In this video, we’re going to be giving you five tips on surviving this pandemic as a short term rental host
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Julian Sage: 00:00 In this video, we’re going to be giving you five tips on surviving this pandemic as a short term rental host. So stay tuned.
Julian Sage: 00:08 Vacation rental machine helps hosts just like you learn how to start, grow and scale your short term rental business, the show’s all about creating systems that help you automate your business, giving you more time and money freedom. If you’re ready to start living the vacation rental life, then subscribed to this podcast today, come and join us on our Facebook group, the host nation where we’ll be talking about starting automating and scaling a short term rental business. Now onto the show.
Julian Sage: 00:34 Hey, welcome back host nation to another episode of vacation rental machine. I’m Julian Sage with John Bell and we are talking about tips and strategies, on things that you can be doing, specifically what we’re calling like the green, yellow, red strategy for this pandemic. So we’re going to be highlighting some of the things that you should be doing or you should have been doing right away, such as applying for the SBA loan, 2, some of the more severe things that you really need to be taking a look at your business at this point. But if you do implement these steps into your business, this will help to mitigate the risks just depending on how far you are kind of in the hole, so Jon, what are some of the tips that you recommend for hosts to be implementing in their businesses right now? I know we’ve been talking about this stuff for quite a while now, but maybe just to refresh everybody on the things that they should be doing in their businesses today.
Jon Bell: 01:25 All right, so let’s just go with the certain level of severity that things are at right now. So right now, this is probably about the second or maybe the third month that people are feeling the impact of COVID 19. Soright now if you have not already, you need to get on the list and apply for one of the two SBA loans. I posted something within our Facebook group that showed us exactly which one to apply for based upon the certain circumstances or things that you needed to get funding. So the PPP is more likely the way that you want to go if you’re a rental arbitrage host. But if you are like having your own properties that you are actually listing and have out there, you might want to go for the EIDL, what is it?
Julian Sage: 02:15 Eidl.
Jon Bell: 02:18 Once you do that the next thing you were just pretty much going to sit and wait because it’s not like they are really moving the funds along or anything that way. So there is some time that you need to kind of consider and possibly position yourself a little bit better.
Julian Sage: 02:35 So with a lot of these loans they have already exhausted that first round of funding. So if you are planning to try to acquire one of these loans, then you definitely want to be on this new round of funding that they will be coming out with very shortly. So you definitely want to stay posted. We have some really awesome people in the host nation community such as our good friend Alvin cavalier, who has been sharing a lot of really resources of himself going through that process. But also on YouTube there’s a lot of people that are giving updates constantly every day. One of the people that I follow is this guy meet Kevin where he’s been addressing everything about the EIDL, the PPP and just all of the fund disbursements. So definitely want to go into the host nation Facebook group connect with some of our members there such as Alvin, and also use the resources online such as YouTube. We’re not experts in the space, but we are just trying to put these resources out there for you and let you be updated with our progress as well. So Jon, what’s the second tip that you recommend after applying for these loan programs?
Jon Bell: 03:42 Tip number two is to go out there and really start looking into some of the thorough data that is out there now about this whole COVID 19 thing and look at the trends within your area. There’s plenty of sites that have free information. Some of the sites that you probably already use have some information that’s out there. One of the sites that I go to and use is price labs. They have great information if you’re already using them. They also have some free information that’s available on their site as well as air DNA. I also go to the resource page within lodgify and there’s plenty of links that are there that we could actually click on and digest and all the information that’s there. Some of the things that we really want to look forward to is looking at the length of stay. This lets you know that Hey, people are booking shorter term, longer term, midterm still within my market.
Jon Bell: 04:38 I feel like within our DC market, it started to begin where people were booking longer-term stays in the beginning. Now that some of those longer term stays are starting to fizzle out people are really booking those two day stays, which is okay, it’s not great. It’s not really what I personally want, but at the same time it is a reservation. It is revenue, so you can take that data and reposition yourself to price better. That might mean increasing prices, but discounting prices heavily on seven days stays or 30 day stays or more. You might want to increase those discounts to attract still those longer term bookings and kind of shy away the two day bookings that you might be getting. All right, tip number three. So if you’re in dire straits and you are ready to just get something in the door, you need to switch your model from minimum price to an occupancy-based price.
Jon Bell: 05:36 I know within price labs they have a tool that’s built in that automatically does this for you and if you’re not using it, then you need to come up with a way to actually just lower your price below your minimum price. Because right now you’re just looking for revenue. It’s better to have $2,000 in the bank versus trying to fill the gap of a $3,000 lease when you haven’t had anybody to stay. So filling in the gap for a thousand dollars is a lot easier. One of the common things that I’ve seen for people that are in this situation where they can’t pay leases is the landlord is asking for half of the month that they can’t pay. That way they can still push over some of the debt that they’re carrying instead of the entire missed payments. So go to an occupancy-based pricing model.
Jon Bell: 06:29 Of course, one of your concerns is going to be the type of guests that you’re going to be bringing in. Yes, it is a major concern. However, right now I seem to only find good people that have been coming and staying. I have not attracted the riff Raff, but if you do, you should have the appropriate systems in place, which really relies on either external cameras and noise monitors to let you know when something’s going awry and you just take care of the situation. And if something like that happens, you get to evict the tenant and still keep the revenue from there.
Julian Sage: 07:05 Right, Jon. We have to imagine as a guest when we are using just Airbnb to try to find places. If you go on to Airbnb right now and you’re looking in your market, you could probably find a lot of places that are undervalued. Maybe they are even below what the market rent or what the normal, what their minimum prices should be. So we really have to take a look at that market, look at what everybody else is competing against. And if you have to, you’re going to have to go below your minimum price because people are trying to find the best bang for their buck. We saw some properties or Sonder some of the buildings that they were in and some of those units, those are some expensive places and their nightly prices were like $60.
Julian Sage: 07:47 I even see on Facebook right now, it’s like for one month and a Sonder unit, it’s like $1,800, $1,700, just ridiculous when they’re probably spending like double that amount. And that’s really just because they’re hurting right now. And they have really transitioned their whole business model to occupancy based over revenue based cause they’re just trying to survive this. So if we’re trying to compete with the Saunders or trying to compete with someone that has a really, really beautiful place, then we’re going to have to be realistic with our pricing. In a very hot market where everybody’s traveling, those places are going to get booked up right away. And depending on where your properties at, depending on, you know, how good your offer is, people are gonna want to stay with you. But if everybody else that is really underpricing themselves, you’re going to have to underprice yourself too. And you may have to just kind of swallow your pride in the situation and accept that you’re not going to be making as much as you once were. So Jon, at this stage, maybe we aren’t able to cover our minimum nightly price, our minimum required price to be able to cover our lease payments. What’s the next step that we should be looking at at this point?
Jon Bell: 08:54 Tip number four is to know the terms of your lease, specifically when to exit or when your expiration date is and when you need to send notice that you are vacating the property and possibly the penalties that are involved with all of that. So once you know this information, you then could either position yourself to exit the property at the right expiration time. So for me, because I scale a lot right around this time, I can end up sending my letters of vacancy right at the right time so I’m not carrying out for an additional month. Losing an additional set of money that I could have kept for myself. At the same time, knowing exactly the terms and how you need to exit the lease is key when you want to go. And this is probably the next tip to negotiate with the landlord your exit because this whole thing is going on. Everybody’s feeling the hurt at the same time. If you come to them and let them know that you are trying to vacate peacefully and within the expedient matter, they might be lenient on you to allow you to break the lease and maybe just surrender your security deposit.
Julian Sage: 10:09 One of the other things that you can do is if you are looking for either consultation or looking to either sell your business, you can go to STRbroker.com, we have been getting quite a few submissions from people that are looking to exit out of their contracts. So if you’re looking to potentially pick up somebody else’s contracts or sell your business, that would be the place for you to be able to do it. But we really just want you to be able to keep this business afloat.If you do have to undercut your prices to be able to just at least cover and then supplement that with something like one of the loans from the SBA and that’s what you’re going to need to do. There really is just kind of a lot of bad timing in a lot of these things.
Julian Sage: 10:48 A lot of hosts have been trying to scale, coming in recently and really kind of expecting like all of us, a real nice boom in the summer, the spring, starting from around March is typically when you can kind of see that nice traction. But what we’ve been seeing is a lot of hosts that were getting in a little bit before then or just getting in right before and expecting that nice push. And then just being in a situation. One of the things like with Sonder and a lot of these larger companies is that they have just been scaling, scaling, scaling, and with an arbitrage master lease model, you know, you’re either putting away your reserves or you are scaling the business and just depending on where you were, depending on where you started can really make an impact.
Julian Sage: 11:34 So we definitely feel for a lot of the hosts that have been reaching out for us and we wish that we could help everybody personally. But if you are just looking for some different ways to be able to maybe exit listing your business on STR broker, even even reaching out to us for some consulting or just sending a message in host nation Facebook group with your situation. Just being open and communicating with us is the best steps that you can be doing. But question the day, where are you with your business? How are you right now? Leave your comments in the comment section down below and then in the next episode, we are going to be talking about rental arbitrage versus co-hosting moving forward in 2020 and beyond. And if this is still going to be a sustainable business, which ones are we going to be doing moving forward?
Julian Sage: 12:22 And until next time, host nation. Keep on hosting. If you’d like Jon and I to answer your guys’ questions and be sure to go to the host station, Facebook group and use #askVRM. Hope you hosts found value in this episode. If you did, please go on over to iTunes and leave us a review as that would greatly support the show. If you’d like to connect with Jon, the community, and I then go on over to our Facebook group, the host nation, talk to you host the next episode, keep on hosting.
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