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Investing in Short Term Rentals – Michael Elefante

The Real Estate Investor Podcast interviewed Michael Elefante. Michael is the founder of BNB Investor Academy that has helped over 1,000 people find, invest, and design and manage short-term rentals successfully.  Michael is also the co-founder of Home Team Vacation Rentals, a property management company built to streamline investments for homeowners, and Somerled Designs, a design studio that helps short-term rental and short-term rental investors.

His biggest obstacle was what tech to adopt. He didn’t realize that there was so much software out there for short-term rental space for everyday investors. Investors can manage properties pretty much from anywhere at this point in time.

Michael adds. “10, 15, 20 years ago, when you think of typical vacation rentals, they were managed by property management companies charging 40 or 50% of your revenue, by the beach, in the mountains, in the lakes that you would take your family to. But now with tech, you just have to have cleaners, you can streamline that process and streamline pricing, like all sorts of stuff. So that has really opened my eyes and enabled us to scale up the pace at which we did because we were able to hold on to a lot of that cash flow because we self-managed for the first three years before building Home Team Vacation Rentals. So I think that was pretty eye-opening and for me, a mistake was not adopting that tech sooner, especially when you have one property. You’re like, “Oh, just save an extra 20, 50 bucks a month,” whatever it is, and do that.

And then the other thing is there’s data for historical daily rates occupancy where the top preppers are located, what they provide guests, all that is there for you to consume and leverage. So yeah, I think the biggest mistake is not leveraging that information and paying for it upfront.

What are some of Michael’s favorite tools?

AirDNA is a great tool for historical data and identifying where the top properties are located.  What are they charging per night, daily rates? That can help you craft a more accurate forecast or do a low, medium, high.

For management, you need property management software. The one that Michael used personally is Guesty for Host and then Guesty for Pros. Now he uses a system called Track for the management company and then a turnover cleaning solution, so you can do restore cleaning on turn out and that enables you to sync calendars for your cleaners.

Fo pricing, Price Labs and Wheelhouse are the best and he highly recommend those tools. They look at active data and analytics in your market and apply it to your property and you can also set a whole slew of customizations and it will help you make more money on high-demand days and then help you get booked on low-demand days.

What makes a good short-term rental?

  • Location is very important. Location within a market too because there’s a particular reason why people are willing to spend more money and rent more frequently in zip code A versus zip code B and C
  • Who are you catering towards? You have to figure out what amenities you want to provide.
  • Design is critical. It’s a very competitive space and you need to go all out with design and providing a space that people are willing to spend more for because they don’t get that experience every day at home themselves.
  • Pricing.  You have to be price accurate to which people are willing to rent your space for. Michael says “I think a lot of people get caught up “This is my daily rate.” Some people will just charge USD 300 a night the whole year. That’s the biggest financial suicide of short-term rental. I mean, you want to be able to charge a certain – it changes every day with Price Labs or Wheelhouse.”

Using those tools will help you make a lot more money and be booked more frequently and the reason why that’s important is because if you’re getting good impressions on Airbnb and Vrbo, you’re getting clicks and ultimately conversions because you’re priced right which helps you rank higher in search over time, along with good reviews.

What are some of the big KPIs that Michael look at on a regular basis?

Michael’s cash-on-cash target has always been 25%. With higher interest rates, he tells his students about 18 to 20%.

He als offers that “something that’s special about short-term rentals is if you plan to use the property at all for personal use, you can leverage a secondary home loan and put 10% down. So talk about double the leverage. I mean, you could put half down the normal 20%, and then you just have more money to play with. You can maybe get a bigger property.”

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