In the short-term rental riches will discuss investing in real estate with a specific focus on short term rentals quick action items to wire. Scale your portfolio I’m your host Tim Hubbard.

Well I was thinking the other day you know I’ve got long term rentals in short terminals and I think they both have their place and certain properties work better for one then they do the other but when you have a vacancy with a long term rental are we really considering how much that’s actually costing us a lot of times when we think about a short term rental we think that there’s just way more expenses right so I wanted to break that down this week and just kind of compare the 2 we’ll talk about some expenses you’re going to have whether it’s a short term rental or a long terminal but then some that are unique to each and then just a real brief example with some numbers going to try not to bog you down too much but just to break it down like on a year lease comparison what the actual cost might be so let’s jump into that there are some obvious expenses with short term rentals that we don’t have with long term rentals and now this is 100 percent across the board but in general in general we do not pay for our long term tenants utilities maybe we include internet sometimes these days if it’s an apartment building but if it’s a single family home we’re usually not paying for any utilities there right so that’s one that’s going to be more unique to your short term rentals and then of course if we have a long term tenant and a property for a year we’re not doing housekeeping has definitely unique to short term rentals and that’s a bigger expense it’s a bigger piece of the puzzle and I’ve talked in prior episodes about the different options that we have for that and really your housekeeping costs could range from 15 to 30 percent maybe more just depending on your setup so those can really vary we also have some costs that kind of go along with house. Keeping that you’re not gonna find it with a long term rentals and those are supplies cleaning supplies but also toiletries toilet paper and paper towels and soaps and bath soaps and and linens and towels so we’re not gonna have those with the long term rental either right those are strictly for short term rentals now you may have a long term guests that staying multiple months but I’m not considering that for these purposes as a as a long term tenant we also have some different start up costs right for our short terminal big one is furniture were not furnishing our long term rentals unless were catering jazz to a gas that stain over 30 days usually and then we could consider maybe a long term rental but for the purposes of this podcast want to break down a typical short term gas less than 30 days and a typical long term tenant usually about a year long lease so that’s what we’re talking about and these costs are associated with those 2 different types of guests first tenet those are a few of the short term rental expenses were not going to have with our long term rentals now there’s actually a number of expenses we have with our long term rentals that we don’t have with our short term rentals and maybe you haven’t considered these yet but it is definitely worth factoring in and putting it in the picture so you can really compare if you have a property that you think is prime or in a good spot first quarter model I consider these costs because after you calculate these N. you you might be more inclined to try that trick terminal self what we have well at least turn over you know if we have a tenet that’s been our property for a year or longer we usually have a big expense when they leave Friday maybe we have to paint the whole apartment or the whole house maybe we have to redo the carpets hopefully guys are putting vinyl plank or tile in your units it’s so much bye. But if you have carpet we’re gonna have to have it cleaned maybe we have to have it changed or maybe we are going to change all the flooring and this is a big expense usually at 1 time you know on a typical size apartment 12 bedrooms if you have a property manager doing it especially I mean you could spend 3 to $5000 factory in in all of those different class and that’s different than a short term rental in the past I’ve talked about having that extra budget for wear and tear on a short term rentals but maybe $100 per bedroom per month so what better maybe $1200 per month whereas if you have a year long lease and you got to redo the whole thing going to paint you know you could be spending quite a bit more than that so really consider that and now we also have our lease up fee what is that so if if we have a tenant in there we have a professional property manager helping us they’re gonna charge just to find a new tenant sometimes it’s half the first month’s rent sometimes it can be more than that just depends on where you’re at and what’s typical in your market now we do have leasing fees but their short term rentals through Airbnb or BRB others really the commissions that were painted a listing companies so you could say that’s kind of the same but it’s not really a big chunk like it would be with a long term tenant lease up now this 1’s gonna be totally unique to long term rentals and that is if we run into a situation where our tenet is not paying us or for whatever reason we need to evict them while that could set you back quite a bit not only with frustration and the time that it takes but financially I mean what if they’re there for 3 months depending on the state that you’re in or where your property is these time ranges are going to be different but what if you’ve got a tenant in there for 3 months it’s not paying the rent and actually with all this covert stuff going on at. Even believe you can affect someone you want to double check that regardless we don’t have these eviction fees with gas that have stayed less than 30 days because they don’t have tenant rights we can call the police and we can have kicked out a property if they don’t have a contract to stay at our property for more than 30 days and if they’re breaking some sort of house rule so that is unique to a long term rental and that can really set you back if someone’s not pain and they’re in there for 3 months and let’s just say the lease is $1000 a month well then you’ve got $3000 you just missed out on and all your port fees so that’s kind of a nasty scenario I gotta say investing for over 10 years there’s only been one tenet that I had objected and it actually didn’t even make it all the way through the eviction process they will last before the court closing and all that stuff so we’re able to work that one out depends on the type of rentals that you have the lower income rentals you might find that the evictions are going to be a little higher but that is definitely unique to long term rentals and we don’t have that expense with our short term rentals unless we’re running for over 30 days and that gas becomes a tenant so those are some of the main differences now we talk about vacancy with that tenant moves out at the end of their long term lease whether it might say it’s a year sometimes it takes awhile to find a new tenant right depending on the season into if you’re coming up on winter in the lease ends at a bad time and it might take it 2 months or something a lease out and during that time your property is 100 percent bacon now with short term rentals I gotta say and again knock on wood even during cove it. Words like never 100 percent vacant I mean maybe we get down to 60 percent are in really bad time of the season with cove it happening as well the chances of just having a whole month where you don’t get any short term rents is not as common again these are generalizes if you’re in a country or a city in the world were coded shut you down 100 percent then that’s possible but we are in a special year right normally when we get through this that’s not gonna be very common that you’re 100 percent bacon with a property otherwise you turn that one back to a long term rental because there’s not a short term demand there you know if your long term leases vacant for a while I can really add up. Where intermission thank you so much for listen in the podcast it’s been fun for me and I look forward to getting up so it’s out if you have a specific topic that you’d like us to talk about send us a comment and let us know you can send it to contact at rest methods.com and if you haven’t already subscribed and given us a review that would be greatly appreciated too and lastly if you know someone that you think would find benefit in this as well send it on over to help us keep growing and help us to get amazing content back to you without further ado let’s jump back in. One example of a short term rental versus a long term rental and I’m not gonna get into the nitty gritty numbers here but we’re just gonna talk about one year operation and I try to make it is as simple straight forward as possible let’s say you’ve got a lease a one year lease for $1000 a month tenet at the end of the lease wants to move out and it takes you a whole month to lease up the property and when you lease it up your property manager charge you 500 Bucks to lease it up for the next 10 it they had around there background to do all that and then let’s say that your turn your property turned painting and patching holes from where they had shelves or cleaning the carpet or put in new flooring let’s just say that cost you 25 or box I think that’s kind of conservative so all and you’ve got about $4000 in costs at that 13 months after they left because you had $2500 for the apartment Turner the property turn get $500 for the lease up and we’ve got to count for the month that was 100 percent bacon at $1000 so that’s $4000 in costs as I would calculate it on a on a 12 month lease in that 13 month period that long term rental basically earned $8000 and now that’s very rough you know there’s going to be likely some other costs and things have gone in there some maintenance and stuff like that but I just want to give like a very very basic break down how much money you you’re actually maybe making with that that long terminal just gross this is gross right now let’s take a short term rental that rents for and this is again this can be very conservative I’m gonna say $2000 a month accounting for vacancy already so over a 13 month period 26 grand not too shabby these proper. These are all over the place they’re still out there and we’re talking gross again now if we deduct the hunter I’m calling this a one bedroom there’s one bedroom places all over the place you can make this kind of money so one batter my going to deduct that $0 a month for general wear and tear her bedroom sets one bedroom so there’s 1300 Bucks now I’m gonna go ahead and I’m gonna deduct 30 percent from this right off the top to account for housekeeping and for utilities now again those costs are going to vary depending on your property depend on higher management set up let’s just deducted half let’s say it’s 50 percent so you’ve got a gross $24700 after your $0 allowance per month divided into what is that $12350 compared to 8000 with the long term rental now this is assuming that you’re you have a property in a good market one that makes sense we talked about that prior process did you had demand and that you also didn’t have any crazy maintenance things happen or anything like that so just to break it down I mean there’s some really really good potential with short term rentals not every property makes sense not every market makes sense but you can find great properties out there to give you much better returns and then your long term rental and also not have giant up front expenses at the same time like you would with a long term lease checking out so those are just just to recap some of the expenses that you’re gonna have their short terminals that you don’t with long term those utilities your housekeeping supplies and you’re up front furniture cost as well so that examples assuming you already have the furniture in there and then some expenses with your long term rentals that you maybe weren’t considering or really thinking about that much and that is your least turnover how much it’s gonna cost to turn that up. Apartment over that house at the end of their year lease or whenever they move out the lease up fee from your property manager if you’re not doing it yourself and then potential even fictions and eviction fees and that vacant pureed during that time as you straighten that out with your resident or long term tenant so those are the basic ones and then the vacancy again world never almost at 100 percent vacancy it just like doesn’t happen like even with cove it when you’re single family home doesn’t have a tenant it is 100 percent bacon so keep that in mind I think both long term rentals insured terminals have a great place in your portfolio hopefully this gave you a little bit inside and until next time have a wonderful day. So we just had our live virtual fan and I gotta say it was a blast as always we done to live events before and this was basically a replica except for we got to attend from the comfort of our own homes and the beautiful thing about doing a weapon or is it was easy to record so if you missed it jump over to rest methods.com forward slash virtual and you can get your copy we jam packed it full to the brim everything that I’ve found to be the most important setting up your short term rentals and making sure you’re earning maximum revenue and highest occupancy but all while not giving up all of your time in creating passive systems so I give you all my resources we go over my actual properties case studies with pre and post code numbers and in my outlook in the future I think there’s a ton of opportunity so if you guys are just getting started or you have several properties already there’s no need to reinvent the wheel get all my tips and tricks things that I’ve learned and save yourself the headache and frustration just head over to rest message star forward slash virtual I know you’ll find a ton of value in it enjoy.

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