Short-Term Rental Design for SUPER High Revenue

0:00The hardest thing to do and might even be impossible is to is to you can't outbuild a bad property right yeah if you buy the wrong property to start with it doesn't matter how much design you put in and how great the furniture is and da D you've bought the wrong home and so starting with the right piece of property is is crucial we don't we do some highlevel advice and suggestions and things like that and we work with investors all the time that are buying their first or their 10th property I'm looking at I probably got three or four homes in my inbox right now to look at this morning as we're recording this and I'll give some thoughts and advice we also have partnered with some great companies like Str search where they actually go out and help you find the perfect property underwrite it make sure that it has meets all the regulations and requirements so

0:49It's either going to be you Outsource it and hire somebody that does this for a professional you know for a profession or you spend a lot of time a lot of your energy in underwriting deals looking at regulations looking at properties either way we're happy to help you but yeah there's definitely a lot of work that goes in on the front end to making sure you find the right home because like we said you can't outbuild a bad property yeah and then if you think about it the furniture Decor amenities as an afterthought and you have a really small budget set aside for it you're going to be disappointed in your results because your final product is going to be disappointing right if you buy a $600,000 house and all you have set aside is 10 grand for furniture towels Linens cups plates trash cans like what are you going to get

1:37A hot tub cost 10 grand so you're G to get Ikea furniture Walmart the cheapest of the cheap and then your guests are going to know that they're going to feel it they're going to realize that your home was poorly put together not going to get great reviews and then the home is going to underperform from a revenue standpoint and that's what we see more often than not is when people say hey short-term rentals don't work and I can't make any money and this property's not cash flowing and we look at their home and we say well of course it's not would you want to stay in this house yeah would you pay,000 dollar a night to sit on that couch in that living room no of course not so you've really got to be strategic and your fi your your furniture Decor your Renovations it can't be an afterthought it's got to be on the Forefront of your underwriting yeah yeah and speaking of pricing how how do you

2:26Recommend people budget for furnishing and design in the setup of the property as they're starting to look at potential deals yeah that can be really tough because it's based on a lot of factors right the condition of the home is it brand new construction or does it need Renovations the square footage the bedroom count the location there's so many things to consider and that's why my inbox is full of properties right now to look at for people so always happy to take a look at an address shoot it my way if we'll share the email in the show notes I can give some thoughts and insight do the same thing with inspection reports we review those with people from a license general contractor standpoint there's a couple of online calculators that can be helpful obviously like

3:14Listening to this podcast will give you some insight and thoughts into to how to budget for that but just like anything I think it's going to take you twice as long it's going to cost you twice as much as you think on the front end right yeah do you have like a a ballpark rule of thumb cost per per room or anything like that that you advise people as a place to start yeah I mean I I would say it's if you've got a three-bedroom two bath house I think you need to budget somewhere in the 50 to 60 Grand range at least if you've got a larger home you probably need to be 70 to 80 and I've seen houses where people are spending as much as $100,000 in Furnishing and so it's a substantial investment depending on the size of the home and what goes into it so I think that that catches some people off guard especially when they're new but

4:03What I've also seen is that people that are on their second and third one they understand like they're like yeah I thought the first one was going to cost me 20 grand it end up costing me 60 and so yeah yeah yeah and and do you think that this process like working with you guys do you think it's as important to have a designer involved if you're doing more of like utilitarian you know more affordable Properties or is it it just for like the high-end you know typical vacation rental type areas yeah I mean it certainly wouldn't hurt I I don't think that people are very visual when they're booking short-term rentals and they don't read descriptions I'm a firm believer in that they book on location and the photos that they see

4:51And I think that photos when you look in the Airbnb and VRBO app it's very similar to like Instagram or social media where where photos are the highlight and and what capture people's attention and so if you don't use a professional designer and your home is poorly furnished and doesn't photograph well of course you're going to suffer and even in the lower end price point right even if you book a motel 8 they have great photos we all know what it's going to be like when we get there but those those rooms look good in photos because that's Hospitality they understand that we're booking based upon visuals and emotions and so yeah I think it's super important I don't know if there's any more important than making sure that your property is visually appealing to people when they're looking at their options when they're going to book yeah that's a good point yep and

5:40On your website you you guys mentioned that you specialize in data driven design can you just kind of explain what datadriven design is and how it's different yeah absolutely it's very much looking at the comps of the market the location and the guest Avatar and figuring out what's going to drive revenue and so an example would be like if you put those Pathway lights you know the outside nighttime Pathway lights that can be quite expensive if you have a professional company install them and they might be a really nice thing to have if you were living in the home and you had a higher end house but they don't necessarily Drive additional revenue and so spending thousands of dollars on Pathway lights outside is probably not going to have any Roi when you operate a short-term rental same thing with

6:29A tile Subway shower if you have a shower it's out of date in a home and you go in and gut it and do a brand new tile shower with glass doors it looks really nice probably cost you 10 to 15,000 in today's money but it doesn't drive any additional Revenue that money would have been better spent putting a hot tub in the backyard in some markets because that hot tub that amenity probably will drive 10 to $5,000 a year in additional revenue and will pay for itself and so that's what we mean when we say data driven design and Renovations is making sure you're allocating resources to the proper place in your home and not wasting money on things that you might like to see or you might like to update in the home that will most likely not translate into additional Revenue as a short-term rental got

7:17It that makes that makes a lot of sense yeah and it's not intuitive in a lot of cases it seems like it's counterintuitive it's actually goes against a lot of the things that we've been taught and we've learned earned as Real Estate Investors yeah where the kitchen and the bathroom are always priorities right why wouldn't you replace those countertops and D D D D D and I would say well great because we have a home down the street that still has for Mica countertops in it and it did $250,000 last year in Revenue yeah because they put the money where they should have and and and they're seeing the the fruits of their labor on that and so yeah it's totally counterintuitive to what we've learned that's interesting yeah and and earlier you mentioned you know some people set up properties that they wouldn't even want to stay in themselves you know that the couch isn't comfortable and you know

8:06Different features like that how do you Bal I I've noticed that it's in some ways difficult as you're setting up a property to balance function with design you know like the property that I'll see some listing photos where it's like it is a gorgeous property anyone would want to stay there but every item there looks like something that's going to break the first time guest shows up you know they got a white couch they got like a bunch of you know Decor that's like very fragile and stuff like that so how do you balance the items that that are going to hold up over time because it gets used hard with really beautiful Design Elements as well yeah that's a great question great point because I know firsthand experience

8:55We've got a 5-year-old and a three-year-old whenever we get to a new property you know what we do the first first thing we don't even bring our luggage inside we walk through the house and we start picking up knickknacks the little glass balls the D that are kid level and we know we're GNA break and we put him on a top shelf and we have to basically declutter and decorate some houses that we've stayed at because they weren't thinking about us as the end user and our little kids we don't that that stuff might look cool in a photo but it's definitely not functionable it's going to break my kids's going to pick up these little glass ball deck deorations and throw them against the wall or throw them at the dog right yeah yeah so you it really you're leaning on expert experience from people like us or professional designers who've done properties that can use Hospitality grade Furniture can

9:44Still make something look great but also be functional at the same time and that there there's definitely an art to that and and a trick to that and I think that people who do it well have done it over and over again and have made mistakes and learned oh we shouldn't use that we should use this like I've got a house that we just we use some outside furniture for the couches in the game room because it's a guy game room with poker tables pool tables dart boards a bar we know they're going to be drinking we know they're going to be eating we know there's going to be spills the couch looks really really good and until you sit on it and you like looked at it you wouldn't even realize that it's a piece of outdoor furniture but it's got that very nice microfiber weatherproof cushions and it's going to stand up up to the test of time in that room and so that's just like

10:32An example of a professional company knowing hey if if we threw a cloth white couch in this guy's game room it is going to get destroyed and so we've got to be strategic about what we put into that room yeah absolutely that makes a lot of sense and and something you mentioned earlier that I I fully agree with is you really have to know the the the guest avatar for that market and understand the comps in that Market to determine you know what what's required from a from a design standpoint that being said generally you know in in your experience what are the highest incom producing amenities that you recommend like what you know when you do a typical deal and I know they're again they're all

11:20Different all different markets but do you see there's like a few things that stand out that you would highly recommend people have because the revenue really gets boost when you see these yeah absolutely the first one is going to be heads and beds and so if you can increase occupancy in a property then you're immediately going to see a huge boost in returns and so what I like to look at and and look for would be maybe lower bedroom count homes with higher square footage so a three-bedroom two bath that is 2800 square feet well immediately I'm thinking hey that's probably got two dining rooms one of them's a formal dining room it's got an office that could become a bedroom it's got a Den space there's probably additional rooms in square footage in the house that could be easily and inexpensively converted into a fourth or fifth bedroom and

12:09Now I'm increasing my occupancy by two four six and so increased occupancy in my opinion is always one of the highest Roi decisions you can make in a short-term rental I call it an amenity it's an amenity yeah number two depending on the market hot tubs are very high Roi driving amenities if you are in kid-friendly markets having a kid-friendly property pack and play high chair toys books a room set up for kids that that families are going to look at and go oh our that's the kids room that's where we're sending the kids to play those are going to be high Roi decisions to make families pay a premium because they're traveling with six seven 10 people at a time and so definitely increase your occupancy definitely

12:58Tailor to your guest if that's a hot tub or if that's a kid-friendly property those are going to be the biggest things that you can do and then I would say the next thing to me is doing amenities well and not half-assing them and so I would rather you instead of saying I'm going to do five amenities in this home but I'm gonna have a crappy little fire pit with just a couple of chairs and I'm gonna have one arcade game in a closet that I'm going to call a little game room and just poorly doing things I think you're better off just doing one or two amenities and doing them very well and so hey we've got an epic fire pit with 10 chairs for everyone and string lights and a swinging bench and some cool Decor elements to it and we've turned this room into a really

13:46Really cool game room so I I would prioritize quality over quantity when it comes to amenities and making sure that what you do you do really well got it that makes a lot of sense yeah you see that even if you set it up you know decently initially a lot of people let those things go and then their guests show up and it's like you said like there's one chair that works when they show up and the fire pits really run down and stuff so that makes yeah that makes a ton of sense I was actually I was pretty blown away because we have a a hot tub in one of our properties and I was blown away at the the cost to maintain you know the the ongoing cost it's actually more expensive than our pools you know to the weekly maintenance the you know if something breaks the maintenance on

14:35That increased you know expense for for your utilities the refunds that you have to give because there's going to be times people check in yep and the hot tub's not working and that's the only reason they booked and so you got to give them you know a discount on their stay so all of that factors in not just you know the cost upfront to buy a hot tub but you really have to think through all that so how do you determine in a market yes a hot tub does make sense it's going to above and beyond all those costs it's going to make you even more Revenue or it's not worth it yeah yeah that's you're right there's definitely a delicate balance there and you do have to look at it holistically the whole picture not just what's the additional Revenue but what's the additional cost what's the additional expense are we going to net any

15:23Additional money by having this here we're looking at readily available data you know you've got rabu you've got airdna you've got some of these resources that give you the comps and we're looking at hey if the top five properties in this home all have hot tubs and then the next five properties don't have hot tubs and there's a difference between 10 or 15 or 20 grand in Revenue was probably a probably a good decision to have a hot tub in that market if there's not if there's only a three or $4,000 difference in Revenue then maybe the benefits don't outweigh the negatives and the costs and the and the the headache of dealing with it yeah so definitely looking at that we also are using first-party data so we're using our ability to look at homes that we've done in these markets is a great Benchmark for us and

16:12Because we've been doing this for five years we have the benefit of saying hey and in Blue Ridge we've done five houses and these guys did this and this and this is the revenue they're doing and these guys didn't do this and this and this is the revenue we're doing and so we've learned a lot made a lot of mistakes and and there's things there's amenities there's decisions that we made two three years ago that didn't pan out and we go oh gosh we're not going to do that again that just didn't make any sense and and guests weren't willing to pay any more for it and there's other ones where it was a slam dump and we said hey man we started putting pickle ball courts in these houses and they're making 30 grand a year on top of everybody else and the pickle ball court only cost 25 Grand so boom that was a great decision to make that's what I was going to ask you about next actually is it's funny you bring that up because You' mentioned pickle ball courts before I've seen that

17:00A lot recently like more and more people are putting in pickle ball courts it's become more and more popular do you think this is a a trend or do you think it's here to stay and it sounds like it generally it is a good idea like it it pays for itself or is it only in very select situations yeah I I think it's definitely Market specific I don't I couldn't fathom that pickle ball is going anywhere it's still the fastest growing sport in America I just saw a news story the other day that there's a couple of female professional pickleball players that are getting paid more than WNBA players to play pickle ball and so I think I don't think it's a a fad or a trend I don't think it's disappearing in the next couple of years I do think that it's something that's going to be around

17:48For a long time and then at the end of the day too as from a contractor's perspective putting in a pickup ball court in your backyard could be simply rep purposed or dual purposed and you could have a basketball hoop or a basketball court or you could use that concrete pad in the future and put a Pergola on it and seating and fire pits and things like that and so even if you have to repurpose that investment or or shift it a little bit it's still a valuable asset to have in your property if it makes sense and you have the space for it and so it's definitely not one of those things where I think hey in five years people aren't going to be playing pickle ball and you're gonna have to start ripping out these concrete pads I don't think that's going to be the case