Episode #19 : Where to Make the Most Money with Airbnb

 
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Short term rentals have become even bigger players in the real estate investment world with the rise of platforms like Airbnb and VRBO. These flexible properties can bring in a lot of extra income, especially if you own properties in a popular vacation destination. There’s an art to making good money with your short term rental, and today we have an expert here with us to explain where and how you can make the most of your Airbnb.

Carissa Vivirito brings over 17 years of real estate and digital marketing experience to her business. Her deep love for empowering people, proven marketing expertise, and hands-on personal experience as a buyer, seller, investor, landlord, interior designer, and general contractor make her an expert in the short-term rental space.

Carissa and I talk about why short term rentals have become such a popular investment and vacation option and what to look for when you want to buy one. We discuss marketing and making your listing stand out, managing the property, and how to protect yourself and your assets.

Carissa shares tons of practical, actionable advice with us today - and even though she is based in Arizona, a lot of her recommendations could be applied to any short term rental.

This is the first episode in a miniseries about Short Term Rentals here on the Richer Geek, so be sure to tune in next week for our next installment!

In this episode, we’re discussing…

  • Different strategies for investing in short term or vacation rentals.

  • What to look for when you want to buy a short term rental property for your investment portfolio.

  • How to market your Airbnb so it stands out.

  • Ways to protect your investment and assets with legal documents and clear communication.

  • How to increase the income you’re getting from your short term rental.

Carissa’s Top Tips:

  • Figure out what kind of property is in demand in your area - will short term guests want a pool? Multiple bedrooms? Decide what amenities are important and be ready to make some tweaks to your property.

  • Be sure to protect your investment – work with a lawyer to set up your property as an LLC and ensure guests will abide by your terms and conditions for the property. And make sure you have the right insurance!

  • First impressions are important - invest in high quality, professional photography to best showcase your property online. If you want to work with an interior designer or have an Instagram-friendly theme for your property, these can be great selling points, too!

Resources:

 

+ Read the transcript

Welcome back to the Richer Geek Podcast. A quick announcement we have opened up a 506c offering for accredited investors who want a safe and secure way to diversify outside of the stock market. You can check out the details specifically for this at the richer geek.com forward slash invest. Now diving into today's episode. This is kicking off our four part miniseries around short term rentals. As a side note, I am guilty of sometimes saying Airbnb when I really mean short term rentals. You know Airbnb, it's almost like the Kleenex version of saying short term rentals. It shouldn't be Kleenex it should be tissue. Same thing here. As you know Airbnb is just the platform. You could use VRBO booking, com any number of sites all in conjunction with each other or exclusive to each other for your short term rental. Now, that's just a little side note there. For today's episode, I invited a real estate agent who has expertise in short term rentals here in Scottsdale, Arizona. Now normally, I would not be so location specific, because I have listeners all over the country. But I felt like for this mini series, it really does make sense to feature this local market and this agent. Why? Well, you'll learn more as we go into the episode. Clarissa vivre Ito is a realtor in Scottsdale, Arizona and she created her real estate company after 15 years in the digital media space. Chris's company is called evolve. And she created this brand really to reflect how she experiences real estate which is from the heart, as Chris shares with her community, which would be her clients, the partners that she works with and people that she interacts with on a daily basis evolve is a lifestyle brand that invites people call to work with her company that are driven to be involved in something bigger. Welcome to the show, Clarissa

Let's go ahead and jump right in. If you can share a little bit about I know I mentioned that you have the experience in digital media, but share more about your background and how you came to create evolve.

Sure, so like you said, I went to college for graphic design and photography, and I ended up working in advertising, namely digital media, for... it was more than 15 years, it was probably about 16 years, building websites, doing digital marketing campaigns, social media campaigns, search engine optimization, all that digital marketing stuff for other clients. So in the capacity where I was at an ad agency, and we had multiple client, while I really loved strategy, and managing and working with teams, and all the skills that I learned in that field, it never really truly fulfilled me from a deep passion sense. Now, at the same time, from the beginning of my career, I was investing in real estate. It's almost like I worked much less like like, I think a lot of your listeners do worked a full time job to fuel what was my passion, which was real estate. And by doing that I amassed a number of long term rental over the years, where after 1516 years in an industry that I had, that was just worn out and tired of it and burnt out. I took about a year and a half off of nowhere. And the way that I was able to do that is because of the passive income and wealth management that I had built myself through my real estate portfolio. After that year and a half of traveling and soul searching and all those things. I realized, well, why don't I just do this thing I'm passionate about and bring all of the skill set from my marketing career to it. And I did, I worked for about a year and a half as an agent, and eventually realized I wanted to create my own brand. And build a team and hence evolve was created with as you so articulately explained, it is me it's a representation of who I am. But it's bigger than me. And it doesn't have to be limited by me.

Fantastic. Thank you for taking us through that journey. And I met and in the beginning that I was introduced to you through our investor meetup and that you really have a tremendous amount of knowledge and background and understanding of the short term rental market, specifically in the Scottsdale Arizona area. And I would love to really follow what you have presented in that. In that meetup, which started with you provided some of the historical trends and background in just vacation and short term rental in general, could you take us through those and what's kind of led to this build up that we see now?

Sure. So the Airbnbs and VRBOs of the world started to they've been around for a while, but they really started to gain momentum, around the same time that we started seeing the Uber's of the world and the lifts and the Postmates. And the the crowdsourcing, if you will, of industries that used to be so driven by a company so instead of a taxi, cab and employees taxi cab driver company, you know, have Uber where people anywhere with a car can be part of that workforce. So around the same time that that happened is when you saw a large uptick from people realizing they had extra space in their home. And either they could rent it out to help cover their mortgage, as a room share type situation, or rent out a whole property to families or travelers as a legitimate full time business to generate more income than you could on a long term rental from the properties. So the combination of the technology and the marketing awareness behind it, along with market demand of people wanting them more options than just staying at the, you know, lucky, or the resort, the Four Seasons or whatever, that they want more of a different experience when they travel, and namely in our market. And the whole state of Arizona specifically Scottsdale like you've mentioned, in 2016, a law was passed at the state and the city level banning any restrictions on short term rentals. There are other cities that are the exact opposite. Like I think, I think New Orleans is pretty strict. I think New York City is pretty strict. There's a handful of large vacation markets that limit that you can't rent for short term. So those who do are really getting premiums, and technically breaking the law and saying the risk is worth it. But this market here in Arizona is really primed to make more money because it's totally legal. So we've really seen I've personally seen a quick rise in the last three years. So since that happened since in 2016, out through 2019 of people wanting to get into that market and buy properties solely for the interest of short term renting them. Whether it's a condo or a full family home with a pool, it really is has been on a rapid trajectory of growth. Because it's such a small portion of the market share is even dominated by those yet there's tons of growth still to be had.
That's such a great background. And it's interesting to after the 2016. If after those laws were passed, it just took all the uncertainty out of it. Because I remember being on investor forums and seeing people saying, whoa, be careful. And you don't know what you know what laws are going to be passed and what's going to happen and having that be a statewide. Now I know that kind of leads into and you have shared before some of the most profitable places to own a short term rental across the US. I know that's part of the reason why but also could you share what some of those areas are, and other reasons why they're the most profitable.

So two of the top 10 are in Arizona, Scottsdale is number one and two songs number 10. Primarily, it's because it's a very legally friendly area and state to invest in secondary Scottsdale in particular in the Phoenix metro area has always been behind travel and tourism. Scottsdale is a mecca for resorts and spas and plastic surgery and shopping and all these things that people come from all over the world to visit, especially the climate being beautiful, about seven, eight months of the year. So the legal the history of it being a vacation area, the legalities around protecting the investment. And generally speaking, when compared to other markets, it's a very cheap market to buy in the fact that you can buy a single family home totally remodeled with the pool for under half a million in Old Town Scottsdale. You can't do that in some of those other top markets. So I'm looking at the chart now. And some of the other top markets are number two is Orlando, followed by New Orleans, which is surprising because I know they have more strict laws, Miami, Santa Monica, Santa Ana, Honolulu, all these places that I'm naming properties far more expensive, other than maybe maybe New Orleans, but I don't know what you're going to get for less than half a million in Honolulu, or Miami, you're not getting a single family house, that's for sure. Not to mention Arizona as a state has extremely low taxes for property taxes. So it's very beneficial from a number of reasons from an investment standpoint, and a market share return on your investment standpoint.

That's such a great point. And I think it's interesting too, that Scott steals number one and two sons number 10. I mean, they're both they're in there. But it's kind of surprising. But you're right Tucson is doesn't have quite the draw that the Scottsdale market does just from a pure density of all of those amenities that you talked about.

Right now. The boom time of year in the Phoenix metro for everyone who isn't local here is q1. So we have the it's the big golf event knowledge, the waste management open, it was the Phoenix Open, which they say is like the biggest party on the green. There's golf, but mostly just people showing up and partying. But that draws a ton of people to town and late January, which then kicks off the cactus League of spring training. And there's I think nine teams that train out here and have spring training games that draws tons of people from all over the US around the world for that part of the year. So a lot of these vacation homes, they make 70% of their income in q1. It's just a huge room, it's almost similar to if you're in retail, like the holidays, right? It's when you make all your money for the whole year is during that q1 that first quarter.

It's interesting on the timing too. So if you're looking to buy a property, do want to be cognizant of that, and make sure that you're prepared so you can take advantage of it. Now in your events. And one of the things that you do with your company is you have events that are focused on different areas is of the real estate market. And they happen every other month here locally. But recently, you had one where you moderated a panel with three different Airbnb owners. Can you share a short profile of those three examples that you walk through?

Sure. So we had, like you said, three host owners of Airbnb properties. The first is actually my teammate, one of the agents on our team also named Nicole, she purchased a home that had a finished converted one car garage, into a studio apartment, I think it was used as an in law suite or something. And she converted it to a studio, Airbnb. And that studio brings in just over 30,000 a year. That's one example. The next example are clients of mine, a husband and wife who purchased two homes on one lot of small front home and then a student like a studio cabana in the back. And the husband's very handy. So he's been remodeling everything himself, you know, to the front house, I think it went live early February this year. And they're on track for just the front house alone to do over 50,000. And I believe the back house is going to be ready to go any day. So with both of those up and running all year with a full year, they'll easily surpass 75,000 a year. And to give you an example of where the purchase prices for some of these things, in Nicole's case, it was part of her home. So it's really just not only offsetting mortgage, but making more money. The price point I think on the two homes on one lot was I want to say it was right under 250 ish. And they've put work into it, obviously, but just to give people examples of price points. And then the third guests we had is a friend of ours who owns three single family homes with pools in the Old Town, South Scottsdale area. And they're all three bedroom, two bath. So they sleep between 10 and 12 people. And she rents them out making anywhere from I think it's between 65 and 85,000 a year. And it kind of depends on all the amenities and how close she is old town and how much she can get per night. But she's been so into it that every time she gets a new one, she socks away the profits from that one. So then invest in buy a new one. And her goal is to stop working full time and only manage properties and purchase more of her own. Because she enjoys it so much.

I love the diversity in those three folks that you talked about. And they have kind of a different approach and a different style. My favorite one is just the the converted garage. You know, I love that I just I don't have any space for that. But I would love to be able to do that. Because then you know, I also could have my in laws stay right there when they're visiting. Right? Kind of like a double bonus.

You'll give them a discount rate.

Exactly. Exactly. So, you help a lot of people look for short term rentals in the Scottsdale area and you have a really good handle on things to avoid and what to look for take us through what are the advice that you give people when they're looking to purchase a property here in Scottsdale? Sure.

So the number one thing is for them to decide what type of property they want to get. It's much like long term rentals, it's usually better to buy a home or some sort of property that's not within an HOA. The reason for that is h ways as many of your investors may know they're kind of their rogue, they kind of can make up their own laws and limitations at any time. Obviously, they need ownership, approval of those things. But the risk is even if you buy somewhere that allows short term rentals. Now, they may not always allow them an HOA is have jurisdiction to override those state and city laws that we talked about. However, if there is a good portion of short term rentals in a community when you are buying odds are you're fine because the owners aren't going to pass laws that hurt themselves. But generally speaking, steer clear of always, unless you really want to get your foot wet and start at a lower price point, then go ahead and risk it and get in one that does have other short term rentals as a starter. And potentially your second or third property is a single family home. And none of these matters. So if you have a pool, if you're looking either in a community with the pool or single family homes, a pool means especially in the the summer months here in Arizona or the hotter months, it means it's going to rent more often you're going to have higher occupancy rates than those without pools. And you can add in heaters to the pool. And then in the winter months when it's too chilly. Surprisingly, in Arizona, it does get cold at night and the water is cold, you can still rent and use that added amenity of the pool because they can heat it. And Kelsey The one who owns three single family homes, she has pools and all and she has a heater. And what she does is if people want to use the heater they pay for that. So she doesn't pay to keep it heated all the time, is they will want that it's an upgrade of whatever, you know, 30 bucks a day or something that offsets her bills, and is an added benefit. So it she she hasn't booked more often. And then I always tell people to run. I'm sure I'm sure all your investors do this anyway. But to run a performance analysis to run based on that purchase price work with a partner who either works in vacation management rentals, or has access to that data. What can you expect for a nightly average rental rate? And what occupancy or vacancy? can you expect? And how does that look from a total cash flow perspective, people doing short term rentals, they really want updated properties. So find something that's updated or budget to update it. There are a lot of options. So you do want to stand out and being an outdated property usually doesn't cut it for people.

You mentioned running the pro forma. Looking at the numbers. That's something that you help with, isn't it?

Yes, I can't help with that. I have partners both on the lending side and in the short term property management side that can help pull very accurate data for those and we are conservative when we estimate. For example, those three hosts that I mentioned, they all have between 85 and 99%, occupancy or bookings all year. And when we run these pro forma, we usually run the average percent of booked for the whole market, which is closer to like 65 70%. But you see, it all comes down to how attractive your property is how good you are at marketing it, how on top of it, you are as a business, right that you can move that needle and it means 15 $20,000 more a year. Again, from a estimating standpoint, I like to be on the conservative side. So really, it's only up from there. If the numbers work on a conservative level, there's things you can do once you own it to move the needle and increase that profitability.

You mentioned and the marketing side of things. What is it that an owner obviously, there's a rating system, and that's really important. But what else is an owner property owner trying to do to market?

Sure. So I'd like to talk about the distinction between self managed and outsourced. So some owners are more hands on all the ones that I talked about as our client examples or friend examples. They are all self managed, meaning they run everything from the marketing, managing the profiles, make sure the places cleaned and turned over and the decor, photography, everything. If you outsource the management, you can outsource everything or portions of it. And vacation management companies will usually offer a range of those, whether you just want some operational support, or you just want it all handled, but regardless of who's managing it, you are correct. There is the response time and the ratings and the reviews on the sites like the rvO and Airbnb. But other ways to market it, you can go you could have your own website for the product, you could have social media profiles, I've seen where people have in store the or really cool photogenic things about the property, they may pick a theme of, I'm just going to throw out an example like the green turtle. Okay, so the property might be called the green turtle. And there's all these cute turtles everywhere. And green is part of the decor. And maybe there's a mural in the back that has really funky green colors and a turtle and we encourage people to take pictures with that. And then they posted on Instagram with the hashtag for your property, hashtag the green turtle, or whatever it is that you create. And all of that helps from a branding and marketing standpoint to drive visibility. You have more bookings, you can increase the price because there's a premium for people who want to stay at the green turtle. I mean it, it's whatever you want to make it and any marketing from any other industry applies. It's just how do you make it your own for your rental, your short term rental properties?

And you mentioned what I like is you talked about marketing and how that creating a brand can enable you to charge a premium. You also talked about one of your the panelists who mentioned having a heater for the pool, what are some other ways that you see people are able to increase the income that they're getting from their short term rental?

Sure. So it's similar to any other business model where where you can up charge items that are not necessities that would be convenient to people. So maybe there's minimal of charges for things like bicycles, or a pack and play or Carsey, or things that people would need that they may be, you know, might not be traveling with, or they want to use or like you said services, if they want to use the heater on the pool where they want to use the hot tub when they're there, that you can do add on fees, because not everybody wants that. And then you can charge a lesser base fee. Some other ways I've seen people will increase profitability is to increase their cleaning fee for cleaning deposit. So it's really just tweaking little things here and there offering more things that are conveniences or upgrades for people and looking at your standard fees. And can you increase them slightly?

You mentioned the cleaning deposit. And I love that. But then also, that makes me think of what can owners do to protect their investment because I'm just thinking of a cleaning nightmare. But there's probably some other things, what have you seen?

Well, there's all kinds of things. So from the very start, I do advise, I am not a lawyer. So the recommendations I'm making are one step off from that. But I do work closely with Real Estate Attorneys. And they always recommend with short term rentals to protect your investment, that the property is set up in its own LLC, that from an insurance standpoint, you're covered for the right insurance for that property, that you also have an umbrella policy over all your properties to protect your personal assets, that you look at creating an additional short term license contract, instead of just relying on what VR vo or Airbnb or whatever these sites that you're booking through. They have terms and conditions. But those are terms and conditions to protect that. They're not necessarily terms and conditions to protect you, and your asset and your investment. So definitely talk to a lawyer about creating a very simple clear, short term License Agreement. It's not a lease, it's a license. Because if you call it a lease, you're in the whole tant tenant landlord tenant rights and all that eviction stuff, you want to steer clear of calling them tenants. And then from a monetary standpoint, it's always within your rights to charge a security deposit. Some people do some don't. And I've heard varying degrees of kind of where that threshold of where they should set it. And that license agreement that you have should address whatever your security deposit in. So say it's 400 bucks, it should say that within that reason iterating what the security deposit amount is, and that that is the most by which they could ever come after you as the owner, meaning you're protected beyond anything that they've paid, even if they do damages or something. I've heard from some people with like the nicer end houses or the bigger houses with pools that they had problems when they had lower security deposits. And when they upped it to kind of a ridiculous amount, say like a $2,000 security deposit, it starts to make people first of all, the people that rent that place isn't somebody who can pay a $200 security deposit, I mean, it's a $2,000 security deposit, and they're going to maybe be a little bit more careful with things if their money is really a risk. I've heard some things about like having video or telling people that you have video monitoring properties. And I think that's really up to each person. And you'd want to address that in some licensing agreement because you have to disclose that. For the most part, people are pretty respectful of throwing in there for a couple of three days, they may be messy, but they're not coming into trash a place, if anything, personally, I've had people trashing my long term rental investments, because those are people that are you haven't been in the property for a year, maybe two, maybe more and who knows what's going on, at least with a short term rental, you or your management or cleaning crew is in there, usually every week or a couple times a week, you know, and I feel like there's less damage that can be done in a very short period than in a long wear and tear type situation.

That is such a great list. And I know that you work with a team of folks that you refer people to with lawyers and some of the agreements that you mentioned, such a great list of things that would help someone who's a little bit worried, right, that their property is going to get damaged. So super helpful. Tell us how do people make their listing stand out?

Sure. So yeah, it's, it's similar to anything like right like, your first impression is what matters, whether it's a property that you're selling, or it's your profile and dating site, or your profile on an Airbnb site. It's really all about incredibly good photography, really strong marketing copy. And because of photography, so important, the decor of the place is really important. It's worth investing in high quality photography. For the listing photos, don't I know your iPhone school and you have a bunch of apps, but if you're not a professional photographer, it's worth paying somebody a couple hundred bucks to get you high quality, wide angle, high resolution, great photography, because the photos aside from your reviews that are everything, helpful descriptions, creating, like we talked about potentially a brand theme for your property. And if you're not a super creative person, don't overthink it and make it too hard. Either maybe work with someone who's an interior designer or creative or think about something that is just you absolutely love, maybe, maybe you love copper. So maybe it's the copper casita, and everything has all these cool copper elements. I mean, it doesn't have to be some huge burst of an idea, just what's something that's cool to you, and use that in your decor and use it in your marketing, copy your hashtags. And a lot of times, if it's something that's close to your heart that you care about, you're going to find cool connections of people that also care about that quirky thing that you like. And who knows, maybe you need new friends through the whole process. You can even do I've seen some properties where they offer people high profile people, if they want to come do photo shoots at the properties, you can offer that as a service package. Then you're getting cross promotion of these Instagram influencers at your property like sipping a pina colada at the pool and their hash tagging your property, like, however, you can cross promote and market your property. If it has something cool. That's going to draw people in by being a niche thing. Maybe your thing is all about dogs and you're super dog friendly, you know, find the thing that's your thing, sing and play off it as much as possible.

That's so great. Very good advice. I am in Timmy. So you were in digital media, so to you hashtags and all that. But I can tell you, that whole world can be intimidating. But the good news is that there are companies that will do that, too. So like you said in the beginning, you can you can outsource the marketing and those pieces. Tell us I could because we talked to us a little bit about pro forma and helping people. What are some other resources that you provide to help guide buyers through this process.

I have partners that can help with anything from the financial performance analysis to actual loan officers and lenders, whether they're public or private, hard money, any sorts of access to money, but I'm sure a lot of listeners have that as well, the furnishing part. So people who are not creative and don't want or don't want anything to do with, you know what furniture shopping, there's designers that will help with that all the way from helping you design your theme to executing and buying and setting everything up the vacation management companies, whether you want to outsource some or all of the management duties, from marketing, to cleaning, to dealing with guest questions and all that sort of stuff. Pretty much anything that you would need, whether it's end to end or you just don't have those couple pieces.

Thank you. Thanks for taking us through that. And we are going to have this presentation that you've used for your panelists and sharing more of this detail in this information. For everyone listening that will be on the richer geek calm. But how can listeners also get in touch with you directly?

Sure, well, my name is so unique, so you can Google it. And you can find me everywhere. But some direct ways to get in touch with me our social media, you can find me my personal account is CarissaViv.

Excellent. Thank you so much for coming on and for sharing all of this great information with us. I really loved having you on the show today.

Thanks for having me, and happy investing everyone.

As we wrap up this episode, I wanted to share with you a couple of resources. First, Clarissa has a more detailed presentation that she's used in some of her speaking and other panel events where she talks in more detail about short term rentals. You can find that presentation at the richer geek.com forward slash Episode 19. Again, the richer geek.com forward slash Episode 19. Also, if you want to get more data on what's happening with short term rental rates, which markets are rising, which ones are flat, which might be declining. There's an awesome tool called AirDNA. You can find the details in the show notes and also at that same link I just mentioned therichergeek.com/episode19.

The information, statements, comments, views, and opinions (collectively, “Information”) provided in this podcast are not intended to be and should not be construed as financial, economic, legal, accounting, tax or other advice.  For our full disclosure, click here.

 
CarissaVivirito

ABOUT CARISSA VIVIRITO

Carissa brings over 17 years of real estate and digital marketing experience to her business. Her deep love for empowering people, combined with an intuitive instinct the spaces we call home, and proven marketing expertise provide an ideal skill set for any real estate endeavor. Carissa infuses a rich combination of art and science into her work, successfully weaving together the complexities of a real estate transaction into a beautiful masterpiece. Her hands-on personal experience is wide-reaching as a buyer, seller, investor, landlord, interior designer, and general contractor. Her goal is to truly partner with her clients to achieve more than either could on their own, guided by the core belief that we rise by lifting others.



 
 
 
Rental Properties, Vacation RentalsNichole Stohlerpodcast, season 1