Sarah: James Svetec is the co-author of Airbnb for Dummies, the co-owner of Learn BNB, and the founder of BNB Mastery. He's dedicated to helping BNB. And co hosts each earn a full-time income managing other people's properties on short term rental. Awesome. Airbnb, there's obviously been a few changes in the past. I know there's some bylaws coming down or rumors of more coming down. But what's happening? What do we need to know in the world of Airbnb?
James: There's definitely been a number of changes and Riley, my business partners here with me, so that'll be great. I think that like regulation wise, we're not seeing any too many tremendous changes that are happening too quickly. But one of the things that Riley and I do, so we also invest in purchasing properties.
We've got some properties up in Kawartha Lakes and North of there, as well as Riley's got some over in Halifax. And from a regulation standpoint, we're always looking for areas that the economy really relies on short term rentals. Like the challenging thing with regulations when you're buying a property that you wanna hold onto long term is that regulations can change, right?
Whatever regulations they have right now aren't necessarily gonna be the same in five years, 10 years from now. We're really looking all the time for areas where the economy there locally really depends on short term rental, and it's a big part of the driver for local businesses. A lot of neighborhoods like Kawartha Lakes, a lot of those local businesses rely on all the tourism that flows that way especially during the summertime.
That's what we really look for from our regulations standpoint. One of the changes that we definitely are seeing in the market, Is right now just with, obviously with things opening back up, lots more people are traveling and so that's made a few different impacts depending on where you're investing.
Initially when Covid hit, we saw that a lot of the kind of cottage markets, more domestic travel type markets, Did actually really well because when people weren't able to travel internationally. They traveled more domestically. They weren't able to hop on a flight and go down to Florida, but they were able to drive two hours north of Toronto and go out to Kawartha Lakes to Bobcaygeon, those kinds of areas.
We've definitely seen a slow down in those areas this year, now that people can travel internationally. It's also become, there's much more competition. When the numbers got really good up there, a lot more people started flowing in there and buying properties. We're seeing a slow down, but then also we're seeing a speed up of other markets that did rely a lot more on international travel.
If you had, if you're investing in an area that caters to a lot of business travel, a lot of international tourism, those areas are starting to open back up. That's one of the biggest changes that we're seeing as of late.
Sarah: Absolutely. I have a couple cottages I put on the short term rental market as well. And versus last, last year you had one open day and it was booked like the second it became open and it was booked much in advance. So a hundred percent. I see what you're doing now. Are you maybe shifting some of the marketing strategies? Could you, we get some key insights for somebody listening that might have a cottage or a place that's not doing as well?
For example Airbnb, you could have gotten a hundred percent probably of your rentals back then, but have you started pivoting to just try to get some other potential clients from different platforms?
James: Great question. The way that I always frame it to people is that in the high season and basically last year was just a high season. It was just an entire year of high season. In the high season, everyone gets booked. It doesn't matter if you're not doing so well, if your photos aren't great, if your listing isn't great, your pricing isn't dialed in because there's just more demand than there is supply for short term rentals.
If you have a listing up, like you said, it's getting booked right away. Whereas when you're in the low season which is like where going into now, even in the high season, there's still not quite as much demand as there is supply. For instance, I was able to, like last weekend we spent at a college in Muskoka that we got for a really great rate.
I booked it only a few weeks in advance. Last summer, you wouldn't have been able to do that. Now there's just more availability. It's not every single property that's getting booked, it's only the top chunk in the market that's performing well. As we go into low season here, even more like in low season, we're gonna see probably 50% of the market is gonna largely stay vacant throughout the low season.
Only the top 50% and really the top 25% of listings are actually gonna get booked up consistently. It's a matter of just making sure that all the things that you may have taken for granted last year that you're really getting on top of this year to make sure that the listing is optimized.
You've got really great photos. You've got a really great listing, great headline. One of the big things that people really forget about is pricing optimization. You have to be able to adjust your pricing. Based on what's happening in the market. You need to be able to have a strategy to look into the future, see how booked up you are, and either raise your rates or lower your rates as a result of that.
I'm seeing a lot of people that have the sort of set it and forget it pricing strategy where they just set one constant rate throughout the year and they would've gotten booked up completely last year, but this year that rate doesn't fly. And so they're leaving a lot of money on the table by having their rates too high and not managing that properly.
Sarah: Do you think for example like for me, I don't know, like you've definitely got a ton of experience with this that there should be a different weekday rate and a different weekend rate, especially as we're going into the mid and slower seasons.
James: Definitely. The way that we like to look at it is that, again, like it's all supply and demand. Anytime that there's more demand for what you're selling, you can afford to have a higher rate. If there's less demand, then you wanna have your rate lower. There's less demand for a Wednesday night, then there is a Friday night. Especially if you have a vacation type listing, like I know you do like the cottages and so you wanna be mindful of keeping your rates a bit higher on the weekends and lower on the week.
It's also great to offer different incentives for like one of the great ways to fill up weekdays is to get those people that are book checking out on a Sunday and ask 'em if they wanna just extend their stay for an extra night, do a discount for them to do that, cause they're already there. You're already getting your cleaners in there.
It's just based on the icing on the cake at that point. And then similarly, if there's any event on weekends, like long weekends, Thanksgiving weekend, Christmas time, New Year's Eve, those are really good opportunities to have a slightly higher rate, especially if you can set it high right now and then slowly work it down as you need to until you get booked. Cause there's just more demand for those days.
Sarah: Absolutely. Okay that's some great tips right there. What about screening the renters? Are there any specific things that you would do or suggest that somebody do to make sure that they're not gonna have, somebody that's gonna trash their place and throw a big party?
James: Definitely. There's a few things that you wanna do with the listing itself, making sure that your pricing is set like a baseline pricing that you're not gonna go below because if you end up dropping your price too far, then the quality of guests tends to decline as well.
Have that baseline pricing where you know that you're just not gonna drop your prices below that. I really recommend any property that's larger than two bedrooms. You wanna do a two night minimum stay or longer? Because what, like the thing I always tell people is that not all one night stays are gonna be parties, but almost all parties are gonna be one night stays.
If you just take one night stay of the equation, you're taking almost all instances of parties outta the equation. Because when someone's searching for a place to have a party, your property doesn't even show up cause you've got that two night minimum. Having a security deposit is really, is another really good deterrent.
Having house rules that specifically state that in the event of a party that the guest is gonna get charged the security deposit a fine. Now it's not always possible to actually fulfill that. Oftentimes Airbnb won't actually allow you to claim on the security deposit without damages. But having that as a house rule that they have to agree to when they're booking acts as a really good deterrent because it's just one more kind of red flag for them where it's easier for them to book the other property nearby that doesn't have that rule where it's gonna cost them unless they're not gonna have that issue.
I also recommend having a noise monitor at the property, like a noise wear or a minute sensor so that you can tell if there's this excessive noise to the property and make sure that you're getting in touch with the guests before your neighbors get in touch with you.
Sarah: Absolutely. The noise sensors are a great point. Maybe some outdoor cameras as well, not facing anything, like beachfront per se, but usually, cameras to maybe the driveway or whatnot, you can see how many people come in. Awesome. So Riley let's go to you and maybe talk a little bit about, financing and accounting or insurance or what we need to know with that side of things, if we're gonna go the short term route.
Riley: Sure. Financing, accounting and insurance?
Sarah: Let's talk about that. What are some of the key things that we need to be aware of.
Riley: Sure. In Canada it's challenging, It's not that easy to get short term mental finance. Lots of different options though. In the states are much more open right now to different types of programs when it comes to financing. In Canada, the one thing that we do a lot of is like joint mentoring and just, I'm sure that's another conversation for another day, but people that come in, they have mortgage capability, they have the money for the down payment, the rental costs, furnishing costs, and and so they're the active partner.
We, or they're the money partner and we become the active partner. We do all the work. That tends to work quite well for financing. There's no specific programs right now though, for short term months investing that we've been endorsing. It really does come down to telling the bank sometimes, Hey, this is going to be a primary residence for this person.
That's the advantage as well of doing that will allow us to do five or 10% down where we can only do so many of those naturally. Joint mentoring allows us to tap into more 5% down deals. The other way as well is we can for financing we can certainly twist it around and say, Yes this is going to be more of a vacation rental.
We've submitted applications that way and that works super well. It can be a vacation rental or a secondary home. That will allow for financing purposes. We've done that a few times where it's a secondary home. , and that, again, we can usually do 20% down on that, quite consistent.
Sarah: That works well for cottages and that kind of stuff. Depends on where you're located. If you're, I don't know, in Burlington or like Hamilton, it's not gonna be so much of vacation rental, but you could always just have them potentially almost take market rents as a rental property and then just go through the mortgage broker so the mortgage broker can massage what the lenders need
to know.
Riley: Usually their default as well, like the mortgage broker's default will be to use the long term rental rents. You know, you have to keep that in mind when you're doing your debt to service, especially if you're buying a multifamily. We bought multifamily Airbnb in Halifax and how we ended up buying that property was through.
What is this gonna do as a long term rental? We can't actually show them, Hey, we're gonna do $10,000 a month in service, right? In income for that property. We had to show them we're gonna do, $4,000 or whatever might have been for the long term rental runs for the triplex. . That's usually what they're gonna look at on both the purchase of the property. If you're doing a refund later on, good luck at your long term rental rent
Sarah: Awesome. Insurance obviously needs to be different than if it was your regular home. Can you share some insights on that?
Riley: Insurance usually goes up compared to a long term rental, it will usually go up like 50% to 75%. It does get a bit more expensive. There are different programs that exist for property insurance, so sometimes you do a hybrid of, maybe you're living there 180 days of the year, and the other call it 186 days of the year, you are renting it as a short term rental, so you can do it part-time, short term rental, or you can do a full-time. All of our properties are full-time, so you definitely don't wanna play in the gray area too much with property insurance companies. You just wanna tell 'em the way it is.
At the end of the day, if something were to happen with the property, you wanna be covered. The few things that will pop up for insurance, especially when it comes to short rentals, if you're doing a cottage especially, if you have a fireplace. A lot of property insurance companies don't like fireplaces, so you have to usually disconnect that fireplace and make sure it's not operational for the guests.
That's one thing to keep in mind. Other than that, there's really no other blocks. It's just you have to be ready to pay that 50 to 75% more than you would if it was a long term mental illness.
Sarah: Absolutely. Last question from each of you in just one or two quick points, 20 seconds or less. What do you think the biggest benefit and potentially the biggest downside would be to this strategy or the biggest risk to this strategy that we should be aware of. Let's just do upside and let's just do downside. James, let's start with you.
James: I would say to me that the biggest upside and biggest downside are pretty similar. It's cash flow, right? If you buy the right property, they can cash flow really well. You can get deals that'll cash flow 50% and 20%, even 30%, 40%. If you pick the right deal. The downside is if you don't analyze the deals properly, I'm seeing a lot of people that are trusting their realtor to tell them how much the property's gonna earn an income.
That realtor's just taking the best guess. If you're not doing your due diligence properly, you can buy a property that isn't gonna cash flow nearly the way that you thought it will, and then you're stuck high and dry. Because a lot of the time with these properties they may not make a lot of sense as a long term rental play. If you misguide the short term rental play, you could be left in a hard spot.
Sarah: Great advice. Riley, what about you?
Riley: Definitely gonna echo a bit of what James said. I think cashless king with short rentals. The other advantage as well is I really look at properties now with multiple kinds of levers that we can make money or multiple different strategies that we can make money with that same property.
I look for, can we do it as cash flow? As a long term rental, this property is a medium term rental and is a long and is a short term rental. If we can do all three and usually we'll go with the short term rental option and then if it doesn't work well then, like James said, we can flip it into the medium term and if that doesn't work well then we can do the long term.
We wanna make sure that each property's usually hitting like everyone who is the 1% rule, usually it hits like 0.75% as a long term rental and it will be around like 1.25% or even 1.5% for a short term mental. That's like quick math on what we're looking at. But yeah, like James had also mentioned, the downside is if you're not running your math properly and you're just buying a property and it's sole strategy that will cash flow is short-term rental investing.
The medium and the long term don't have cash flow, then yeah, you could be in a difficult place, especially if interest rates are going up. .
Sarah: For sure. Awesome guys, thank you so much. Now I know you do offer courses and you offer some insights, so feel free to add that to the chat as well. And then we're just gonna put your contact information on the screen there for people to reach out to you if they wanna know more about Airbnb mastery, about short term rentals and all that good stuff. So thank you guys for being on.
James: Awesome. Thanks all for having.
Riley: Thanks.
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