or a small shelf from Ikea or whatever happens to be just a hold, a few things a little dresser.

But it doesn’t have to be a full-blown closet. So that’s one thing that I would consider. Wonder if your property happens to have a space where you can technically close it off and call it another bedroom. That’s great, but let’s say you can’t do that, but you can still add that third bed. Well, we’re not going to be changing the size of our property, right? But you’re probably going to be able to, at least get more income knowing that the demand in your Market is much higher for that three-bedroom, than is for two-bedroom.

Just make sure that you just close everything properly, make sure that your housekeepers know that you have another bed that’s going to Lenin’s and that is one other operational piece, you know, because sometimes people might not rent that property, wanting that third bed and which case you wouldn’t want to leave it open with linens on it. So, a little more operations there, but they’re pretty good way to add more income. If you see that the demand is there.

All right, I want to leave you with one last thing you can do to be able to list that property as a three-bedroom. When maybe it’s not actually a third bedroom. And this goes back to an episode, I actually did a while ago, episode 111 on combined. Azure linked listings. So, let’s say you’ve got that two-bedroom home, but it also has a little detached guest house, right. That’s a studio or a one-bedroom. If it’s a studio and it’s the only studio in the space and you can call that another bedroom. That could be a combined listing where on Airbnb you combine both listings. So, guess have the option rent, the two-bedroom and guess have the option to rent the studio separately or together. So, you actually have a third listing which would allow someone to book, both them at the same time, allowing you to earn that higher. 3-bedroom average daily rate versus the two bedrooms, but also giving your property a little more diversity, right? You’re going to be open to more gas.

So, remember with short-term rentals size, doesn’t always matter. The bedroom count is, what’s more important and there are ways to add more bedrooms that you don’t really have the option with, with traditional real estate. So, see if your bedroom count is ideal and your short-term rental, do a little bit of research. If it’s not. See if you have a way to add another bedroom, There and also keep that in mind when you are doing your scouting for new properties in the future because it’s really, really important.

That example I gave you of my friend who wanted to spend the extra hundred thousand dollars for that. Third bedroom addition, the average daily rates in that City for example, and that zip code we’re almost two hundred dollars more per night than they were for the two-bedroom and went from $250 to $450 as an average. So, there can be a lot of opportunity, make sure that you’re properly. Is set up, right? And that you’re looking for the right properties, going forward in the future. Hope that gave you a little bit insight and as always, I hope you have a wonderful week and I’ll talk to you soon.

Want to get on the fast track to Financial Freedom through short-term rentals what all starts with the properties you acquire. But you want to make sure that you acquired the right properties, I want to give you my e-book that will show you how to do just that. There is no charge, it’s my gift to you for being one of our subscribers. Just go to restmethod.com, that’s REST methods.com