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Full Video Transcript
Sam
Good morning. I’m Sam Finney at Trophy Point Realty Group. And this morning we’re doing some training on short term vacation rentals.
So basically for short term vacation rentals, it’s a lot easier to get it anywhere outside of city limits than inside of city limits of Savannah.
So I put a lot in here about what they, you know, the different limits that they have within the city limits. Basically a short term vacation rental is anything less than 30 days, so you can have something up and do 30 days or longer, pretty much all of these rules don’t apply to you. But there’s a whole bunch of verbiage on the city website about the different wards. The cap is 20%, they put in that cap a few years ago. And generally speaking, it’s pretty much filled up inside of the city and all the wards, they have a couple of different maps to show you where the current vacation rentals are. But those aren’t frequently updated and could be wrong. So basically the simplest and easiest way to go about it is to find somewhere outside of the city limits. I included a map
A little bit down below, so the rest of unincorporated Chatham county, and then the map word right there has a link that you can use to go check it out. But I’m not gonna dwell on that a whole bunch. There’s a variety of rules and regulations. But in general, it’s a lot easier just to have one outside of the city than it is inside. Right. So I’ll let y’all look that over read through it a little bit. And if you got any questions at the end, we can kind of circle back to it. What is possible and very doable inside the city limits is what’s called an executive rental. So it’s basically a furnished place for rented out for 30 days or longer. The target there is pretty much traveling nurses. You can also do like movie producers or anybody that’s, you know, on a work-from-home sort of situation and is looking to come stay in Savannah for an extended period of time.
And those can also rent for generally much higher than a regular long term rental can be. With those you probably, you’re going to want to obviously talk to the guests and see whether they want the place cleaned regularly whether they don’t want it cleaned at all, and then kind of come to an agreement on what what’s expected of you and what’s expected of them, right? Some people might want it cleaned every week. They might want fresh toilet treat, you know, toilet paper, all that stuff, restocked that’s just a conversation you probably want to have up front rather than getting a phone call a weekend, saying “I’m out of toilet paper. You need to get some more so usually smaller units. So again, most of the time you’re not catering necessarily to families here. It’s more to individuals who are coming in.
So a 2-1 or even a studio apartment would probably work best. Now the only caveat for that would be I have seen, you know, executive rentals that they work a lot with insurance companies. So if somebody’s house burns down, their family needs a place to stay, the insurance company would pay for that, right? So that’s another option that would probably be better for larger places. But something, something to dig in further at a later date. Uh moving down. So Tybee they recently put a cap on it. Wynn, you got in just before the bell!
Wynn (background)
6 o’clock meeting, we got it done before the bell. 2 hours to spare!
Sam
There you go. There you go. So yeah, Tybee pretty much unless it already has a certificate. My understanding is going to be pretty difficult to get it Thunderbolt. So now we’re, we’re kind of venturing out into Chatham county. Thunderbolt recently changed their regulations a couple months ago. So now it’s a, before there were no regulations. Now it’s a $700 annual fee for a license and you have to get a license now. There is not a cap to my knowledge. But again, these things, they seem to be changing pretty rapidly. So whatever, and there’s a little note at the bottom, but if you’re ever going under contract, just double check during due diligence, if it already has a certificate that it’s transferable and make sure that that’s the case. And then if it’s one of these other areas that we’re saying, it’s, it’s probably good to go. Double check that during due diligence, because it could change pretty quick,
Kelly (background)
Do you know where to go to get a license?
Sam
Um so for Chatham County, it’s going to be over kind of where the Truman changes from going south to going west. So in that area, that’s where the Chatham County. Now I can, I can text it out or add it to this document afterwards as well. But if you’re not in Thunderbolt, a lot of these other places that are listed Whitemarsh, Wilmington, Georgetown, Port Wentworth, a lot of those are just going to fall under Chatham county. So that’s going to be $350. You need to make sure that you’ve got a fire station subscription, which is like $300, I think. And then you have to show proof that you’ve already paid for trash. And I’ll, I meant to include that as a link, I’ll throw that in here after this, but I’ll, I’ll have a link for the application there as well.
The other big thing – your insurance needs to see that you have a, a short term rental or at least some sort of rental going on at that property. And they have the exact verbiage on the website. So, and as you can see, so these different areas, right, you’re going to attract a different crowd for each of them. So probably on the islands you’re going to have a lot of bachelor, bachelorette parties possibly, and then just families that are coming to visit and a lot of this, right? So if you got a bigger place, you’re going to be catering more towards family gatherings and large groups. If you got a smaller place, it might be more couples coming out or something a little bit toned down. So for Port Wentworth, so up there, there’s a lot of work going on at the dock obviously and SCAD’s got a lot of work. So like we’ve had the same person who’s working as a SCAD contractor stay at our place, I think four, four weeks, Monday through Thursday in the last two months. And he just keeps, keeps coming back. So that’s also an option. What’s up, Wynn?
I was going to say I’ve never thought about contractors and traveling people who come out to town during the week and then go back during the weekends. They just need something for a few days during the week.
Yep. So, and then even, you know, at the port or a lot of people you know, bring their ships here to get worked on and yachts or whatever else. So they might be stuck here for a month or two months and you could have more an executive sort of thing going on there. So there’s a lot of options. I mean, Kate and I have had folks from, folks visiting from France that came in and stayed. We had a professional golfer with his two golf buddies that were coming in for a tournament that stayed for a week long. So you get, you get a lot of different folks coming in. And then finally, and this is kind of going back to inside the city of Savannah. The best way to get around the cap is to either buy a multifamily and have an own-occupy permit, the trouble with that is if you ever move out, then you’ve got to shift it over into executive rentals. And technically you won’t be able to do long term rentals or excuse me, short term rentals anymore or get something that’s commercially zoned. And then the cap doesn’t apply or shouldn’t apply.
So, moving down, so some of the best practices and just a little bit of background. So there are two different ways that you can kind of go about doing it. You can just use Airbnb, which is the simplest and you can get a lot of traffic. So there’s a lot of folks that don’t, don’t even go outside of Airbnb. So they automatically take out all the taxes for you, file those so you don’t have to worry about it. It’s, it’s a simpler process in that respect. If you start expanding to like VRBO and having it listed on multiple different sites, then you got to start worrying about the calendar, making sure that you don’t have double bookings and all of that. So usually so Logify is one that Aaron Miller uses for his rentals. I use as well, but it kind of keeps your calendar straight and makes sure that there aren’t double bookings or anything like that.
All right. And then the other thing kind of with that is there’s a whole bunch of pricing software out there. So like, I don’t know when, you know, some concert’s going on in Savannah or when a big event’s going on. So Price Labs, there’s a whole bunch of different ones out there, but you pay like $20 a month per listing and they automatically raise the price if there’s not much available, or lower the price a little bit if it doesn’t look like it’s going to be a busy weekend. And then you can go in there and modify and adjust it as you see fit.
Wynn (background)
The different sites have different fees too, right? Airbnb fee is different than VRBO and different than all these others.
Sam
Correct.
Tucker (background)
Not to dwell on that too much, but do they like change the price for you or do they just send you an email with a suggestion?
Sam
No. So they they’ll change the price for you and then you can go in there and adjust it. So like for ours, we were noticing we’ve got every single weekend out to, I think July booked right now. So I went in there and I upped the Friday night and Saturday night rate by 25%. And then the week days, we don’t, I mean, some of them are booked some of them aren’t. And so if there’s a weekday that’s coming up, you can either select certain days and lower the price X percentage. Or like I have Monday, I guess, Sunday through Thursday, discounted like 15%. So, you can play around with it a lot. You can have it to be where, if it’s, if there’s a vacancy in like the next week, then it slowly discounts the price as it gets closer and closer to try and make sure you’re, you’re keeping your doors open.
But again, I mean, similar to long term rentals, the lower the price goes sometimes the less, the less good people take care of it. Right? So if you, if you’re willing to lower your price way down, you might be making more money on the books, but that’s not to account for them completely trashing the place or breaking things or whatever else. Right. So there’s kind of a, there’s kind of a balance there of what you’re okay with going down to. So another way that this is very different and y’all can see when we go down here, the management fees. So usually long term management is 10%, short term management is between 20-25% of the gross revenue. Right. And that’s because some of these best practices it’s more of a hospitality business. So think of hotels more than anything. So if, you know, for example, if there’s a rat in the property and you get a call at nine o’clock, then you’re going to be calling an exterminator and getting him out there immediately, or you’re going to be going Walmart and getting some rat traps, which I’ve done before.
So yeah, so you need to be responsive. You need to make sure that there’s some clear expectations. So as far as like pictures and everything, right? So you want to, you want the place to look good, but you also don’t want to have the place look so far above and beyond what’s there that people show up and they go, “what the hell is this? Like, I booked a nice place and this is not nice,” right? So I’ve seen that happen before. So if you’re going to, if you’re going to market it as a very high quality stay you need to make sure that it actually is reflected and that the pictures don’t just make it look awesome. And then they walk through the door and it’s, it’s less than awesome.
Wynn (background)
Can I hop in?
Sam
Yep.
Wynn (background)
So if the guest comes and destroys or break something in the house, so you have it on, we have it through a website at Airbnb or a, like, is that, is that, is there an insurance policy on that separate than your homeowner’s insurance or who pays for the, I mean the, how does that get adjudicated?
Sam
Yeah. So there’s, There’s a couple of things. So you have a security deposit. So we have ours set at $200. So it’s for basically anything, a little bit smaller. If it was a bigger issue, like somebody punched a hole through a wall or completely destroyed the, the kitchen or something like that, um then yeah, you would, you would file it through Airbnb. You’d provide pictures and all kinds of stuff.
Wynn (background)
And they’d file it for you?
Sam
Correct. Yeah. So that’s,
Wynn (background)
They would then go through, they’re probably insured, have a rental policy, for this kind of stuff.
Sam
Yeah. And like, I mean, like anything dealing with insurance, it’s going to be, it’ll be an uphill battle. Yeah. It’s probably going to be a real pain in the butt. So the best, the best way to do it is just to try and prevent it all together. And you can set the, the settings to where they have to message you first about why they’re coming into town or whatever else. And then Airbnb, I’m not sure on VRBO but you can set your house rules. Right. So you can say that,
Kelly (background)
I know some say no bachelor parties, like absolutely not allowed. Like I’ve seen some of those before.
Sam
Yeah. So yeah, you can set your house rules however you want to, and then if they’re violating those, and there’s a lot of, there’s a lot of different gadgets that you can get, like one of them is called noise-aware. And so it basically averages out the sound volume over a period of a couple minutes. And so if the, if the noise threshold is above a certain level or averages above a certain level for over a couple minutes, then you’ll get an alert on your phone. Then you can go check it out, right? So it’s not list to what they’re what they’re saying necessarily. (Kelly/peanut Gallery: sure you’re not, Sam!) I’m not, I don’t care that much. I got, I got other things to do.
Kelly (background)
But then you’d know if like a dog’s barking.
Pat (background)
You’re not allowed to have cameras all around the house, though, right?
Wynn (background)
Not allowed to have cameras in the house for privacy.
Sam
I believe so. Yeah. I don’t, I’ve never had any desire to put cameras in the house. And I think,
Wynn (background)
No. And make sure not to. But like, just make sure it’s, that you’re not breaking rules.
Tucker (background)
Like when you start using Airbnb, they make you sign basically the [unintelligible] if I read and agree to all their conditions and it’s 18 pages long and in there, it says you can’t do any of that.
[Group consensus that we agree]
Wynn (background)
What about cameras, like exterior, like on the entrance?
Sam
Yeah. So like installing a Ring or something?
Wynn (background)
Um either a Ring or a camera light that just only looks at the driveway.
Kelly (background)
I think you can have a Ring, so you’re alerted, yeah. I’ve stayed at multiple that have a Ring.
Wynn (background)
Yeah at that way at least you have some knowledge of a bachelor party or something.
Pat (background)
Yeah, something to coordinate entry that way, or like check in too. Different systems for, for how to do that and the smart locks and you can buy locks that you can like reset from your phone.
Sam
Yeah. So I mean, there’s anyways getting back to like the, the insurance thing, like yeah. You, you go through the whole process, you file a claim. Just like anything, there are horror stories out there of them not doing anything to help out. I don’t know. We haven’t, we haven’t gone through it, but I’d say the best, the best thing would be just to avoid it all together.
Wynn (background)
It’s a risk, whether it’s long term short term, people could destroy your house if you own it and have people staying, whether it’s for a couple days or a couple years, like you are, it’s not free money. It’s a calculated investment that you’re taking to say, “Hey, I want to do this,” but it’s. Yeah.
Tucker (background)
They also sign a lot of paperwork when they ask for refunds. Sign to your account, to your property, sign [unintelligible].
Sam
All right. So going down a little bit so we already touched on photography a little bit. All right. As far as like designing the house, I got lucky Kate loves designing places. But like Pat mentioned, when we were going over this, it’s definitely worth, worth it to have somebody who’s a professional or has an eye for it, make it look good. Right. because again, you don’t want to make it look better than it is, but you want to make it as good, good looking as possible. And one of the big things, Kate and I have been surprised by is there’s been, I don’t know, probably 10% of the people who have left us a review that have commented on the kitchen and how they booked it because of the kitchen or their favorite part was the kitchen. Right. So something, I mean, that’s something that we didn’t expect. But I think the kitchen and kind of the common spaces and a little bit more of an open floor plan, obviously if you’re having a get-together, you don’t want a house that’s completely closed off in every room. Right.
I know one of our buddies is in another company where it’s mandated, like, you want to use this, you need this design style, kind of everything the same. So you couldn’t go and do what you wanted to do. If you wanted be with their company, you needed to kind of use their designer and have a certain style.
Yeah. And it gets down even into, you know, like what white sheets, people like white sheets, a lot more than different-colored sheets. Right. just for, I think the cleanliness aspect or the hotel, looking like a hotel, aspect. But some different resources for pricing. So AirDNA, you have to pay for that one included a website. They have actually do short term vacation rental loans. So they, if you type in whatever address you’re looking at, hit the beds, the baths, and then the number of people that you could probably have there, then it’ll spit out a price from AirDNA. So it’s not good for all across the market, but if you’re just looking at one or two properties that, that would help out and then MashVisors another one I’ve seen used it’s more so used for like new markets. You can do overlays of the average housing price and, you know, in different suburbs of the neighborhood or whatever else, and then the occupancy rates. So that’s kind of how you could use it to target a new, a new city.
Moving down a little bit. So operating expenses, again, management fee is between 20 and 25% of the gross revenue. So not to insult anybody’s intelligence, but gross revenue. So that’s the total dollar amount coming in. Right? So they take 20 to 25% of that. Prior to a lot of the taxes, a lot of the cleaning, all the other stuff. Okay. And with, with short term rentals, because of all the tax and the, the additional fees and upkeep and all that stuff, it’s, it’s a pretty substantial difference that it’s the gross rather than 25% of the net sales and use tax, hotel tax. So you’re gonna be paying all that as well as, you know, income tax. So 7% for sales and use hotel tax in Georgia’s $5 a day. And then there’s a couple other minor ones. So just for general calculations, I’d put it at, you know, 8 to 9% for taxes.
Kelly (background)
Question Sam, but the hotel tax is that whether it’s occupied or not?
Sam
Yes. Yep. So all of, so the taxes only apply when somebody is staying in there and paying you. Um, cleaning. It depends, it depends a lot on where you’re at. And also it’s one of those things where it’s not worth it to, to skimp on it too much. Right. So you want to get somebody good to clean your property, because if they miss a clean and somebody shows up at four o’clock and the place is a mess then you got a whole other deal and you very well might lose a booking. I mean, I’ve seen week-long, like $3,000 bookings out the window because the place, you know, the yard wasn’t mowed and the place wasn’t clean.
Wynn (background)
Bad reviews, and all of a sudden now you’re not number one yet. Yeah.
Sam
So it, it it really, I mean obviously depends on the size of the house, the location. So out on Tybee, since it’s drive for most people that’s going to be considerably more. So you probably for like a 3-2, you know, 1200-1500 square feet, you’re probably looking at $150, $200 a clean and then kind of the rest of Chatham County, probably between $70-100 for a clean and then downtown again, it’s, it’s more like Tybee prices for the most part. But that’s, that’s a relationship that you either, if you’re doing it, you want to have a good relationship with whoever’s cleaning it or, you know, whoever you have property management, hopefully they have one or two good cleaners. So
Kelly (background)
So you only run yours through AirBnb, you don’t have, you are your property management,
Sam
Correct.
Kelly (background)
Just source out Airbnb. And what was the other one?
Sam
VRBO
Kelly (background)
But the calendar one you said you use, so you’re not messing up.
Sam
Oh, so Logify?
Kelly (background)
Logify, is it on here?
Sam
Uh that is not, I can, I can throw that in as well. Um and there’s a, there’s a lot of different sites like that. It’s like Guesty is another one that does it as well. And basically they just, they’re just trying to simplify the process. So you can have your listing out on a whole bunch of different websites, not get double bookings and then it’s supposed to provide an easier way to communicate with the guests which it kind of does kind of doesn’t because some of the, some of the platforms mesh well together and others don’t. So moving down. So does maintenance become more expensive? Yes and no. Right. you’re seeing you or at least your cleaner is seeing the property probably every week or a couple times a week. So a lot of the deferred maintenance, if there’s a small leak somewhere, something like that, it’s actually a lot better than long term rentals because if you have long term rent renters, you know, the roof can be shot and there could be water dripping through the ceiling in three places and they’ll just put a bowl under it every time it rains, right? And then you come in at the end of the year and you’re like, “dude, you could have just told me!”, right?
Pat (background)
I had a tenant call me last week and said “hey, I think there’s termites in the house. It’s like there’s holes in the drywall and like a crack in the wall” and I’m like, “holy shoot.” Like that’s not good. I sent my guy over, there’s like, it’s just like a, not very great mudding job and like just a normal kind of settling crack, like going on. But I made sure not to like, I’m not going to charge for it. I was like, “thanks for letting me know,” you know.
Wynn (background)
Biggest thing is for any
Kelly (background)
There’s such a fine line there.
Wynn (background)
for any homeowner whether it’s long term or short term stands out maintenance. For maintenance. If, if there’s a, a call like you got to get on it. Cause if you let it go let it go, it’s just going to get worse.
Pat (background)
Honestly, that’s something I didn’t think about though. You’re going to be in there all the time, so you know, you’ll notice a lot of problems before they, before they come up.
Kelly (background)
There’s a fine, like I’ve stayed in so many of these and I actually prefer these over like condos or hotels. Like they’re great for vacations, but it’s like, I’ve dealt with, “Hey, if there’s a problem, call me,” “oh, are you there? Okay, great. You’ve arrived. Do you have everything you need?” And being like overbearing, like I’ve had some where I’m like, there’s like signs everywhere – don’t touch this, don’t do this. Don’t do that. And then there, so there definitely is a line there. I don’t want to be that guy.
Sam
No. Well, and to be honest
Kelly (background)
“Do you need anything? Are you okay?” [Unintelligible]
Sam
I mean, and that’s like not to, not to do too much profiling in here, but that’s probably somebody who has one property who’s might be a little bit older so yeah. That’s, I mean that’s on you, but it takes more time and effort to be that person. Yeah.
Kelly (background)
But I always rate people, but because he was so obnoxious. I didn’t give him a, I didn’t give him bad review, but I didn’t give him a great review cause he wouldn’t leave me alone. And I it almost made me think that was cameras in the cause. I’m like, why are you messaging me? So don’t, don’t use that.
Sam
Yeah.
Pat (background)
So if you get a four star review, is that like, you know, like the kiss of death? Like does it need to be five stars or nothing, or?
Sam
No, it’s not the kiss of death, but if you get a one star review, you’ve got to get like 40 5-star reviews to offset it. So yeah, if you get a one or two star review it’s that’s bad news bears. Yeah.
Kelly (background)
Do you do anything welcoming for your guests? Like we’ve stayed at some of those where they have like, not like we’ve had somewhere it’s like bottle of wine, but again it’s like you said price point, like welcome to our home kind of.
Sam
Um no, we, we don’t I’ve read a little bit up on it and I mean, I, I think, I think what’s a lot more important than, you know, having something out on the table or whatever else, is just having an accurate representation of the place. Right. Because when people, when people come, they’re not going to necessarily expect a box of chocolates. Like we did Kate and I talked about for the dude who came back for like four or five weeks in a row. Like just getting him, getting him something, you know, a small present or something like that or like for Valentine’s Day. And like we decorated the place for Christmas. But I don’t, that’s something if you want to go above and beyond, but I don’t know that you would actually see a great return on it for, for the time spent. I think it’s more important that people, people get what they’re expecting to get and that’s, you know,
Kelly (background)
And I might’ve missed it, Sam, but where do you base your pricing? Because obviously it’s not as easy as pulling rental comps or
Sam
Yeah. So that’s another one where Price Labs comes in, and then they’ll, they’ll recommend a price. And then you can always tweak that too, right. So you can like when Kate and I first had it listed, we didn’t have any reviews or anything like that. So we had ours, I think, substantially lower. Until we started getting some bookings and reviews and I honestly, I left it lower for too long because then we started booking out like a month and a half, two months out and then I finally increased it. But that’s the other thing too. You can, you can play around with it at any point. Right. So if it’s not booked, you can change the price however you want.
Kelly (background)
Do you know anything about Brian county and what Brian county’s rules are with STVR’s?
Sam
I have no idea. Nope.
Katy (background)
Where do you go to find that information?
Sam
To the county websites.
Pat (background)
Every county website has a municipal code. It’s usually what there’s like a website with codes you can just look it up. But just go to municipal code and control F and look for STVR or STR. And then um and then that should shed some light on it. Yeah. I’ve never even looked into Brian County. I imagine, the thing about Richmond Hill, like almost everything Richmond Hill is an HOA and almost every HOA in existence does not allow vacation rentals. And if they do, they won’t, as soon as you start doing it, cause all you need is one obnoxious party and that’s it, you know?
Sam
Yeah. So that’s a, that’s actually a key point that I didn’t throw in here, but yeah. Anywhere, anywhere in Chatham county. Right. If it does have an HOA, that’s pretty much a No-Go
Kelly (background)
For either executive or STVR?
Sam
Um, I think
Pat (background)
It’s in the bylaws, right? Because executive isn’t too much different than a long term rental.
Wynn (background)
Some HOAs don’t even allow long term rentals.
Pat (background)
Yeah, some don’t, I mean.
Wynn (background)
So townhomes, condos, are in their covenants, in their HOAs will vary place to place.
Pat (background)
One thing to keep in mind. Even, even though they allow it, now they change the rules on you. Like, and they probably will, you know, if they don’t have a rule against vacation rentals, then you start doing it, that’s a matter of time before they’re going to outlaw it. Cause most of the people that live there don’t want that. You know? I, yeah. So I would never operate vacation rental in an HOA unless, you know, unless I wouldn’t mind if I go back to being a long term rental, you know?
Wynn (background)
Well, I mean so that’s really anywhere. I mean anybody can change rules.
Pat (background)
That’s true. I mean any governance can change rules.
Wynn (background)
I mean when we put [unintelligible] downtown because people who live in the area don’t want
Kelly (background)
You look at the map and the map, like it has measles, like it’s crazy.
Wynn (background)
We’re on the investing/rental side, so we want them but a lot of people don’t want, three times a week, new neighbors coming in taking their parking spots,
Pat (background)
Not only that but if your renters [unintelligible]. So not only is it the neighbors that don’t like it, but it’s the [unintelligible] you know, in the same, you know, rental numbers. So I, I don’t think they’re going to get rid of vacation rentals at Savannah, but I don’t think we’re ever going to see anymore,
Wynn (background)
But rules can be changed. Whether it’s HOA, governmental city, county, could do with caps, you could
Pat (background)
If I was the city Savannah, I’d have like a $2,000 permit fee every year for vacation rentals, because people would pay it.
Kelly (background)
I just want to build my community of tiny houses and I run a bunch of vacation rentals.
Sam
Get with Kate she’ll, she’ll be all about that
Kelly (background)
That’s what it is – you go to lakes like lake Dewey or whatever, and you’ll pull into a community and it’s all, they’re all the same thing.
Sam
So just kind of going back to the, you know, rules can change whenever. So not to say that the, you know, Savannah or Chatham county or even Tybee couldn’t one day come together and say, all right, no more vacation rentals. Because they potentially could historically though the most that they’ll do are that I know of is they’ll put a cap on it. So they’re not going to screw over whoever has vacation rentals right now, but they’re going to put a cap on it saying we’re not doing any more of these. You got what you got. If you don’t renew your license, then you’re going to lose it. And that’s what we’ve seen historically. So
Wynn (background)
Cities want short term, because they want tourism, right? Tourism in Savannah, is #1. Do away with STVR do away with short term stay, city’s not going to make any money. City doesn’t want to jeopardize all the tax revenue has coming in with hotel tax [unintelligible] tax. The general just tax base was [unintelligible] every year in Savannah, Tybee. They’re going to want that.
Tucker (background)
So five six years ago, this wasn’t even possible just there wasn’t even Airbnb. There wasn’t enough internet presence for any of this to make any sense. So it’s
Wynn (background)
A new world that governments are lagging behind. Go catch up.
Kelly (background)
I think Covid helped too, um cause definitely was an increase with the Airbnb cause nobody wanted to be in a closed combined space. They didn’t want to go to a resort. They didn’t want to go to a hotel or a condo. Like they wanted their own space to be safe. Yeah. And that’s like, I did some reading on that and that’s when they saw like a huge increase. And it’s just getting higher.
Sam
Yeah. Well, and y’all are going to see here in a minute. So we’ll, we’ll finish up the operating expenses part and then kind of open it up for any further questions at the end, but going back to the maintenance where we, where we got started on the tangent. So it’s it is more difficult to plan maintenance, right? Because if you’re looking at doing any sort of serious maintenance, it takes longer than a couple days, right? The average, the average nightly stay for Kate and I’s place is $300. So if you take it off the market for a week, you’re looking at losing $2,000. Right. So in that way you kind of got to be a little bit strategic about it. And sometimes it’s a lot easier to push off maintenance because you can say “well that, that can wait for another little bit.” Right? How much does it cost to furnish? Usually between $10k-20k. And I’ve got a sheet somewhere that I can, I can share with y’all as well about kind of what Kate and I put in ours. And, and there’s a lot of stuff out there on the internet,
Kelly (background)
Your sheet
Sam
My sheet?
Kelly (background)
Yeah, can I see your sheet?
Sam
Sure.
Kelly (background)
I have to send something over to Wynn, I just want to double check.
Sam
Um but yeah, usually about $10-15k for a mid to smaller sized house and then $15k, $15-20k for, you know, 1200-1300 square feet up to 2000 square feet
Kelly (background)
And that’s sheets like it’s everything.
Sam
Well, that’s pretty much everything to start off with. Yep. And obviously that also depends if you’re going to like Ashley’s and buying all new stuff, it’s going to be way higher than that. If you’re going to Wayfair buying, stuff like that. Another good is to have outdoor rugs around every single bed. So outdoor rugs because they don’t stain as easy. And they just kind of help keep, keep the floor for a little bit longer and all that.
Katy (background)
When it comes to high-use furniture or whatever, do you recommend going and spending a little bit more on furniture that, you know, will be easy to clean stains off of, but it costs more like, so I’m thinking of like a sofa, like you could buy a really cheap one off Wayfair and it might be comfy, you know, it’ll work. But like if a stain goes on it that stain is staying no matter how hard you try to clean it, Is it worth spending the extra money on that or does it not matter?
Sam
I think it, it, it just depends on, I mean yeah. It depends on a lot of factors and also, you know, kind of where you’re marketing it at. I mean, I think it’s just, it’s important to understand that the furniture is going to wear out quicker, right? People aren’t going to take the best care of it. It’ll wear out. Whether you get something that’s very, very durable and easy to clean or whether you get something that’s not, it’s going to wear out quicker than it should. Right.
Kelly (background)
Furniture is, Katy, [unintelligible] in essence. But if you’re looking at it as every two years, I’m going to have to replace my sofa, then you would want to lower your price point. But it is that you get what you pay for, for sure.
Sam
So I don’t really, I don’t have a great answer for you there. It just kind of, it depends on what you’re going for.
Kelly
Just don’t do white.
Tucker (background)
You can also put covers on everything, that’s a big, short term thing on Tybee. They just buy covers, they go for $25, go get 25 of them and throw them on a couch every.
Wynn (background)
So asking for a friend. So like, would you do more like cloth or leather would be lot more durable, but then if you like, or do you just do the cheaper?
Kelly (background)
Depends where you are, like what Sam goes back to
Wynn (background)
Suppose you’re on the north side of Tybee for a friend.
Kelly (background)
No. Then you would not put leather in that house. You want a coastal look. In that house. Light blues, light greens, you get away with stuff like that. But no, you want to put leathers like lake cabin, things like that, or just a standard house.
Wynn (background)
The friend’s a good guy by the way.
Sam
Um so yeah. So another thing with like protecting your stuff. So you want to do mattress protectors, like waterproof mattress, protectors, waterproof pillow protectors, all that jazz.
Kelly (background)
That was going to be my question. Like bed bugs – have you ever dealt with that before?
Sam
No, thank the Lord. No, but [unintelligible]
Kelly (background)
But there’s no, there’s no like treatment that you can have like termites or whatever.
Tucker (background)
Not like a yearly thing, but like when it happens, when it comes up.
Kelly (background)
Oh yeah and it costs a shoot ton of money, no I know that. Yeah.
Sam
Yeah. So yeah, pest control is definitely something that’s worth investing in, obviously. Because again, any, you know, a day or two that it’s taken off, the market is $500. So paying a couple hundred for pest control is, is well worth it. And then going down to, how much can we make in this market? The short answer is it really, it really depends. There’s a lot more factors than long term rentals. You got a long term rental, it’s a 3-2, it’s in downtown, you know, it’s going to make, you know, you know, somebody’s going to rent it for $1,800 or something, right? Short term rentals. It goes into, you know, what amenities do you have there? Is there a pool? Is there a hot tub? How does the yard look? Is it private? How does the neighborhood look? What are your ratings? How many different platforms are you on? All, all kinds of stuff there. So as a general rule somewhere between 20% and 60% NOI is what I’ve seen. So substantially higher than any sort of long terms. And I mean, I can, I can talk with y’all a little bit later on about Kate and I’s and how that’s going, but it’s, you can, you can make a lot money in it. The issue is it’s a lot more effort to manage and upkeep than normal. Right?
Kelly (background)
How your return, Sam? What do you, what’s your percentage, you guys set aside of the oh shoot account. Do you guys do that? Do you have an oh shoot account?
Sam
Um we have a personal one, but yeah. I mean, cause you think about it, even if you have, let’s say you have a terrible, terrible guest that trashes the place, right? I mean even worst case in their area. Let’s say they completely destroy the countertops in the kitchen and like, you know, bust the marble and they break, you know, they break or whatever else, a couch, and all that. That’s still going to be cheaper to fix than it would be to put in a new HVAC or a new roof or something like that. Right. So even, even in like the very, very bad case scenarios where they put somebody through a wall, you’re still only looking at, you know, a couple thousand dollars probably. So I don’t know, maybe I’m wrong. It could be
[Unintelligible]
Wynn (background)
For long term rental, the data says, and everybody’s spreadsheet is different but the data has about $1,500 per door per year is what you need to have set aside for a slush fund. Whether it, whether it’s a nickel and dime every month $75, or they don’t get anything for 3 years and all of a sudden you have to replace the HVAC, like, $1,500 per door per year. Think for a short term, you’re at least doubling that just to be on the safe side with wear and tear and everything. So maybe yeah, $3,000 per door per year as a safe buffer maybe?
Sam
Yeah. Well, and I would even go above that. So I’ve seen, I’ve seen like, $10,000 or so for set aside for maintenance, for, you know, a $300,000 property and you know, so, and that’s not
Pat (background)
Of course you have furniture and decorations and you probably need to paint it more often, because with renters you might get away with scuffs on the wall for 3 years but not for,
Sam
So you talking about repainting like doing all new linen every year or so. And the linen, usually you want like 2.5 to 3 sets of everything, right? So you’re buying, if you have four queen beds in a house, we’ll say you’ve got 12 full sheets full queen sheets for it. Right. And you’re going to have to replace those every year.
Kelly (background)
Costco telling the best quality sheet I’ve ever seen in my life. And they have all sorts of patterns, I know you want white, but they might have white, but it’s literally, I think $20, $25, maybe $25 for a king and $20 for a queen and they’re amazing. And they feel good.
Sam
There you go. But yeah, so just for, I mean, I guess the slush fund I would, I would set aside, you know, probably $10,000 for if you’re looking at like a $300,000 place again for painting for sheets, for, and the other thing too, like I was talking about it’s everything is much more time-sensitive, right? So if you got a guest coming in and you know, the guest tells me tonight, “Hey, this isn’t working or this is broken” and there’s another guest who’s coming in tomorrow, who’s paying $2,000 for the next week, then I’m going to be calling whoever it is and telling them, “Hey, if you can get out there within the next five hours, you know, I’ll pay you double whatever it is,”
Wynn (background)
Weekend service calls. Instead of $100, it might be $250-$300 for the same thing you get during the week.
Sam
Yeah. So yeah. So that’s the other reason the price is, is a little bit farther up um.
Tucker (background)
Larger scale, I’ve seen what they pitch to the owners they say they’ll have a 3 bed 2 bath but technically they can sleep 12 people in there so what they’ll do is per head count per person put in there, they want 5% of each per person. 5% per person of however many people you have in there. But that also covers a lot of other things. Like if you can’t rent the place out for two weeks, something happens. In 2020, we had a month where we couldn’t rent out anything because that’s the mandate. Couldn’t do it because of COVID so that fund covered that. It covers repairs. It covers for two weeks, covers when your kid jumps off the bunk then breaks his arm that you’re getting sued, because there’s no corporate bail there. You have to own the property like an owner. So it’s your name. So a kid jumps off of bunk and breaks his arm and then the parents sue you, because they’re idiots, that’s on you. And so that’s also part of that, but that’s on a large scale operation where that’s all under the same, it’s all under an umbrella.
Wynn (background)
Which raises another question for liability. So this isn’t a liability talk. But I would think, you know, whether it’s long term short term, a lot of times you may want to take it out of your personal name, just for liability. So in case somebody does get sued, they go after the company assets, not personal assets, so whatever this case is, have it in an LLC, probably have it under an umbrella policy, cover broken arms, lawsuits. That way they’re not coming after their own personal stuff.
Sam
Well, and then that gets into, that gets into the whole lending thing. So if you do have it in an LLC, then you’re looking at a couple percentage points higher for interest and all of that as well. So it’s yeah. Something to think about as well. The other big thing, no lenders like lending for short term vacation rentals. The one way I’ve found is to do what’s called a DSCR loan which is where they have the appraiser come out and appraise the amount that it would be able to rent for long term. As long as you’re appraised long term rent is higher than your mortgage payment, your PITI then they’ll give you the loan. So that’s the best. There’s also some places that do bank statement loans as well. But usually unless you have a proven track record, you’re going to have to get creative with, with how you’re going to get a loan for it. Because banks don’t like it unless you can provide two years of taxes.
Wynn (background)
We can talk more about that after we wrap up.
Sam
Yep. But yeah, kind of to wrap it up. So like we talked about the game is changing constantly. So just because that’s the way it was last week or today doesn’t mean that it’s going to be the same tomorrow. And then just because a place has a permit doesn’t mean it’s going to be able to be transferable, right? So something to keep in mind. And then I guess, does anybody have any other questions? Comments, concerns?
Katy
That was a lot!
Pat
Yeah. Cool. That was good.
I want them so bad. Seems sexy. Just like sexy short term vacation seems like it’s not.
And then you get in there and realize somebody tiled your shower the wrong way,
But I’m not organized or timely enough to deal with that. So,
So, and somebody keep mind with any, any investment for this long term short term you know, you don’t need to be Money Bags McGee to have these, but you do need to have a bit availability capital to take care of issues.
Kelly
This is exactly where I want to go. Eventually for me, just personally
A lot of sense. Yeah. A lot of people have a house or two and are under capitalized and they don’t have you know, the, the ability to, to,
Pat
I mean, there was people selling, you know, April 2020, like literally one month and not make money. And then they had to sell their asset. That’s now worth 30% more.
Not only Don’t have don’t you don’t need to have million dollars to be a landlord, but you do need to have, you know, short term, you need to have 10, $15,000 in an emergency fund. You need to have long term rentals. You need to have $1,500 per door for year emergency fund. A lot of people don’t tenant,
Kelly
Does the bank need to know it’s a vacation rental versus just a normal rental? I’m just saying like, so say can’t change my business plan
Pat (background)
So they you know, if you’re buying a place, if you have an income qualify for one regardless, then they don’t need to know anything, you know, you could buy the house just to buy it and it’s still vacant as long as your personal income means their requirements. Then it’s no big deal. But if you need that income they’re, they’re not, they’re only going to underwrite off. Usually you get it about for 25% now, um but they’re typically looking at long term and, and a lot of times they might want to see a lease in place already, depending on what you’re buying. Or like if you a place and fix it up on a hard money loan and refinance it, they’re not going to refinance it until they see a long term lease in place. Now you can put a long term lease in place for a year, get your refinance, and go [unintelligible], but you also have to change the insurance policy. We have to get a vacation overrider. okay. You know, so just that you have to, but once you have, once they close the loan you
Wynn (background)
Something to keep in mind a lot of these hard money lenders are switching to DSCR loans banks, saving loans
Pat (background)
You can probably find someone who specializes in vacation rental loans. You’re probably going to pay a higher interest rate.
Wynn (background)
So over the last six months, so the last six months, a lot of our hard lenders that working with are putting out products for converting those hard money loans into long term 30 year notes, which never used to happen. Right. In order to get 30 year note go a bank, lending institution, have two years of bank statements and all that stuff. Now the hard money guys are all starting to offer these 30 year notes in house versus going on.
Kelly (background)
You said still a higher rate.
Wynn (background)
Yes and no. So about three months ago, when I was pulling these out, they were six and a half, 7%. I just got a quote yesterday for converting a hard money loan to a 30 year investment note at 5%. Do you know who they’re selling those notes to? They’re keeping them in house because here’s what’s happening. The inventory is so low. All these hard money groups are investor-based. They raised funds. Hundreds of thousands of dollars or hundreds of millions of dollars of funds are raised. And if the supply of houses is low and people can’t keep flipping houses, all these hard of money guys have money sitting in an account, they’re all cash in. So since the supply is low, they have too many funds in their bank. They’ve got to get that money, making money for these investors who also not going to make their return so they’re starting to put out all these products. All these hard money guys are putting these products. And as they’re more desperate to make returns, their interest rate is coming down to now I got to go to 5%. I mean, if I go to an open market on an investment loan, you’re probably going to get 4.5%-5% going through bank of America or, or whatever, but keeping it in house, they probably have already, already have your financial information. They just do a switch of the loan and you do an appraisal and you’re good to go. So that’s going to be a whole other avenue of lending for investors which is going to be tremendous, all because it’s a side effect of the housing shortage.
Sam
So I guess kind of the last note before we, we wrap up all this officially, but the other thing to think about, right, because I thought about this a little bit, having a short term rental is what, what’s your competition? I mean, your competition is basically hotels right, up until this point. The they’ve put a cap here, they’ve put a cap on Tybee. They’re, I’m convinced that they’re going to put a cap pretty much everywhere because of how much money these things can make and the fact that people are just going to continue to do it and you’re going to get some disgruntled folks in, in the neighborhoods. Right. So you’re going to put a cap at some point, I think. But ultimately it’s less so about competing against other Airbnb’s. And I mean, if you just look at the numbers, you can have, you can rent a place, you know, a hotel room in downtown Savannah for a couple hundred bucks a night, right. You’re still going to be paying all the taxes and fees and all that. Or you could rent a place that sleeps five times as many people for less than double the price with a full kitchen, with some privacy, with a yard. So I see the limiting factor, I think, isn’t going to be, there’s going to get to be too much competition. I think it’s going to be trying to get in before they put a cap on it and before you can’t do it anymore. So
Wynn (background)
Now Sam mentioned DSCR does everyone know what DSCR loan is? No. Right. DSCR loan is Debt Service Coverage Ratio loan. That means they don’t care about your income as long as you cover your debt with a certain ratio. So they took a rental income. And if your debt service, your rental, your mortgage, all your debts needs a certain ratio and if it covers that ratio they’ll cover the loan, not necessarily based on your income or your W2, or any of that stuff.
Pat (background)
They usually look for like 35%, 45%. So like if you’re bringing in you know, $1,000 a month in rent, then you know your mortgage must be around $400. I think that’s, that’s usually what I look for. If I’m getting loan anyway. I mean, you don’t want to need much more than that on your debt service percentage to, you know, revenue.
Sam
So I’ve talked to a few of them Pat, who, and they’re
Pat (background)
If they’re looking at vacation rentals then it’s probably much less than that, I’m talking about long term rental income.
Sam
No. So there’s more than a few places out there that as long as it’s above one, they’ll give you the loan. So if you’re – that is not, that’s not a smart deal. [unintelligible] So if you’re doing a long term rent and your DSCR, you know, if it, if they say, or you can rent it for $1,500 and the amount that you can charge or excuse me, if you can rent it for $1,500 a month and your mortgage payment is $1,450, they’ll be give you a DSCR loan. But that is not something you want to do. Yeah. Because you’re going to have all kinds of vacancy and maintenance and capital expenditures. So you’re going to be losing money on it, but for the sake of short term rentals, it can work out. Gotcha. But yeah, Katy, I think that concludes it unless anybody’s got anything else.
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Another interesting trend we can see from this graph is the number of homes selling for under $250k around Savannah from the last 5 years.
For those interested in multifamily homes, here are a few tidbits to look at:
Savannah's number of multifamily listings was up to 27 properties in April 2022, compared with 30 active in March 2022 and 22 last April (2021).
This chart shows us trends over 5 years of number of new listings (in green) compared with the number of closings (in blue) for multifamily properties.
And this will show the number of new listings (in green) compared with closings (in blue) over the last year.
