When we first left our 9-5’s to get into real estate, we knew investing was part of the plan. That’s why we began renovating properties the first year we got into the business!
While our first and primary focus is serving our buyers and sellers in their own real estate transactions, it’s important to us to expand our own investment portfolio in our native Phoenix, AZ. That’s why, when the chance came to pivot a remodel project into a short-term rental, we were thrilled! After three months of owning and operating this Airbnb property, we’re ready to dish on what we’ve learned.
In this post, I want to share why we made the decision to invest in this way, how it’s been to rent it out, tips for running an awesome rental property, and why we’ve loved it so far.
Our journey into running an Airbnb started almost by accident. We’d already decided that it was something we wanted to do. The numbers convinced us:
Maricopa County is one of the most profitable counties in the country for Airbnb rentals. Thanks to our relatively affordable home values, and and massive tourist population in certain months (thank you, Spring Training and car shows!), we’ve even heard of some properties that can cover their annual overhead costs in the space of 8 weeks in the spring.
And, while some neighborhoods are better suited for vacation rentals than others, all Arizona municipalities must allow short-term rentals. The state passed a law in 2017 affirming that no restrictions can be made on these properties (with the exception of those imposed by HOA’s) as they aren’t classified as hotels.
Arizona is a great place to invest in short-term rentals, and we were open to the right opportunity.
Fast-forward to last year, our last remodel was hitting the market. We knew this would be our last project for a while as the market shifts here in Phoenix, and it was one of our finest products to date.
We listed in the fourth quarter of 2018 and saw a lot of interest, and accepted an offer. Due to the buyer’s circ*mstances, that deal fell through, and we were left with a decision: put it back on the market through the holidays, or hang on to it until the busy touristy season of Q1 in Phoenix? Ultimately, we decided to try our hand at turning it into an Airbnb and had a target “live” date of March 1st, 2019.
Getting the property up and running was a feat in and of itself. Getting the entire home ready for someone to rent it out short term took a lot of thought. Because Airbnb can be unpredictable - we could have gotten a booking for 3 nights or 30 days - we needed the home to have everything someone might need for comfort and convenience.
During January and February, Bryce made more online orders than we ever have! Amazon and Overstock became our best friends. If you want a pretty exhaustive list of items that every Airbnb needs, let me know in the comments and I can send that out.
At one point, we had an Amazon van come to our house full of over 20 boxes. It was a crazy time! Then, of course, everything had to be taken over to the property, unpacked, cleaned, washed, and placed in the right spaces.
Because this was a whole home, we needed multiple seating areas, full dining, a complete kitchen set up, washer/dryer services, and full bed sets in three bedrooms. Not to mention linens, bedding, towels, and extras of everything “just in case!”. You need multiples of everything to be able to flip the space quickly for the next guests.
When it came to renting it out, we knew we had a couple of options. We could do it all ourselves, between managing bookings, communicating with guests, then cleaning the home and preparing for the next stay. Or, we could hire a management company to take care of it all, for a cut of the profit as payment.
In the end, we wanted to manage it ourselves. Bryce has taken care of 100% of the bookings, communicating with guests, and coordinating cleaners to come by the property and deal with cleaning, laundry, etc. He’s been able to ensure 5-star service for all of our guests so far, making their booking experience as pleasant as possible.
This option gives us the highest profit margin while also giving us peace of mind that things are getting done the way we’d like. However, in the future, I could see us diverting to a more full-service management company, as this does take a lot of time and effort from Bryce. During peak booking months like March and April, Bryce was logging in to Airbnb every day, responding to inquires and answering questions. He had a spreadsheet with all arrivals and departures, when he’d need to schedule cleaners to flip the home, and he’s the point person for any of our guests.
I think that a lot of people overestimate how profitable short-term rentals (or any type of property investing) can be on average. When we were looking at this opportunity, we loved the chance to own a piece of property and earn income on it, even if that meant just breaking even some months. Because that means we get to hold an appreciating asset (real estate) while serving a need that’s currently in high demand.
We understood that the summer months in Phoenix would be our least profitable, as visitors and natives to the area try to stay away from the extreme heat. So, while we did see wonderful profits during March and April, thanks to Spring Training and other seasonal activities, we planned to put all that profit back into the property in case we had slow summer bookings. We still expect the bulk of our rental income to occur during January-April, but we will see how that goes in 2020!
With how beautifully designed the home is, and having professional photography in our Airbnb listing to show it off, along with our 5 star reviews, we’ve been lucky to see 90-95% occupancy rates in the last 3 months.
While we were prepared for out-of-town-guests to book our property, we didn’t anticipate the booking needs of our local residents! We’ve had two long-term bookings from local residents who needed a comfortable place to stay while their own homes were getting remodeled. This makes location even more important - our property is in one of the highest sought-after corridors in town, making it desirable for locals, too!
Be Prepared and Set a Timeline
If you don’t have a property yet, hire a real estate agent (like us!). As they say, you make your money on the purchase, meaning you have to get a great deal on the RIGHT home if you plan on being profitable. A real estate agent can help you find a the right sized home for your budget, in the best location, and negotiate a killer deal to set you up for success.
Then, give yourself a goal go-live date. Leave plenty of time to allow yourself to fully prepare the home for guests, but not too much time. Work will expand to fill the time you leave yourself, so setting a deadline will ensure you don’t dilly dally while getting the property functional.
Go a Step Further
Don’t ask yourself how “cheap” you can pull this thing off. Instead, ask yourself how you can create a memorable experience for guests. We put a lot of thought into the furniture we purchased, the art on the walls, and the comforts we provide to guests. This helps our guests save money and have an easy and enjoyable stay, earning us great ratings and good juju. ;)
Communication is HUGE
Just like in our real estate business, Bryce takes his job of communicating with guests VERY seriously. Inquiries should be responded to promptly and thoroughly. To help him out, we created a few templated messages that can be sent for new booking inquires, to guests upon arrival, and what to know before their departure. By making our guests feel heard and understood, while making expectations very clear and easy to understand, we’ve made the booking process more enjoyable for everyone involved.
Stand Out Online
There are a lot of listings out there on vacation rental sites, and you need to stand out! We spent a lot of time writing an exciting description for the property, and hired a photographer to take professional photos to make sure it stood out from the rest (best $150 spent!). If the home doesn’t look good online, it won’t be a tempting offer for prospective guests. We also were sure to position ourselves as an authority in the area through the details in the listing, by letting guests know that we are located close to the home (just in case!) and know all the best spots to recommend.
Are you interested in investing in a short-term rental property in Arizona? Contact us and we can show you how it’s done!
