In our new series, we chat with a variety of experts and gain some insight into their industry.
Interview with Coleman Washbrook of Raising Standards -- Part 3
What has your experience been since the Covid-19 outbreak started?
Initially, like everyone else, I experienced a tremendous flood of cancellations. We had over 150 cancellations within a five day period. But that allowed us to transition to mid-term rentals, which to me means anywhere from ten days to 90 days.
I’ve also seen a lot of last minute bookings from locals who want to have a place to party and have a good time -- which has created a lot of other unique challenges! But that’s where high quality management and a ton of experience saves big time.
So has your occupancy rate decreased?
Actually, since covid hit, my portfolio that I manage has been just under or just over 80% occupancy during the pandemic when people are supposedly not travelling or going anywhere. So we’re right on target for our occupancy!
Jan, Feb, and March is slow season, with a typical short-term strategy trying to get people in for 2-3 days. But with covid, we kept or reduced our slow season rates but went into longer stay bookings which filled our calendars and increased our occupancy.
How were you able to insulate your clients from some of the negative impacts of covid-19?
Our primary strategy has been to change from short-term to mid-term bookings. There’s a lot of different people who need those mid-term stays.
We have people who live in other countries who just happen to be here and they can’t go home. We have people who are here because they are about to give birth, so they’ve come to the city [Edmonton] for 3 to 4 weeks to be close to the hospital and ready to go. There’s also been workers due to a ton of pipeline construction and those guys, not all of them live in Edmonton, so there’s a lot of out of town workers who are here and they’re busier than ever.
So there’s still a lot of interest but the short-term demand isn’t as high as what it normally was. By not having that demand of short term stays filling up my calendar a month or two in advance, it’s allowed opportunities for these people who are pregnant to book for 4 weeks, or to allow the guys working on the pipeline to book 2 or 3 months, or these people who can’t fly home or who are flying back to Canada to book a few weeks. Our calendars are essentially open to where we can actually host those stays.
There’s a part of me that thinks that demand was always there but my strategy and how we marketed, priced and listed our properties meant we were too booked to even attract or accommodate those people. It wasn’t even an option.
Do you think you’re going to carry forward some of this mid-length booking strategy even after the covid outbreak ends?
I think this strategy will become a part of my tool belt. For some properties I manage, this is the ideal strategy, and for others it isn’t.
For example, for a downtown condo within walking distance to Rogers Place, this mid-term strategy isn’t the most ideal over the next ten years. My assumption is that condo will attract people going to festivals and concerts, so that strategy will be different.
However, for a 1 bedroom walk-out basement suite in the southwest of Edmonton, this is an amazing strategy. It provides an affordable, clean, and functional place to stay for people who are looking for longer terms. And for that homeowner, it provides them higher than normal [long-term rental] income where their property is kept in better condition, and they’ve got more flexibility on the people coming and going instead of a long-term renter who may not be a good fit but are down there for a year’s lease.
What do you think the short-term rental industry will look like post-covid? Will things return to status quo or will things be different? Or, like you, will other people change up their strategy a bit?
When covid hit, Airbnb decided to 100% refund all guests who could not travel, even if the hosts of those properties had strict cancellation policies. Homeowners choose a strict cancellation policy because they want to protect their income as much as possible, and when Airbnb overruled those hosts’ decision to have a strict policy and pulled money out of their account, a lot of hosts felt very violated and out of control. They also felt they had built their investment structure based on something they had no control over, so that has changed how things will play out moving forward.
A lot of hosts have lost their trust in Airbnb and are creating their own website or going to a different website or moving their business to different areas so they can protect their asset and have more control over them, so that in itself will change how the industry works and operates. So will it go back to status quo? I don’t think so. Even in regards to travelling, it’s going to take probably 1 to 2 years or even 3 to 4 years to return to normal, depending on how long it takes for the economic recovery to happen. It’s going to take time.
What about Airbnb rentals themselves? What will change inside the rentals in regards to furnishings and amenities?
What we’re seeing right now, which makes a lot of sense, is a lot of people are working from home and I think that is a global standard that’s changed. Companies that have been on the fence about working remotely were forced into it when covid hit. Now they’re months into it, and their business models are operating differently, families are operating differently. The function and flow of the world has been forever affected.
But people’s needs within the property are different than what they were before and that’s where the change is. People who travel for work will choose to stay in an Airbnb [instead of hotels] for cleanliness or separation from multiple travellers. They will need a place to stay and function and still have space to comfortably work. So I think there are places that may put more emphasis on office or desk spaces within their units to accommodate more people working remotely.
How do you think Airbnb hosts will be able to succeed in the new, post-covid world?
The people who can anticipate the needs of the new kind of traveller by connecting with them and consistently and continually asking them, “what do you need more of during your stay with us?” -- those people will be the top 10-20% who are doubling their income. It boils down to 80/20 principle in regards to furniture, amenities and location.
If you provide the things that people are willing to pay for, that’s the winning formula.
Coleman Washbrook manages 35 listings in the Edmonton area and can be contacted via email (email@example.com) or Facebook (@RaisingStandardsAB).
In our new series, we chat with a variety of experts and gain some insight into their industry.
Interview with Coleman Washbrook of Raising Standards
Airbnb Property Management can be a rewarding career
Coleman, what’s the name of your business and tell me about the value you provide your clients.
My business is Raising Standards Property Management. The value I provide is the highest and best rental strategies through a white glove management service. These strategies include mid to long term fully furnished and traditional unfurnished long-term rentals, but my focus is primarily short-term furnished rentals.
How did you get involved with Airbnb properties?
My brother and I had a condo that we were in a negative cash flow position and if we would have sold, we would have taken a loss, so we gave Airbnb a shot. That was August 2017.
So it turned out well? You guys were happy with Airbnb?
Yeah! Within 2-3 months we were doubling our revenue on Airbnb, so it was a pretty clear win.
Why did you decide to start an Airbnb management company?
My goal was to manage ten airbnb properties and for each of them to be paying me about $500/month. My goal was to generate an extra $5,000/month by doing this as a side gig. When I got up to ten properties, I actually got laid off from my job. It was both awful and perfect timing because it presented me with a choice, and I think so many people are presented with that choice in life: either I pursue another safe, secure job or I dive into this and see how far I could go.
How did you find your first few clients? What kind of strategy did you use?
I started reaching out to people. I started targeting properties that were furnished in relatively good areas of the city. I asked homeowners if they’d let me rent and re-rent their property on Airbnb. I got a ton of rejection, a lot of people weren’t comfortable with it but there were a couple of people who were. I did that for about three properties, then people started reaching out to me and hiring me to manage their properties. It was a pretty quick transition going from listing my own properties to straight management.
What benefits do short-term, furnished rentals have over long-term unfurnished rentals?
I noticed the benefits with the first two rentals that I own. With the first property, we had a long-term renter move out. When he left, he left holes in the walls, small knicks, scrapes on the flooring -- typical things for a long-term renter. When we it up for an Airbnb, we had those things fixed and once it was set up for an Airbnb, there were no knicks or dings for the next year and a half that we had it on Airbnb because we had cleaners consistently going in there and viewing the place so if anything got damaged or broken we were able to claim against the last guest or the last guest would tell us about it and we would get it fixed very quickly, primarily because people want a consistent, high quality experience so it’s also our obligation to keep on top of those things. But it was a lot less than what I found from traditional long-term rentals.
What kind of condition would a typical Airbnb property be in vs long-term rentals?
For my second property that I listed, I had just finished doing a full renovation on a legally suited house. I listed the basement suite as an Airbnb but the main floor - out of my nervousness - I decided to get a long-term tenant to guarantee some level of income. Two weeks after the long-term tenant moved into the main floor (and after I had put in $50,000 in renovations) the main floor was so dirty I wouldn’t even take off my shoes to go into the place! It was seriously disgusting and I was mad. I couldn’t believe it, I had invested so much money, time, effort, and energy and to not feel comfortable taking off my shoes after two weeks was crazy.
I’m not saying all tenants are like that but that was my personal experience. If I came into an Airbnb and it was like that, I would kick that person out right then and there. However, with the long-term tenant I can’t, I’m locked in.
What do you find your clients need the most help with and how are you able to solve their problems?
The biggest questions from clients is: what’s the income potential of my property? Depending on the property type and location, there are very different levels of income potential. A condo by Rogers Place or a basement suite in the very south of Edmonton have very different income potential. Those different property types also need a different furniture strategy. For example, putting $15,000 into a one bedroom basement suite in the southside is a bad use of money because you’re overspending. But that same $15,000 furniture budget in the condo by Rogers Place is a very good use of money. You will probably double your return on investment in a year.
[AirDNA is a good source of rate and occupancy data for Airbnb units.]
Is the difference because of the difference in market? Because it’s a higher end market downtown?
Yes, totally. I think of it in regards to food. If you’re hungry, you have a lot of options. If you’re busy and running around the city and you’re starving, you might look at a McDonald’s and think, ‘I can get food into my belly in 3 minutes or less and it’ll cost me $7’. So it’s fast and affordable. It solves the problem of getting food in my stomach. Same with short term rentals.
It might be an empty place with a bed and that’s all you need. It could be an old, decrepit bed but you don’t care, you just need a place to sleep. Obviously the return on that investment and your ability to charge a premium is very minimal in that situation. McDonald’s competes on price and quantity vs. a fine dining restaurant, who are providing an experience and you just happen to get a meal with it.
Looking at properties in the same light, there’s much more profit in selling and providing an experience through short term rentals.
What if someone spends $15,000 to furnish their condo downtown to get that higher revenue and that more expensive furniture gets wrecked? Why would someone potentially spend thousands every few years to replace their leather sofa vs hundreds for a cheaper fabric one?
If a homeowner spends a premium to get a leather sofa and higher end decor, and then someone wrecks it, the beautiful thing about Airbnb and other short term rental sites is that they typically have a $1million home guarantee policy. This means that whenever anybody books a listing through that website, Airbnb is backing them with their insurance.
In addition, the host can charge a damage deposit. I typically charge anywhere from $300 to $1,000 depending on the property. So if the damages are more than that damage deposit, first I use the damage deposit but after that Airbnb’s insurance guarantees those damages. Even if that leather sofa is wrecked, I can recoup from the damage deposit and insurance up to the replacement value. The benefit of that vs long-term rental is that a long-term rental’s damage deposit is the same as a month’s rent, let’s say $1,000. So if they rip out the kitchen cabinets, you can keep their $1,000 damage deposit but the damages might be more than $1,000. So now you have to go to court and present your case and file all these papers. It’s a tremendous effort of energy and time to go through the legal process and if the person doesn’t have any money at the end of it, you need to go through your insurance. It’s a tremendous effort!
If the same situation happened with an Airbnb, you first get that damage deposit but then you tap into Airbnb’s insurance. You take photos of damage and send to Airbnb, make your claim, and they pay you out. It’s as simple as that. You don’t need to go to court and go through the legal process.
That sounds relatively painless! Terrible that someone wrecked your property but the process to get compensation doesn’t sound too bad.
In Part 2 of our conversation with Coleman, we will discuss how to maximize revenue at your Airbnb rental.
Thinking of starting an Airbnb rental? Contact us to help you increase your revenue with our room packages.