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[00:00:00.170] – Jordan
People really want that fresh feel. It’s going to pop in the pictures. So in general, as much as you can afford to, you want to fix everything up so that it’s nice and new and shiny and it really does make a big difference. So don’t cheap out here. We have worked with people who have tried to save money and do it themselves and drag it along and it just comes back to bite you 100%.
[00:00:22.050] – Intro
Welcome to the Michigan Short Term Rentals Podcast, the show about buying, optimizing, and managing short term rentals in the state of Michigan. Get insights and recommendations from vacation rental operators to help take your property to the next level. Are you ready to profit from your short term rental? Let’s get started.
[00:00:43.710] – Tony
Welcome to the Michigan Short Term Rentals Podcast. My name is Tony Stancato. I’m here with my co host Jordan Painter. What’s up, Jordan?
[00:00:51.510] – Jordan
What’s up?
[00:00:52.560] – Tony
How’s it going? Getting here. Got any big plans coming up over the next week? I think right now what is his 20th, 19th?
[00:01:01.120] – Jordan
Nothing big. I’m just excited to unplug a little bit. I’m going to try to close down the office as much as I can this week and just work remotely a little bit and mostly not work at all hopefully, so we’ll see.
[00:01:10.920] – Tony
That sounds like a pretty good plan. Unfortunately, on the upside, going to have some guests and we’re pretty booked up for the Christmas season, so we’ll definitely need to be plugged in and ready for any conversations with the guests that might arise. But other than that, doing a little bit of traveling over the holiday season too. So going with Gary down to Savannah and St. Augustine. So staying at a pretty cool airbnb and I think Gary and I are going to do a podcast at the Airbnb. So I think we’ll just kind of maybe do a review of the airbnb while we’re there, so that will be good. Other than that, what’s the topic for today?
[00:01:52.850] – Jordan
Today we are going to be talking about what does it cost to get into the short term rental business, how much is it going to cost to purchase furnish and get one up and running?
[00:02:02.790] – Tony
Sounds good. Let’s get into it.
[00:02:04.900] – Jordan
For starters, you’ve got to really get paired up. We’ve talked about this in the past, but got to get paired up with a lender up front. When you’re going to be getting into the business, you really want to know what are your costs going to be to purchase, what are your financing options. There’s so many different options, it’s hard to even get into it as a part of a podcast. It could be a whole one in itself. But basically you’re going to be looking at are you going to be getting a residential loan, are you going to get a commercial loan, and what are the down payments associated with that? So you’re going to be looking at typically if it’s going to be a second home or a vacation rental. Minimum 10% to 20% down for startup. We’re going to be basing all of our numbers today on a $400,000 purchase price for a four bedroom, two bathroom home with one kitchen, just to kind of give you a picture of what the cost is going to be for that. So first one is going to be down payment, closing costs. Together, you’re going to be looking at six to $8,000 closing costs, ten to 20% down payment.
[00:02:57.920] – Jordan
So you’re in that $80 to $90,000 range doing a 20% down, conventional mortgage.
[00:03:04.210] – Tony
And you can do the second home loan with the intentions of doing a short term rental. I know before I was like, I wasn’t so sure if I could do a second home loan 100%. But we talked to Bankrupt, our first short term rental, and he said it’s totally fine. You can definitely do that 10%. In this example, you’re going to be looking at that $40 to $80,000 mark for a four bed, two bath at $400,000. And then the rehab. I think we were just talking before we started that every property that we’ve either bought or clients have bought, even if it looks really good in the listing and on the walk through, every time, there’s going to be something that’s going to need to be done. Or at least historically, there’s always been something that has to happen. A lot of times there is going to be some refresh in the paint. So we said minimum plan on $5,000 for rehab. And again, that’s just going to be the kind of bare basics paint, maybe a little bit of flooring, some fixing. A lot of times, you know, maybe you need a rail here or there based on the code.
[00:04:13.740] – Tony
Anything else on rehab?
[00:04:15.270] – Jordan
Here’s what I’ll say with that. And this is kind of the conversation that we have when we’re going through these properties. If you have to ask yourself, should we replace this floor? Should we paint this? Should we update this bathroom? The answer is almost definitely yes. Just get it done, fix it up, make it nice. People are not going on vacation to live in your 90s or 80s or 70s carpet that’s been there forever with the wallpaper on the wall and just the dirty old feeling. People really want that fresh feel. It’s going to pop in the pictures. So in general, as much as you can afford to, you want to fix everything up so that it’s nice and new and shiny and it really does make a big difference. So don’t cheap out here. We have worked with people who have tried to save money and do it themselves and drag it along and it just comes back to bite you 100%.
[00:05:05.600] – Tony
I agree. And then amenities. So every property has to have some type of amenities. You definitely want to make sure that you have some level of fun I know we talk about that. It seems like every other podcast, but you definitely want to plan on purchasing some type of amenity for your property, some fun. Again, I think I referenced a list of $1,000 worth of amenities and I think it was like 15 items on that list. That could really go a long way. But if you’re planning on putting the hot tub in, all of our properties currently have hot tubs. I think we’re planning on installing hot tubs at all of our future properties, even though I would like to try to get away from it. I think as it stands, we are planning on putting one in every property. So what do we have for the cost of the amenities going into these properties?
[00:05:59.930] – Jordan
We did a great podcast a while back about the less expensive amenities that you could do for $100,000. We’ve also done some about some more of the expensive amenities. So if you’re talking about getting a hot tub, you’re talking about those ancillary things you don’t think about, well, you got to have a pad for it. You got to run electric, you got to do all these other things. So we’ve kind of seen to get really good amenities. It’s that ten to 15,000 range is the starting point. We have one of our clients we’re working with that decided not to put a hot tub in and they’ve had solid bookings, but they’re not getting as much revenue on those bookings as we are on other properties that have them. So we’re pretty confident at this point that it is actually increasing our revenue to have one and we do think it’s a good investment to do that. So Tony is really bullish still on the pickleball courts, so we’ll see if we can test that theory out at some point. But you can certainly go a lot above the 10,000 15,000. But that is kind of that baseline of really having something to separate yourself from the competition.
[00:06:58.290] – Tony
I mean, I did turn on the TV to watch the Lions game this last weekend and there it was, pickleball on national television. So I’m telling you, pickleball is definitely something that we got to get rolling in one of our properties. But yeah, for the hot tub. Again, like Jordan said, there’s a lot of extra things that go into having a hot tub minimum. I just had some conversations with our hot tub company, I think last week or the week before. Basically the cheapest hot tub that you can get is going to be around the $5,000 mark. That’s going to be a four seater. I think we actually got some gently used ones from the hot tub company. They rent them out for a season and then they got turned in. So there is one season of rental and we bought two six cedars for $5,000. But if you’re going to get a brand new one and that’s all they have in stock, a four person hot tub is going to be $5,000. And then again, you got to get the pad. Or you can do like crushed concrete. But that’s all stuff that if you’re not going to do it, somebody else has to go and install it.
[00:08:00.910] – Tony
So I think on the lower end for the pad, it’s going to be called $800 to $1,000. If you’re going to do like poured concrete, it’s cost us $2,000 in the past. And then in terms of electrical, historically, it’s cost us about $2,000 to run electrical. So just right there, if you say I’m going to have a hot tub, 5000 plus 2000 plus 2000. So you’re at $9,000 just for the hot tub. So that just gives you a little insight on what it’s going to cost to actually get one there. So if you do find a property that has a hot tub like we did on our first one, that’s definitely a good thing right there. Save you a lot of money.
[00:08:35.700] – Jordan
Yeah. Shout out to Sensational Spas in Stevensville, Michigan. They have been amazing to work with. We purchased all of our spas there and they service them. They’re great about turning them over quick and making sure that they’re offering our guests a great experience with a clean hot tub.
[00:08:50.790] – Tony
Shout out to them.
[00:08:51.520] – Jordan
Done a ton of business with them in the past and definitely going to continue to here in the future.
[00:08:55.520] – Tony
Absolutely.
[00:08:56.650] – Jordan
Furnishings another area where I’m going to shout Tony out here. He’s just a wizard at figuring stuff out and putting stuff together. So he’s done a great job. On our website, michigan Shortterm rentals.com. Check it out. There’s a furnishing calculator and you can put in there. Number of bedrooms, bathrooms, number of kitchens. Gets pretty specific. I always like to say down to the spoon how much it’s going to cost you to furnish these places. It’s very detailed. Links to Amazon. Super easy. Now you’re going to find a system that makes it easier. So when you put that into the calculator, what do you come up with?
[00:09:28.010] – Tony
Tony yeah, so four bed, two bath, one living room. It comes up with $17,225. Now this doesn’t include any of the amenities like your grill, outside yard games, outdoor dining set, that kind of stuff. So this is just the stuff to furnish out the interior. And it’s $17,225 now. We kind of made it so that if you’re going to go over to Amazon and buy all these things brand new, this is what it’s going to cost you. So if you have time to go look on Facebook. And we’ve done this in the past. Jordan myself actually went to our first one. He went with the U Haul. He found all this stuff in Grand Rapids. I went with the U Haul. All this stuff we found in Calendar Zoo. But I mean, we traded a lot of time for that. It probably ended up costing in terms of the value of our time, cost way more than what the $17,000 is. So we probably put $10,000, $15,000 in time to save a couple of bucks. So if you have time and go on Facebook, get a better deal. But this is just going to give you the baseline of if you were to buy all this stuff off Amazon, how much it would cost.
[00:10:32.990] – Tony
Yeah.
[00:10:33.230] – Jordan
And on that note, you’re constrained to a budget, right? So you only have so much money. It’s a finite resource. And so if you’re looking to get into the short term rental game, this is definitely one of the areas where there is some flexibility. If you want to spend your time and your weekends going on Facebook, marketplace and garage sales and all those types of things, you can save a ton of money, especially if this is something that you’re really set on doing. Let’s say you’re six to twelve months out. Start buying stuff now. Start finding stuff that will work. As long as you have a nice dry place to store it. It could be a good way to save 10,000 $15,000 on furnishing, your first one. So definitely some room to get creative on that expense.
[00:11:14.090] – Tony
Absolutely. And then the last expense is going to be one of the more cost effective ones. But marketing. So do not, and I think we’ve already mentioned this plenty of times before, but do not take the pictures yourself unless you are a professional photographer with professional photographer equipment. So you’re going to have to hire this out. It is relatively affordable and again, you can make 15% more by having professional photos in there. So this is definitely not the thing that you’re going to cheap out on, but call it the photo package. Marketing, again, one of the things that we haven’t done, but someone keeps telling me that I have to do it and he’s kind of the go of the industry is you want to get a floor plan for every house as well. So kind of with the pictures, the floor plan you want to have the Twilight pictures. I mean, those look really cool. The drones, you’re going to spend anywhere from $500 to $1,000 for that package. So I guess we’d recommend that you do all of them, right? Drone, Twilight, the interior photos and kind of your basic photo package and then your floor plan layout.
[00:12:20.240] – Jordan
Yeah, for the most part. I think the one thing to consider with the drone is if you have a property that is worth doing the drone for, if you got neighbors everywhere and it’s not going to be a selling point necessarily, that might be a little bit overkill, but yeah, I would definitely say in most cases go all out. Do all of them. Definitely. We really need to get the floor plan done on the properties that we currently have and certainly anything that we bring on in the future is going to have that. Just so that people we’ve mentioned in previous podcasts as well. One of the biggest factors for getting good reviews is setting expectations. So if people know what the layout is, the design, everything’s photographed well, and they know what they’re signing up for, there’s going to be fewer surprises and fewer complaints once they get there. So I do think that’s where the floor plan can be helpful for people that are looking at booking a place and making sure they know what they’re going to get once they arrive. They can be pretty hard to tell in the pictures without the floor plan.
[00:13:11.540] – Jordan
So definitely something good to add.
[00:13:13.540] – Tony
Absolutely. What’s that leave us with? For a total call it range or maximum out of pocket on this $400,000 place.
[00:13:22.030] – Jordan
If you really max out everything, it’s going to be in that one hundred and forty dollars to one hundred and fifty thousand dollars range on a $400,000 house. If you do the 10% down and save some costs, you’re handy, you can do some of the rehab costs yourself and you spend a lot more time hands on. You can do it for cheaper. Our first one Tony mentioned, we did all the garage sale ourselves. We were there. There’s a pretty epic picture of us about two and a half minutes before our first guests checked out, trying to scramble and get off the front porch. So we were able to complete that project for somewhere around $60 to $80,000. Doing a lot of work ourselves. So really how much time and effort you’re willing to put into it can determine the all in cost. But you also don’t forget to value your time because it took a lot of time to do that.
[00:14:05.150] – Tony
Yeah, we were 380 on that one and we were about to call it 70 grand all in. I think we paid up paint or six grand to come in, paint most of the place for us. We painted quite a few rooms ourselves. Probably still needs some touch up paint here and there, but yeah, I think furnishing we did for about ten grand. But I mean, we got lucky because you stopped at that one. I don’t remember where it was, maybe Grand Haven, but you said the lady was like, here, take my TV as you’re leaving. Right. We got like $1,500. We got brand new furniture set. I mean, they gave us like two or three beds that were pretty much brand new and a nice sectional sofa that was probably $2,500 brand new, at least.
[00:14:48.000] – Jordan
Yeah, the leather chairs, we hit the jackpot. My wife really hit the jackpot with that one. Valerie searched around everywhere and we found this couple that they’ve been in their house barely a year and ended up getting relocated and they decided to sell everything. And I’m always a little salty about it because I always joke around. The furniture in our rental is nicer than the furniture in my house, and we pay substantially less for it. So it’s really nice furniture. So if you hustle and you get after it, you never know what kind of deals you’re going to come up with.
[00:15:14.820] – Tony
But again, there is a trade off. And part of the trade off was you breaking down in a U Haul and then having to get another U Haul to meet you on the side of the road so that you and Val can transfer all the furniture from one U Haul to the next U Haul so that we could get it over to the property. So those are the types of things and obviously took a lot of time and effort to do that.
[00:15:36.990] – Jordan
That was a rough experience. Matter of fact, we should probably at some point do a podcast just on our first one because there are stories there.
[00:15:44.510] – Tony
Yeah, definitely. Anything else on overall cost of purchasing a short term rental? And again, this is at $400,000. So if you were to get a 200,000, I think you could probably get in maybe that 70,000 like we did, maybe a little bit less. But again, $200,000 houses, I mean, we got in 2021 and you could still get some decent prices. $200,000 houses, at least in the areas that were doing it, even some of the ones where you’re like, there’s got to be some affordable houses in that area. Everything is over $200, so it’s really tough to get anything under $200,000 price point these days. It is.
[00:16:24.010] – Jordan
And there’s always a trade off too. The less you pay for a house, the more work you’re going to end up having to put into it to get it to the level that you need it to be. So there’s definitely trade offs and it’s good to be able to evaluate each deal separately. A lot of opportunities out there. I think the biggest thing I would recommend is just make sure that you don’t skimp out. You just can’t skimp out in this business. If you’re going to be successful, you really have got to do these things well.
[00:16:47.380] – Tony
Absolutely. If you get a chance, head over to the podcast player of your choice and leave us a review. Really appreciate all those that have taken the time. I think we have the eleven five star reviews over on the Apple podcast. We do have a goal for 2023 to have 50, so would love for a couple of extra people to head over there and leave us a review. And if you’re not part of the Michigan Short Term Rentals.com email list, head over to Michigan Shortterm Rentals.com. Jump on the email list, you’re going to get a four part email series, 650 zip codes that we’ve already analyzed and put projected revenue to different properties there. You’ll get that, you’ll get a Furnishing calculator. You’ll get our property grading tool. So if you want to look at properties the way that we look at properties and give them an actual letter grade A through F. Put in the criteria there. It’ll tell you, hey, this is a letter grade B, or a letter grade C. All our properties are letter grade B. So if you find something that actually falls below the letter grade B, you really might want to second guess whether that’s going to be a good property for you.
[00:17:55.300] – Tony
So go ahead and jump on that email list, and until next time.
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