Generating Income through Short Term Rentals

December 6, 2019 Kristin Laine

One of Boxwood Properties divisions is STR Management. We have locations in Nashville and surrounding cities. AirDNA is a great tool to use to gauge what kind of revenue your property can make on a STR platform. AirDNA Rentalizer tool will spit out a potential earning amount on your property based on the success of the 5 nearest STR properties.

This information is a great starting point, but I would not base everything on this number just yet. So many factors tie into generating the highest possible income. With a part time rental property, you may only see 20-40% occupancy. Some properties have restrictions on how often they can rent, if they can even be full time rentals. A full time rental should be 60-70% occupied over the year.

When I calculate wether a property would be a good investment or not, I use my STR Budget spreadsheet. When my expenses outweigh the net, or when the net is the same I could get for a long term lease, I don’t go for it. It’s relatively easy to use and is available here as a free digital download.

Basic information to input:

ADR: Average Daily Rate (term used in apartment management, you would see this as a nightly rate on your booking sites). Your ADR on weekend days is going to be higher than your ADR for weekdays. Further, weekends will book more often than weekdays. In this basic set up, I’m using 64% occupancy as my base, 135 weekend days per year and 98 weekday days per year.

Cleaning Fees: Cleaning fees will count as part of your overall income on both Airbnb and VRBO. I negotiate a cleaning fee per property with the cleaning service I use. They usually calculate the amount of laundry, cleaning, and frequency. I add $2-5 (property dependent) to each clean. While this extra amount can affect my income, it will be used in expenses to buy paper supplies, toiletries, and extra linens which I provide in each rental.

Fixed & Utility Expenses: STR Permits. Legally we must have these permits in Nashville, many surrounding cities have a similar permit process. The current price for STR in Nashville is $313 per unit, per year. Payment of yearly property taxes, and yearly insurance premiums are a required step in obtaining the STR Permit. Sales and Occupancy taxes are required in the City of Nashville and the State of TN, be sure to study up on your local municipality sales and occupancy taxes.

Utilities are a fluctuating expense, I find with my 60-70% occupancy I am still spending less than $500/month on all utilities including internet and cable. My highest utility expense is wifi and cable, we give our guests the high speed good stuff!

To help you figure out if an Airbnb will be a good investment for you or not, I’ve put together a budget that I’d like to share. For the free digital download go here.

The budget can be uploaded into Google Sheets (for free) or Excel. All formulas are provided, all you need to do is change your rates. The formulas for Sales and Occupancy taxes are made specifically for Nashville, TN.

Pricing Your Home to Sell in Nashville

March 5, 2019 Clare Fernandez

When it comes to selling your home, the most important factor is pricing it correctly. The price tag has to match your house’s worth if you want it to sell (and sell quickly). Pricing your home on the lower end is not the end of the world: you will likely get multiple offers and be able to sell your home at or above market value. However, overpricing your house can set you up for disappointment. If your house doesn’t sell quickly, you could lose momentum and have to lower the price after the fact. Below are some tips to help you find that sweet spot for selling your home as quickly as possible.

Listing Price vs. Selling Price

The first thing to determine is your target selling price for your property. It is unlikely that this amount will be the same as your listing price. The selling price could be higher, lower, or the same as your listing price, depending on the market. Spend some time thinking about your target selling price, and then base your listing price on the current conditions of the housing market in your area.

Be honest with yourself about the condition of your home compared to other homes that are selling at the speed and price that you desire. Do you have a bigger kitchen or renovated bathrooms? Do these other homes have fresh paint, updated kitchens, or professional photos? What do they have that you as a seller can compare to? In simple terms, do you have what buyers want? Are you willing to provide what buyers want? If not, are you willing to lower your listing price?

Assessing the Market

In a sellers’ market, things can get heated. In 2015, we had what I like to call “the summer of the escalation clause”. This was admittedly a nerve wracking time to be a buyers’ agent. There was not enough supply to meet the demand of buyers. Every house and condo in Nashville had 20 buyers lined up for viewings. Sellers were seeing offers written tens of thousands of dollars over asking price with escalation clauses.

In an escalation clause, buyer A is willing to pay X price for a home, but if the seller receives another higher offer, then buyer A is also willing to increase their offer to Y price or by Y percentage. Real world example: "I'll give you $300,000, but no more than $20,000 over whatever this house appraises for" or "I'll give you $10,000 over the highest offer, but no more than $10,000 over the appraisal amount".

In today’s market, we are looking at neutral leaning toward buyers’ market. In a buyers’ market, you want to stand out with the same features and perceived value, but for a little less. Let’s say for example you’re looking to move quickly and you find that all the houses in your neighborhood sold at $214,900. You should price your house at the same price or just below. While there are some really spectacular properties in Nashville getting their asking price, the average buyer is offering asking price or just below and also requesting concessions - such as closing costs, home warranties, or repairs. It’s not the most glamorous market, but it’s the reality, and I am well-equipped to help my clients navigate these waters.

Doing Your Research

Now you’re ready to do some research to help you make an informed decision on your listing price.

First, you should search for comparable homes (or comps) that have sold within the past 3 months. Search within a 1-2 mile radius around your home, depending on your neighborhood’s density. When considering your neighborhood’s density: How many homes are in your neighborhood? How spread out is your neighborhood? Adjust your radius depending.

Assess homes that have similar features to your property. Features to pay attention to include:

Square footage of the home
Carport/Garage
Number of bedrooms and bathrooms
Acreage/Lot size
Age of the home/When it was built

Comparables, also known as comps, is a real estate term used in appraising properties that have similar characteristics (size, features, condition, etc.) to the home you are selling.

According to market data from Greater Nashville Realtors, homes (including condominiums) sold in Q4 of 2018 for Nashville’s urban core (440 loop) had the following median prices:

2br/1ba: $224,900
2br/2ba: $364,900
3br/1ba*: $245,000
3br/2ba: $379,900

* All new 3 bedroom homes have at least 2 bathrooms. The 3br/1ba homes in this survey were built before 2000.

As you can see, a second bathroom adds exponential value to a home.

If you are having trouble finding comparable homes, consider the following factors. If your listing has a garage and others do not, add $10,000. If you have one more bedroom than other homes in your neighborhood, that can add an average of $27,500 in value to your home. Be aware that not all houses have the same additional bedroom(s) or garage and that markets and houses vary.

The above tips are a great starting point if you’re ready to sell your Nashville home. If you’re looking for a comparative market analysis, I will be happy to help you make an informed decision. Contact me with your selling needs.

This is the first post in a series of what to expect as a seller. Stay tuned for more!

Article Review: Weekly Mortgage Applications Jump 5.3%

March 1, 2019 Clare Fernandez

CNBC’s real estate section highlighted an increase in weekly mortgage applications last week. You can read the full article here.

Despite a slight rise in interest rates the past couple of weeks (the article states 5.3% last week, up from 4.56% the previous week and 0.4% higher than this time last year), there is still an increase in total mortgage applications over prior weeks.

Nationally, the mortgage applications have been in decline for four straight weeks. This is the first week in a month in which the total number has increased, though it is still lower than this time last year. As a real estate professional, I am hopeful this means that the spring home buyer resurgence is on the horizon. I have personally seen an increase in the number of clients interested in discussing a real estate move. I am currently assisting twice as many clients this month as I did in February-March of 2018.

The article notes the 10 year low in affordable housing, as reported by builders. Single family homes are increasingly harder to find at an affordable level. In Nashville, it’s hard to find a new construction single family home for under $250,000. I’m hesitant to even consider $250,000 as truly “affordable”; however, with interest rates simmering below 5%, I believe the $250,000 mark is an attainable buy for a solid number of people.

In Nashville, the urban core is still experiencing a lot of infill. Infill is good for our city’s economic structure, but not so good for the hundreds of families moving to Nashville looking for a little space to grow.

Infill is an urban planning and redevelopment term that focuses on repurposing underutilized land and/or buildings as new construction developments. Developers and city planners use these pockets of land/building to create more housing and infrastructure.

Nashville Area builders that I think are really close to hitting the mark for these families are Ole South Builders and Beazer Homes. Ole South has new construction first time home building down to a science. I have had great experience bringing buyers to their neighborhoods, which can be found in Davidson, Rutherford, and surrounding counties. Beazer is another new construction staple. They have a nice neighborhood development in historic Old Hickory called Village Green of Old Hickory. I have yet to visit the community myself but the prices are on point! Both Beazer and Ole South are able to bring their starting prices in under $250,000, which is promising for young professionals and first-time home buyers.

If you’re thinking about buying, contact me today and I can connect you with lenders offering the best options for interest rates. And stay tuned for more reviews on national trends!

Source: https://www.cnbc.com/2019/02/27/weekly-mor...