EPISODES
Episode 49.
Dalton Elliott, Director of Sales at Lima One Capital
All right, you are stuck with me. This week we are talking about short term rental amenities. What amenities are going to increase your a D R, that’s average daily rate, the most? Stay with me to find out. I’m Dalton Elliott. This is the real estate of things. You’re listening to the real estate of things podcast. All right, let’s dive right into this. I want to walk through five amenities that will increase your short term rental profits. Short term rentals are growing in popularity as a real estate investment strategy right investors are flocking towards them because of the chance to increase cash flow by renting properties by the night instead of renting based on long term releases. Now, to capture that cash flow, short term rental investors need to be…
…laser focused on ways that they can increase their a D R, that’s the average daily rate, and one of the best ways to do that, to increase your a D R, is by adding amenities to your properties that guests will pay more to utilize. It’s no different than a hotel that has a spa, a pool, a great bar, restaurant, so on and so forth. You’RE gonna pay more for that versus a property that just offers a place to sleep. So all this sounds great, right, but only if you can choose the right amenities, amenities that will allow for a D R increases that quickly cover capital expenditures as well as ongoing costs. Now the real estate of things. Podcast crew and the lending team at lemo one capital have partnered to provide research that demonstrates the difference in daily rates the different amenities can…
…provide. Now, the lemo one capital market analytics team reviewed air DNA data on five main amenities from short term rental properties across two hundred and sixty five national markets and their recent stays from summer. So what does that mean? A lot of data across a wide spectrum of geographies, right, and also very recent data. So we’re gonna be looking at pool, hot tub, kitchen, Jim and being pet friendly. which provides the most betting for your buck? Alright, first one. Let’s start with a hot tub, right. UH, three nine two dollar average daily rate with a hot TUB versus two hundred and seventy seven dollars without. That is a forty one difference between having or not having a hot tub. Now, while you may think that having a pool or even a full use kitchen will give you more bang for…
…your buck. The biggest return is going to be from a hot TUB. It’s a bit of a surprise, right. I was a little surprised when I read this, but the numbers do not lie, and all the better. This is great news because investing in a hot tub is usually less expensive than adding a full on swimming pool or a full blown kitchen. You know you’re gonna see that for a D R increase. Uh, and that comes down to almost a hundred and fifteen dollars more per night. So if we really get more and more granular with numbers, if you say the current national average occupancy, that means a unit with a hot tub could bring in two dollars or more per year on average. Now, with that kind of cash flow, you’re gonna Recoup your capital cost of adding a hot tub very quickly. A year or two years maybe tops. Uh So, a couple of markets where hot tubs are especially valuable. Santa Barbara, California, talking about…
…a fifty increase whenever you have a hot tub versus not having one, and then Bozeman, Montana, yellow stone area. Shout out to Kevin, cost or talking increase. So hot tubs. Check them out. THE NEXT ONE WE’RE gonna go through kitchen. Right, three two dollars. With a kitchen it’s a D R versus a hundred and nine dollars. So renting out a room, a finished shed or a tiny house, that has appeal for plenty investors, but the numbers show that having a full kitchen available to guests, that is a key way to unlock cash flow. The full kitchen allows you to charge was more on a daily basis. That’s that’s real value that you have added to a short term rental. One big piece to keep in mind when we say kitchen. Don’t skimp. The lesson here is not to skimp when developing your next short term rental. It’s gonna be cheaper upfront to provide…
…a sync, a microwave and hot plate. Right. We have a kitchen. Technically speaking, yes, but most guests want access to a full kitchen and they’re willing to pay to get it moving on down the line. Number three, uh, pool. Right, at first adding a pool seems like a way to significantly increase the average daily rate of your short term rental, but the truth is that it’s only going to add or so to the average daily rate. Far Less than hot tubs, far less the full kitchens. Right. So this means adding a pool should not be an automatic yes for short term investors. That said, in some markets of pool is going to add significant value to a short term rental. Again, we’re taking national averages in this data and pulling out, you know, and in some cases generalizations,…
…educated generalizations. But always remember that you have to do your own market research. You have to dig into your particular market, see what’s working, see what’s not working, uh, and make a decision based on R O I at the end of the day. So let’s look at Hampton’s right, Hampton’s of Long Island. You’re saying a property with a pool in this wonderful area gets an average of six hundred and sixty six dollars more in a d R. that’s not the A D R six sixty six dollars more in a D R versus a property without one, no pool, a d r five oh four. In the Hampton’s with a pool one thousand one seventy dollars. That is more than double. So if we say increases, it worth the headache? Is it not on a national level. All right, we’ll make inferences based on that data, but look at your specific market. If you’re in the Hampton’s that is a massive difference and it changes the calculus for you…
…on whether or not you make that capital expenditure. Another one right, look at a desert locale like Palm Springs, California. Right, similar story to the Hampton’s. So some markets is gonna make a bigger difference, some markets is gonna be below that threshold. So do your research and make a decision based on data, not on hunches. Number four, Jim with Jim Without a gym. I personally one of my favorite things when I travel for work get off a plane, go, run, shower. If I can’t run, always shower. I feel nasty after being on an airplane going through UH airports. So that happens either way, uh, but running after so you know you’re like kind of out of town, get to see a new place. So I get the thought of you on vacation and something workout. So access to a gym. That’s absolutely gonna allow you to charge a premium on…
…your short term rental, but the percentage difference is definitely more modest than hot tubs or pools. So that means as an investor, you need to be more strategic whenever you look to add a gym. Make sure you’re purchasing the right equipment so you can recapture the cost through increased a d R. Now, when we dive into the numbers again, market by market basis, we see a common thread. Beach areas can provide better premiums for gym’s on the Jersey Shore. I never watched the show, but throw a fun fact out there. I am a massive bachelor, Bachelorette Bachelor in Paradise Fan. Peter Season was awful. Hannah should have chosen him during her season. Frustrated thinking about that. All right. Uh, and Jersey Short, the a D R is going to increase right from five fifty two to six nineteen when the gym is included. Key West, Florida. This is another market where you…
…see that big positive job from five oh nine per night to five seventy nine per nine. Uh, it’s a big gain on an annualized basis, considering key West has almost seventy three percent occupancy right, one of the highest in the nation. All right, to shut us down. We’re going to number. Five pets allowed, no pets allowed. What do you do? Uh, this is an interesting one. Right, it is low single digits. You’re talking to four percent increase for allowing pets versus not allowing pets. And it’s not as simple as that, though. You have to get in the nuances. We’re gonna talk a little bit about the platform you’re using to rent out your short term rental. So, unlike other amenities we’ve gone through, one big difference that I feel like we do have to call out is that allowing pets does not require a major capital expenditure. Right, you don’t have to buy something big have construction going on like you would if you’re a hot…
…tub or a pool respectively. Uh, you don’t have a major capital expenditure. So you might choose some other investment, like type of flooring to reduce wear and tear from pet Paus, but generally like that, there’s not a big capital expenditure here. Now, that’s good, because we talked about the fact that the financial upside that is also very limited. Right, just a four percent premium on the A D R um. This maybe because guests are gonna have to pay a pet fee and or a cleaning fee on top of the actual rate of the short term rental. Uh and and if you’re considering allowing pets, you need to review the terms of service for the platform you’re using to rent out your short term rental to see if they’re going to receive a portion of pet fees are cleaning fees. So you really have to look at how these fees are broken up how that effects what you’re charging your average daily rate. So once you do that research, you’re gonna be able to make a solid decision on whether you want to allow pets if that is part…
…of your short term rental strategy, if that’s right for you. So that’s all I got. What’s your next step? Short term? Real investors, you know you need to look at amenities like a host, not a guest. While it may be nice for you to have a Pool A gym, it may not make financial sense to add those amenities in. Once you crunch the numbers, be data driven and while you may prefer a pull to a hot tub as a guest, as an owner adding a hot tub might lead to better cash flow in the long haul. So try to take personal preferences out to a decent extent. Be Data driven. This is business purpose decision, but knowing the value of different amenities, both on the macro level and for your market where your short term rentals are located, it’s gonna help you make smart decisions that unlock more revenue and ultimately more profit from your investment.
So do your research, make the right decision increase your cash flow. Another shout out to lemon one capital’s market analytics team for all the data provided in this episode. Reach out to Lima one. Lemon one dot com partner with the nation’s premier lender for real estate investors. Not only does leman one have really an exceptional short term rental offering, but they do everything from rehabs rentals, single asset portfolio, new construction, bridge lending multi family give the crew at Lem one capital call eight hundred three nine, oh four to one too. I’m doton Elliott. This is the real estate of things podcast. Thanks everybody for listening. Are you a real estate investor looking for the right lender that can finance all your deals and help you scale? Lima one capital has the best suite of loan products in the industry. Barnet, whether that’s fix and flips, fix and holds to new construction or buying rental properties. They…
…have incredible financing solutions for it all. A reliable, common sense lender is one of the most important parts of your investment team, and that’s exactly what you get with Lima one. Let Lima one capital show you how they’ve helped thousands of real estate investors scale and increase their wealth. CHECK OUT LIMA ONE DOT COM or call eight hundred to five nine zero five nine five to speak with the consultant and preparation for your next project. Thank you for joining us today on the real estate of things podcast. Subscribe and tune in weekly for new content from the industry’s best while we continue to unpack the nuances of this dynamic market. Follow US across social media for additional insights and analysis on the topics covered in each episode, and remember to rate, review and share the show.
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