If you’ve wondered why I’ve been quiet the past few months, it’s because we’ve been busy: buying, renovating and setting up a brand new vacation rental business – The Hygge Suite. It’s been a dream of mine to get into property investment for a long time, and ironically we chose 2020, the year of COVID and chaos, to jump in.
There’s a lot to learn in setting up a business of any type, including setting up a vacation rental business. We wanted to share what we learned in setting up our first vacation rental to help you by avoiding the same pitfalls.
1. Don’t underestimate how much stuff you’ll need to buy
After multiple IKEA trips and carefully stacked truck bed of stuff, it felt like we were students again, moving to university for the first time. We bought a fully furnished vacation rental, complete with furniture, knives, cork screws, and door mats. But that didn’t mean any of it was worth keeping.
It depends on the standard you want to set for your guests, and where you want to be positioned in the market. If you want to offer a budget bed for the night, then buying an existing vacation rental that’s a few years old and using the equipment it came with will probably be fine. However if you want to create a higher-end experience to generate more rental income, you’ll need to assess the condition of the existing items and take a call on whether you need to buy new.
The place we bought had been a vacation rental since the 90’s and I don’t think much had been updated since then. We wanted to create a higher-end rental that would stand out, so we ended up replacing everything, even the cork screw!
2. Careful planning
If you’re buying a vacation rental in a remote place, or even one that’s not familiar to you, this will create some challenges. We bought our vacation rental in Northern Minnesota on a ski resort, with very few stores locally, and a three hour drive from the city where we live. We quickly found out that this required a lot of pre-planning. Add to that the challenges of COVID and it creates a project management nightmare.
I highly recommend creating a project plan up front, and if you’re doing the work yourself, you’ll need to plan it down to every last detail. You don’t want to be running to the hardware store every five minutes buying that tool that you left at home. Not only does it waste time, but it also wastes money. Which brings me into my next learning tip – return on investment.
Look out for a blog in the near future on Project Planning.
3. Think like a business owner
Unless you’re buying your vacation home primarily for yourself and don’t care about the profit you make on it, you need to treat every decision you make as a business decision, i.e. what’s the return on investment.
This means you need to save money wherever you can without jeopardizing the overall look you’re trying to achieve. It’s important to understand the market you’re in and the standard of decor and amenities that’s expected. If you’re trying to match the market and everyone around you has laminate countertops, then maybe you don’t need to splash out on quartz. But if you’re trying to appeal to a more premium market, and stand out from the competition then maybe quartz would help with that.
There’s also the maintenance aspect. Quartz will likely outlast a laminate countertop as it’s scratch resistant, stain resistant and hardwearing. So you need to factor in the total cost of ownership, i.e. the upfront cost vs the replacement cost, and how long it will last.
Some questions to consider when making decisions about your rental are:
- How many nights does that take to earn back?
- Can I charge more for having this feature / amenity / upgrade?
- Does this need to be purchased new or can I buy this second hand and save some money?
- Will I be upset if this gets damaged?
- How often will I have to replace this?
- Is this something that only I want? Or that guests would enjoy too?
4. Utilize smart technology
Being remote hosts, we explored ways to manage the property remotely. One thing we did invest in was a Nest thermostat, allowing us to control the temperature of the condo from anywhere, therefore saving money. This came down to the ROI decision I was talking about. We didn’t need to change the thermostat, the old one was working perfectly fine. The $250 it cost to buy though, plus the $100 rebate from our electricity provider, and the money it will save us from turning off the HVAC when we are not at the property, means it will pay itself back within the year easily.
We also upgraded all the smoke detectors in the condo to Nest smoke and carbon monoxide detectors. Not only is it required by local code, but having these detectors in every room with remote capabilities gives us peace of mind to know what’s happening at our remote rental in case of emergency.
Another thing we considered was an August smart lock. This is a remote door lock that you can change the code from anywhere, and costs about $200 to buy. We decided not to go for one, even though we love the functionality. We already have a keypad lock on our door that is easily changed by our cleaning staff each time they clean. It only takes them about a minute, so doesn’t cost us anymore in cleaning fees. So for now at least, the investment doesn’t seem worth it. We’d love to hear from more experienced hosts though to see if you think differently!
5. Try it out yourself
Something we learned from the Thanks For Visiting podcast was to try out the rental yourself before renting it to others. Even though we’d been living there through the renovations, I’d still recommend this as a great idea. Live a day in the shoes of your guests. Can you reach all the glassware? Is it easy to find the trash can liners? Do you have enough space for all your clothes? It’s the little details that count, and having a small detail not considered can mean the difference in a good vs a bad review. Even better, have some honest friends stay at your place before you launch it to the general public. That way you get someone’s fresh eyes on it that you may not have considered.
6. Invest in marketing
Another thing we learned is that even if you buy an existing vacation rental business, you’re really starting from scratch in terms of marketing. The first year is probably going to be the hardest year in terms of raising awareness of the rental, and getting people to book a property with zero reviews. We listed on Airbnb and VRBO, because the research we did via AirDNA told us that 50% of guests booked through each platform in our particular location. And that’s great, but you can’t rely solely on these platforms to get your listing seen.
I’d recommend you set up your listing on Google Business, Facebook and Instagram, and get your own website as a minimum. That way you can control your own destiny. Don’t be shy to talk about your listing on your own personal accounts to friends and family too. Word of mouth is a powerful (and free) tool that can help get your listing noticed and talked about in a potential pool of guests.
You may have to spend some money on getting noticed though – make sure you have a marketing budget. Facebook and Instagram have easy to use ad tools where you can quickly and easily set up a paid ad for a few dollars that can potentially reach thousands of potential guests. Same goes for Google AdWords too. Research keywords, start testing, and see what works.
Look out for a blog in the near future on Marketing Your Vacation Rental.
Our vacation rental business journey
We’re only two weeks into our vacation rental business journey. Our listing The Hygge Suite went live to our first guests last weekend. We bought the condo 3 1/2 months ago, and since that time it’s been a wild ride. From living like students again, camped out on an air mattress for weeks. To having to adapt our designs due to availability issues with products caused by the pandemic. One thing for sure is that we’ve learned a lot, and we’re sure there’s still so much more to learn.
Are you interested in setting up your own vacation rental business? Or listing that spare room on Airbnb? Or maybe you just did? If so, We’d love to hear about it, and what you’ve learned, or have questions about. Message us, or comment below.
Thanks for reading!
Jo & Harv