3 Renovation Mistakes That Will Cost You A LOT of Money | Tim Hubbard

Short term rentals are unlike long term rentals in that sometimes it makes sense to go the extra mile to renovate our properties. Maybe a lot more than we would a traditional long term rental. So that's what I want to break down this week, whether or not we should do that and what areas we should focus on when we're renovating our properties. Welcome to Short Term Rental Riches. We'll 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. Happy you're here again. We're talking this week about whether or not we should renovate our properties when we know it's to time time to renovate our properties. What sorts of things are worth the additional upgrades and what are not. And then also just a few tips on the timing of our renovations. So for starters, we know that short term rentals are not like long term rentals. We furnish them, they have a design element to them start. Some of them are over the top. Unlike our long term rentals, where traditionally, at least historically, we painted them all the same colors, we use the same flooring in all of the units, we use the same hardware and kitchens and they aren't really unique. Right. It's a good place for someone to live where they're gonna bring their own furniture and they're gonna add maybe their own design. But in the world of short term rentals, we're doing that for our guests. And in fact, that is the reason that's one of the main things. It's going to bring our guests to properties. That's one of the main things that's going to raise our search rankings on Airbnb or VRBO or homeaway or booking.com or wherever you happen to have your short term rental. So knowing whether or not to renovate our property and how far to go is very important. I have renovated a lot of properties. If you listen to the podcast for a while, you know a lot of my properties are old. They're really old. Like in the historic fashion, I have property from the 1900s, apartment building. I have apartment building from the 1890s. That is the oldest one. But along with old properties comes a lot of maintenance and a lot of needed work unless the property is renovated properly. So I've gone through this lots and lots of times. And I've also experimented with different renovations in regards to my short term rentals, even in the same building, adding Additional features to one where maybe I wasn't in the other one. So I want to break that down for you a little bit how you can figure out whether or not that is worth it. I've got a couple tips for you. But before we talk about actually renovating our property, we need to know if it's time to renovate our property. Of course, if you bought an investment that needs a bunch of work and that was the main goal from the beginning, a value add deal, as we would say, we're adding value to it. It was ran down and needs a lot of work. Well then you know kind of what you're getting into. But if the property is just sort of in decent shape, maybe you already have it as a short term rental. How do you really know if it's time for you to renovate it? Well, it's pretty easy to know. We get a lot of feedback in this industry. That's one of the beautiful things about it. One of the things I really like. If something's wrong or not meeting our guests expectations, we almost always hear about it. So reviews are the easiest way to know if it's time for us to renovate our property. If you're getting a review from a guest that says the floors were quirky and the walls were dingy and it needs a paint job and the air conditioner doesn't work and the ceilings, you know, whatever it is, if you're getting lots of these maintenance type reviews and feedback, then it's probably time for you to do an overhaul. Now if it's some individual item that keeps coming up, well then fix that individual item and see if you're still getting other negative feedback. If you're not, then maybe you are good to go. So that's a couple just quick ways to know whether it's time, whether you're getting negative feedback on the property as a whole or on the specific item. And if you're getting negative feedback on the same item over and over, it's time to change that or fix that or whatever it is, even if it's an expensive item. I have a property that's older. It wasn't very well suited for a central heat and air system. And it's in a city where it gets really hot and it gets cold. So I needed heat and AC in there. So we installed a mini split system. If you've seen these, they're the ones that very commonly used in Europe. They're becoming much more common in the US now. But this was a multi head unit mini Split system, meaning that there was one condenser that connected three places where air conditioning heat is coming into this unit. And it just kept. Something happened. There was a leak with one of them that affected all of them. And I spent a lot of money on this system. But after several times of trying to fix it, what am I going to do? I can block my calendar for another week at a time to try to fix this. And so at some point, not only is this affecting our guests and our reviews, but we're losing more money than if we just pony up and fix whatever needs to be fixed to begin with. So clearly if something's happening more than once and you're getting negative reviews, that is the biggest thing because that can really hurt us. You want to make sure that you fix that. Another way to know if it's time to renovate your property is to check out your competition, see how their occupancy is doing, look at their listings. Is yours fallen behind the curve? Well, you can check that out on airdna Co or Price Labs is the pricing software that I use. I've talked about a bunch. We have these resources available for you for free. You can check out the links at our website@restmethods.com as well as a whole bunch of other resources, tools and things that I use. But those are a couple ways where you can check your competition to see if your occupancy is lagging. And if it is, look at their listings. If they look like they're much better shape than yours, well, it's probably time. So three reasons why it's good to renovate your property. The obvious one we've already mentioned are better reviews. And the better reviews are, the more occupancy you're going to have at a higher nightly rate. So that's an obvious1. Number two is also obvious, but it's a real thing. You're going to increase your property value, right? If you add a new bathroom or you renovate all the flooring or whatever it is, you're increasing the property value. That's one of the really nice things about owning our properties, right. We've talked about lease arbitrage in the past, which is an excellent way to generate cash flow. That's if we lease a property from someone and rent it as a short term rental. But if we actually own it and we're investing this money into the property, well then we're increasing the value of the property. Well, so by renovating, we're going to get better reviews, we're going to increase our property value and we're going to have less headache because there's going to be less things breaking down. Right. If we do a full renovation, then that property is going to be good to go for a long time. Three renovations that I think personally are a waste of money or that you got to be really careful with if you're investing in short term rentals.

The first one, removing a bedroom to add more space to your unit. Now there's a caveat here. If you're removing the fifth bedroom of a four bedroom home and there's no real difference in the rental rate between a four and a five bedroom home, then it's not going to be that big a deal. But let's say the four bedroom homes in your area are renting for $500 a night and the five bedroom homes are running for $750 a night. Well, then you definitely don't want to remove that bedroom. Right? And that's information that you can find easily on price labs or on air DNA if you break down units in your neighborhood by bedroom or size. So you can do that. Make sure you're not removing a bedroom when you don't need to or potentially even make your revenue lower. So make sure you're not removing a bedroom unless it's not going to impact your revenue. Number two, biggest waste of money I would say. And again, this has a caveat is going with top notch appliances. So we know that we can buy a stove, a gas stove for 600 bucks, but we can also spend $4,000. That's not necessary unless your short term rental happens to be advertising or seeking that person that wants a chef's kitchen. And then maybe you can charge a premium. But I would say that gets a little more risky. So I wouldn't overspend on your appliances. Of course we want to get good ones so that they're not breaking down all the time. Appliances just don't seem to last like they used to. Right. They I don't know about you guys, but I know my parents still have a fridge in their garage that they've had longer than they've had me. And that's how appliances used to be. They don't last very long anymore. So make sure you're getting a decent one but don't overspend on them. The third thing that you want to consider putting extra money into and those are extra amenities in your property. So do you want to add a jacuzzi in your property? You need to do a little research before you Pony up, you know, 10, 15 grand or whatever it is for an amenity like that. And again, you can use those same data resources, Air DNA or Price Labs. Price Labs has a way to actually separate properties by amenities. I'm not sure if Air DNA does, but I know that data is available. So make sure you're checking it out before you're adding any really expensive amenities and kind of any sort of amenity or appliance or, you know, same thing with toilets. For example, you can buy a toilet for 100 bucks. It's probably not going to work that well. So I suggest you spend a little more on a nicer toilet. But you can also buy that $3,000 Japanese toilet. Have you seen those that you walk in the bathroom? They open up automatically. They play rain sounds, they clean you, they dry you. They have a heated seat. They're awesome. When I build my dream home.

I think I'm gonna throw one in there. But for your short term rental, it's probably not gonna raise your nightly rate, maybe not even at all. So really consider the extra cost on some of these appliances and things like that that are just going over the top. So lastly, I want to finish up just with some tips. Renovating in general, we want to do this in the off season, right? If you're in a seasonal place, you don't want to do it during the peak season. And make sure to allow yourself more time than you actually need, especially if it's a big renovation. Because we know these things tend to go a little longer, don't they? Another thing you want to consider is longevity. Again, that goes back to appliances and toilets and making sure we're not buying the bare models that are going to break down. We do get a lot of wear on our properties with short term rentals. Everyone uses them differently. Utilize our small spaces, add a desk in there if you've got space and you don't have one somewhere else. And then lastly is the curb appeal, the exterior of the property. If that's not looking good, well, that is money well spent because that is the first thing that your guest is going to see and that's their first impression. And if they have a bad first impression, that's not a good start, right? And especially if it's bad on the outside and then there's even little things on the inside, it just starts to kind of snowball. So short term rentals are not like long term rentals. Sometimes it makes sense to spend a little more money, but we want to make sure we're spending it in the right spots. So check out some of those data sources. If you haven't when do we know if it's time to renovate? Well, if we're getting bad reviews, that's the basic, easiest way to know is if we're getting bad reviews or something continues to keep breaking. Remember that renovations aren't going to just raise our reviews, but they're raising the value of our property as well, which is good news and it's making our management easier because less things are breaking down.

Make sure you're not overspending on some of those appliances. So lastly, make sure that you are renovating at the right time. You don't want to do it during the peak season. Hopefully that gave you a little bit of insight. If you haven't done a big renovation yet, I'll just leave you with my last last tip is that it's very likely going to cost more than you expected and it's going to take longer. Ask any real estate investor that's been around for a long time and they don't have their own team. That's just kind of how it goes. But it can be well, well worth it. So if it needs to get done, go ahead and jump in there. I hope you are doing really well out there today wherever you are in the world. Thanks for joining in again. If you didn't already know, you can check out all of our past episodes@str riches.com and we've got a bunch of resources on there for you. There's thanks for joining. Until next time, have a fabulous day.

Want to get on the fast track to financial freedom through short term rentals? Well, it all starts with the properties you acquire, but you want to make sure that you acquire the right properties. I want to give you my ebook 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 restmethods.com that's R E S T methods dot com.