What Most Successful STR Investors Are Focussed on Today: From a 300+ Investor Meetup

I just got back from the Level Up Your Listing Summit in Phoenix, Arizona. Some of the brightest minds in our short-term rental industry space, some people doing exceptionally well, a lot of common themes throughout the week. In this episode, I'm unpacking everything, the boldest strategies, the biggest themes, and the one theme in particular that kept coming up no matter which workshop I went into or which person I talked in between sessions. Let's jump into what people are actually doing at the highest level. Quick tips for you and your short-term rental portfolio. Portfolio. Let's get into it. The Level Up Your Listing is hosted by Natalie and her partner Tatiana. Between them, they've got a lot of experience and different experience. One of them is a designer, one of them is an operator, an investor raising funds and operating some really successful short-term rentals. If you missed my episode with Natalie, you can go to her podcast, which is the No Vacancy Podcast. It was episode 176. There we talk about Corsley, our company, and all of the things that we're doing to operate our over 230 properties now in over 40 cities. If you missed the episode where I interviewed her, well, you can go back to episode 328 on the Short-Term Rental Riches podcast and you can hear more about the properties that they're acquiring for $300,000 to $400,000 that earn annually $150,000. Make sure you check it out. So between Tatiana and Natalie, they have an amazing following. They attracted a lot of really great speakers and sponsors and just a attendants in general. There were over 300 people actively working in the industry. And as always, there's lots of little good conversations that come up even outside the session. So we're going to break all those down today. This conference was set up a little bit differently than most the ones I attend. It was very design forward and we know how important design is in our short-term rentals. Just happens that one of the hosts is actually a designer. So there were lots of presentations on the way people are currently designing today and the outcomes that they're getting with their short-term rentals. So let's take a step back first just talk about some of the big themes in the industry today. We've talked about them on the show before, but every time I go to a conference, it just cements them in. A lot of people out there today are earning less with their short-term rentals than they were a couple years ago. There's of course a lot of reasons for this. There's way more supply than there has ever been, and competition is higher than it's ever been. At the same time, guest expectations are higher than they've ever been. But nonetheless, there are still operators that are doing very, very well, owners and investors that consistently exceed the market. In fact, if we look at the numbers for any given market, there's usually up to or even more, a 300% difference between the bottom earning property and the top earning property. And I'm not just talking about a small 1-bedroom versus a 5-bedroom. I'm talking about equal properties, competitive properties in the same style, same space that are performing drastically different than the others. So that's a major theme. There's a lot of question marks with you out there just in terms of revenue management. We're going to get into that a little bit, but the reality is people searching for ways to earn more with their properties. And that's led a lot of people into creating properties that really are the destination instead of having a property that's already in a destination. And a lot of that requires some really good design helping you stand out. A lot of people have also taken it a few steps further and actually gone into the development arena where they're building boutique resorts, Airbnb resorts, glamping, you name it, very trendy right now. And I would say that you got to be careful with that because there's just like a lot of people added short-term rentals. Well, there's a lot of people adding these boutique-type resorts, but they can be a really good opportunity. And one of the opportunities that they have more so than sort of your typical vacation rental is they have more opportunity for branding because they are unique. And if you can build your brand, which again is one of the industry's leading topics right now— how do we get more direct bookings and go away from Airbnb or VRBO and bring everything onto our turf? It's a, it's a major, major theme today. And that's one of the things that these boutique- type experience properties have an upper hand on. Okay, so we're going to jump into more depth in each of those topics, but before we do, I want to talk about how to find the best opportunities. For those of you who haven't quite taken the leap and jumped into your first short-term rental, well, I've got a 5-step framework to help you get a little bit more clarity on that. And this was put together by Matt Sanderson, who runs STRiQ. I'm excited to have him on an upcoming podcast in the near future. But what they do is basically break down all of your short-term rental options across the nation and help you identify which ones could potentially cash flow the most. Now, you don't have to use their software. There's lots of data sources out there, but theirs is specifically designed to help you uncover that property. But before you can even use one of these tools, you really need some clarity in your mind. So 5 quick steps for you to help you find your next property or to find your first one. The first one is you need to ask yourself whether this is 100% investment or if there's going to be a personal component to it. Do you plan at staying at the property? Well, if you do, then that changes things drastically. If it's just going to be an investment, then really it comes down to the numbers, right? We look at all the numbers, we analyze them, and the numbers tell us where the best returns will be. Number 2, you need to define what Matt would call your buy box. There's a few elements that go into this. One would be your cash on cash return. There are some markets that purchase price is simply much too high to have a cash on cash return. The other would be your budget. How much can you actually spend on this property? How much will you need to invest in the property to get it ready is a short-term rental. If you've been tuning in the show for a while, then hopefully that's not something that discourages you. As you know, our team manages over 220 properties in over 40 cities and in multiple countries, and we've been doing it for years and years. So I hope this show has helped provide some of those tips for you to give you the confidence. If you have been tuning in for a while and you haven't yet left us a review on the podcast or a like or a subscribe on YouTube, you're finding the content helpful. Well, that really goes a long way and I would really appreciate it. Step number 3, we need to verify with comps. We don't want to just look at what the most potential in the market is, right? We need to be realistic. So the best way to do that is to pull comps, not just at the top tier, what we call like the 90th percentile— the properties are renting better than all the others— but also at the 75th and then the 50th percentile. And the 50th percentile would be your average, right? If you had 100 properties in the market and you averaged out all their annual revenues, 50% is going to land you right in the middle. Number 4, you need to run the pro forma. If you haven't heard this term before, it's basically an analysis of the property, and that accounts for everything, right? That accounts for what your mortgage will be, what your property taxes are, your insurance, your housekeeping fee, how often you expect to have turnover, your supplies, your utilities, all of the normal expenses and income that go into your short-term rental. We've talked about this quite a few times. In fact, we have an episode specifically on pro formas. If you go all the way back to episode number 60, a long time ago, I know, we talked about pro formas and these types of analysis. You can also find a helpful information on our website at strriches.com. So after you've run your analysis, the last step is to execute on the property, right? But we want to do this with confidence. And one way to be more confident about our purchase is to talk with trusted advisors and talk with local professionals. So this includes your real estate broker. This includes people in the area, property managers, your lenders. You need to know that, first of all, you're able to close on the property. So always a good idea to talk to your lenders beforehand. And I highly suggest that you find a broker that that has some experience with the investment side of things versus a residential-only broker. If you want to streamline a lot of that process, well, you can head over to STRiQ. They've got a lot of those steps in place for you. All right. Let's get into one of the biggest themes, biggest takeaways from the conference, and that was on design. There were probably, gosh, I don't know, 15 different designers or companies. The whole thing was sponsored by Wayfair. If you haven't considered Wayfair before for some of your furniture, I just furnished a property recently and we certainly got a lot of things from Wayfair. So check that out. But before you go into designing your property, you really need to understand your avatar, right? Who's staying at your property? Designing for multi-generational families is much different than designing an inner urban city apartment for a business traveler. Here's a few practical tips. If you're designing your property or if you're in the furnishing stage, focus on things that actually get used and not so much decor and things that are going to get broken or maybe get stolen. Any time you're purchasing something, keep in mind, is this product going to perform well? Well. So think the bed, the couch, chairs, things get used regularly. But also, is this product or is this furniture going to photograph well? We know our photographs are really one of the most important pieces of getting reservations. And so it's a great idea to know in advance what your top 5 or your heading photos are going to be. These are the first photos that show up on Airbnb and all the listing sites and really put a little bit more money into what goes into the design for those photos. Another practical tip, try not to really mix mix designs, having industrial with farmhouse or modern. Try to keep your colors somewhat consistent. Maybe focus on 3 main colors. Of course, you can add in accent walls and things like that. But if you're walking into different rooms and the colors aren't part of the same theme, then it just seems— it feels a little bit chaotic. Another practical tip: if you're going to spend more, spend more on your master bedroom. We got to think, who's booking these properties most of the time? Usually the parents, usually the person staying in the master bedroom, right? So make sure your linens are better there. Make sure that it's more comfortable and that will lead to better reviews. Another practical tip, I've said this 100 times on the show before, use white linens. Guests know that they're clean. You can bleach them. There's a reason most all the hotels in the world are using white linens, and so should we. Now, those are some practical tips for design, but a lot of people at the conference were actually creating experiences with their properties versus furnishing them. And now you got to be careful with this because your budgets can go up extremely high. You got to do your due diligence. And I would say this gets a little riskier. If you guys have been tuning into the industry shows for a while, then you've undoubtedly seen Robuilt. He has one of the largest YouTube channels in the industry. I was fortunate to go to one of the houses that they designed recently in Scottsdale after the conference. It was a bit of like a house party. It actually reminded me of like my high school days, but they had designed every corner of this property. Bright walls, an amazing backyard setup. Of course, they did this knowing who their guest avatar is, but these things are not cheap, right? So even with an amazing design and truly knowing our guest avatar, there's some foundational pieces that are going to help us earn more money with our properties, right? And so let's get into revenue management. The first thing is you have to set those expectations perfectly and you have to have a good guest experience, which leads to good guest reviews so you can continue to have visibility. But with those things things in place, it really becomes a story of pacing. How are you doing against the market? Are you pacing ahead, or are you booking ahead of the market? Are you booking after them? If you're using a tool like PriceLabs or Wheelhouse, and this is data that's readily available, of course you need to be monitoring that closely, and you need to be looking at not just this month or next month, but really your whole booking window, as far out as you need to go where people are actively making reservations. Now, if you're booking up equally with the rest of your market, and you're in a market with lots of data, well, your historic bookings can help act as a guide, but they certainly don't tell the future, right? We know a lot of markets have seen a big increase in supply. So the ideal thing is to have a range in your pacing. For example, if you're 5% behind the market or you're 5% ahead of the market, maybe that's the range that you look at to decide if you need to adjust your prices or not. I know this gets a little complicated. And again, we've done a lot of episodes on revenue management in the past. If you're looking for help with your revenue management and all other aspects of your short-term rental, well, our team would be happy to help you out. You can head to STRriches.com. There's a partner with us button. I'd love to jump on a call with you personally, talk about your property and see if it makes a good fit. All right. Moving on to branding. I know this has been a really trendy topic in the industry lately. Most all of the PMS programs out there today are offering direct booking websites and they're also improving them at the same time because people are trying to move away from the heavy commissions of Airbnb and Booking.com, the 15+% that you have to pay each time someone makes a reservation. But getting direct bookings isn't that simple. The more unique your property is, the easier it should be. But there's still a strategy to it. This was a presentation done by Ben Wolfe, who was getting amazing results with his short-term rentals. A lot of them were set up very unique properties again, so they lend themselves a little bit better to social media and capturing demand. His big point was that our direct booking engines are for capturing demand, but social media is actually what creates it. So of course you can do that across Instagram, Facebook, YouTube. There's lots of avenues today, but it's not something that happens overnight. And you do need to put in a lot of effort. You're going to need to experiment a lot. And there's lots of other YouTube channels out there that talk about social media marketing, and it can get really detailed, right? Identifying your conversion rates, how many people are visiting your pages, how many people are going to your direct booking website, seeing it. If they're not booking, why are they not booking? So all this is, is pretty similar to the way it is on Airbnb, right? If you pull up your Airbnb Airbnb listing, you can see that there are views. You can see how many people viewed that page and see how many people clicked on it. You can see how many people actually converted. And so when we take that off Airbnb and we do that on our own, there's a lot that goes into that. Again, the more social media you have, the better the content, the higher the chances you'll drive more traffic to your website. And then once you've figured that out, depending on your property, you can go as far as creating paid ads. If you have a very high-priced ADR or average daily rate with your property and you've figured out some of the social media via marketing to drive traffic to your website, well then you can calculate pretty easily what your paid ad spend is returning. So there's certainly a lot that goes into this. This is something our company is exploring as well. And as we get more deep in the weeds, we'll surely be back here with more tips for you. One last little quick section for any of you out there that aren't in a great position with your short-term rental. Another opportunity. This is actually one we talked about way back on episode 257, and that's PadSplit. If you're in an area has a ton of competition, you don't have a way to stand out, or you've identified that you can't invest more into the property and expect to earn a lot more, maybe by creating a really unique experience, or maybe by investing in social media, or investing in new photos, or whatever it happens to be. Well, you could look at PadSplit, where you still have your furnished property. Larger homes are going to do better, 6 to 8 bedrooms. But this is a way to have midterm reservations. I think their average guest or midterm tenant is staying for 6 months plus. Buy the room, right? Earn more than you would as a long-term rental and potentially more than your short-term rental is earning right now. So that's a wrap for now. I hope this gave you some insight into where the market's at really today. We've talked about these things before, but it is the reality. People are investing in design, they're investing in unique experiences, they're investing in social media marketing to drive more direct bookings and more demand, and they're really honing in on their revenue management. Until next time, I hope you have a fabulous week.