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.