Author Topic: Furnished Rentals - Used Furniture  (Read 1535 times)

totoro

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Furnished Rentals - Used Furniture
« on: November 23, 2012, 02:06:54 PM »
MMM's post on real estate got me thinking about furnished rentals.  I have four and they work for certain markets and folks.  There are two types typically in my experience:  short-term workers (like medical interns) and vacation rentals.  The advantage is higher weekly rates and the disadvantage is more turnover and maintenance and vacancy.   I like the impetus it provides to maintain and upgrade a property.   

What really makes furnished rentals easy for me is craigslist - or where I live - usedeverywhere.com.  High end furniture is available at budget prices.  Does anyone else have tips about operating a furnished rental?


jrhampt

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Re: Furnished Rentals - Used Furniture
« Reply #1 on: November 25, 2012, 06:50:49 PM »
Unrelated, but it's nice to see someone who can make a profit on short term rentals...it seems like most people discount them immediately, saying too much turnover eats into profits.  I do have a friend who rents out her furnished condo to contract professionals, and it's been working out well for her so far.  In her case, she just married and moved in with her husband so left most of her old furniture behind.

totoro

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Re: Furnished Rentals - Used Furniture
« Reply #2 on: November 26, 2012, 10:26:45 AM »
Yes, it can work out surprisingly well depending on the area you live in.  I have had medical interns, engineers on contract, folks attending events/concerts, parents visiting kids going to the local university, and business folks.

I think the world of work travel is changing.  Vacation rentals are taking a larger proportion of the hotel market which is not great for hotels.  What I like about vacation rentals is that you have a home feeling while away with all the conveniences.  The space is way larger and with a family this is great. 

What is really propelling the shift is the internet.  You have the ability to search and read reviews instantly online.  Most recently I am looking at airbnb as an option for one of our duplex suites.  I like that it allows folks to use a credit card to book. 

One of the surprising (to me) side effects of this type of rental is that it motivates me to clean, repair and furnish to a higher quality than I might otherwise invest in and I feel good doing this because guests enjoy it and there is a return financially that justifies spending more.  It keeps me on track and on schedule with renos too.

Meadow Lark

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Re: Furnished Rentals - Used Furniture
« Reply #3 on: November 27, 2012, 02:01:45 AM »
I've thought about doing this.  I may in the future, just am not sure if it is a good idea.
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freelancerNfulltimer

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Re: Furnished Rentals - Used Furniture
« Reply #4 on: November 30, 2012, 09:26:14 AM »
How do you find the renters, where do you post to advertise for short term or corporate rentals?

totoro

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Re: Furnished Rentals - Used Furniture
« Reply #5 on: November 30, 2012, 10:46:44 AM »
For vacation rentals I advertise on perfectplaces.com

Not sure how good it is for every location - you would need to ask local vacation rentals people for what works best for them.

jrhampt

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Re: Furnished Rentals - Used Furniture
« Reply #6 on: December 01, 2012, 09:09:09 AM »
Totoro, since you have experience with furnished vacation rentals, can you give me your opinion on this scenario:

There are a couple of studio condos available in a popular ski area in New Hampshire for about $60k.  They are fully furnished, and there's a rental program onsite.   Property taxes are about $700/yr, HOA fees are about $300/mo.  The studios rent for around $650-$700/week in the winter (or $120/night w 2-night minimum stay) - not sure if summer rates are different, but a lot of hikers in the white mountains in the summer, although winter probably has more tourists.  I'm not sure what kind of a cut the property management rental program takes if they manage the property, but we are about 4-5 hours away so would probably want someone else to manage it.  I'm trying to find out what the rental history has been on the units I'm looking at.  Based on the numbers above, do you think we could at least break even?  What else would you be trying to find out in order to figure out if it was a decent investment from a cash-flow perspective?  We would probably stay there a few times a year as well, so would get some use out of it if it wasn't rented.

Oh, and it was built mid-eighties.  The association fees cover water, sewer, trash, plowing, landscaping, and cable.  ETA also that property management takes 50%.    Seems high, right?  Although I suppose that could be due to the short-term rental costs -  cleaning, advertising, etc? 
« Last Edit: December 01, 2012, 01:12:37 PM by jrhampt »

totoro

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Re: Furnished Rentals - Used Furniture
« Reply #7 on: December 01, 2012, 05:45:12 PM »
I'm not an expert on the ski condo vacation rentals in the US.  I ran the numbers for our local hill in the Okanagan in Canada and it just did not make sense but your example depending on number of weeks you can expect to rent might. 

You need to talk to other owners about vacancy rates and then run the numbers  - make sure hikers really do rent in summer.  Make sure they own the same type of unit because a bachelor might not be everyone's cup of tea.

$60 000 furnished is REALLY cheap - for Canada at least.  You'd be looking at only $300 or less a month for a mortgage - if you need one. That is a plus.  You really need to look into management fees because they can be high - 50% is really high!  Usually in Canada cleaning is the renter's fee - I charge $100 for cleaning for a week's stay and that is what it costs.  Advertising ranges from free to pretty cheap ie. $150 a year. 

Is it part of a rental pool or can you rent to anyone?  Rental pools are not great because everyone takes their turn.  I much prefer a separate title that I manage myself.

You haven't identified how much hydro (heat/cooking) is going to cost. 

So.... don't be shy... ask other owners at that particular ski hill how it is working for them for this type of property. They will know.  If you were looking to buy where I have I would be a good resource.  If you are thinking of doing this then your single best investment of time will be in finding someone who is already doing it at the mountain and talking to them.

If I had to ballpark it I would say this will cost you $10,000 a year to own not including property management fees.  Given that you have to give away half your rent to property management... you will need to rent 25-30 weeks a year to break even and have it free yourself.  Is this realistic?

Once you have concrete numbers for costs set them out in a spreadsheet.  I use this spreadsheet: http://www.biggerpockets.com/tools/REIPropertyAnalyzer.xls

Also, what is the chance of prices appreciating/depreciating at this location?



jrhampt

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Re: Furnished Rentals - Used Furniture
« Reply #8 on: December 02, 2012, 09:55:35 AM »
Yeah, I was thinking 50% was insanely high, too.  I think you can rent to anyone - not sure what a rental pool is.  Since you manage your property remotely, how do you arrange for check-in/check-out logistics (key drop-off, etcl)?  I can see hiring a cleaning service and doing the advertising myself, but I'm not sure about the check-in stuff and maintenance calls.  What do you usually do?

Asking other owners is a brilliant idea - I found a couple on vrbo who have been very helpful so far.  Thanks for the suggestions and the spreadsheet!

totoro

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Re: Furnished Rentals - Used Furniture
« Reply #9 on: December 02, 2012, 12:58:23 PM »
I have family in the town where I grew up and they clean for me.  I have lockboxes on the outside with a key code for keys.  You can hire people though - if it is a ski hill there will be workers willing to do this or who already do this.  Ask other owners. 

As for maintenance, we do regular maintenance ourselves as we use the place one week a month (I work there one week a month).  Emergencies are handled by family although we have not had an emergency call yet.  The only thing that has gone awry (knock on wood) is that the internet did not work properly once.  I called a local technician and got him to fix it.

The key with distance is regular visits if you can combined with a network of folks you can call on.  I would not be a fan of doing this if I was not regularly there - at least a few times a year.