At Envision Advisors, we are always trying to increase our knowledge in order to provide clients with more real estate education and resources. Not only do we try to find great properties and deals, we also look for ways to increase returns and find services that will make it easier to manage investment properties.
Lauren Valinoti and I recently sat down with Shalom and Jonathan, owners of AirSimplicity. AirSimplicity is a property management company for owners of short term rentals. They explained to us how their business works, what it takes to have a competitive property on Airbnb and similar platforms, and what things owners should be aware of before getting started.
- Listen to the podcast “#293: AirSimplicity: Property Management for Short Term Rentals” on the Denver Real Estate Investing Podcast
- Watch the YouTube video (at the bottom.)
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
Shalom previously worked in property management for an apartment complex in Texas before moving to Colorado and getting involved in real estate investment. He purchased a primary residence and tested out short term rentals on it, at one point funding an entire trip to Europe from someone renting out his home while he was away. He convinced Jonathan to move to Colorado as well so that they could go into business together.
They bought a property together in Denver that they used as an Airbnb prior to the city altering its regulations. Soon, they realized they could help other investors maximize their income from short term rentals, too. Because property management for short term rentals is so different from long term, their specialization in this area has proven valuable for property owners who are interested in the concept but don’t know where to start.
What is a Short Term Rental?
While there is no dictionary definition of a short term rental, most municipalities categorize it as a rental length of 30 days or less. Generally, short term rentals are for people who are only staying in an area on vacation or an otherwise limited time, typically finding a place to stay on Airbnb, VRBO, or other smaller platforms.
Most localities have restrictions and regulations regarding short term rentals, all of which are subject to change. The city of Denver allows short term rentals, but the home must be the owner’s primary residence. Other areas around Denver, such as Wheat Ridge, allow investors to have one purely short term rental property with no limitations on how often it can be rented out. Generally, once a lot of investors start buying up properties in an area and turning them into Airbnb’s, neighbors complain and the law changes. In Colorado Springs, for example, they eased restrictions but tightened them up again within five months due to complaints. It’s important to stay current on the restrictions and regulations in your area.
Short term rentals are advertised mostly on Airbnb, VRBO, and other smaller platforms. In an urban area, Airbnb tends to be the best place to advertise, while VRBO is more popular for rural areas. Homes are ranked on these sites based on reviews from guests, which is why it’s so important to be highly rated. To be competitive, properties need to not only be furnished, but have high end finishes and details, too.
How does AirSimplicity Work?
AirSimplicity is a property management company focused solely on short term rentals. Short term rentals tend to have a much greater return than mid or long term rentals, but the tradeoff is how labor intensive they are. AirSimplicity takes care of all aspects of running and managing a property for the owner.
To start, they will sit down with a prospective client and run the home through AirDNA. This software takes into account local comps, occupancy rates, and premium rental months to project how much income a property will generate. While it tends to underestimate returns, they’ve found it to be the best software out there for this type of projection. After getting an estimate, they’ll compare it to a long term rental to see if it’s worth it for the owner to go the short term route. Generally, if it’s not at least $200 more, it’s not worth it. Oftentimes, short term rental properties will generate tens of thousands of dollars in income, which is what makes them so attractive to investors.
Once AirSimplicity determines it’s worth doing a short term rental, they’ll go over local restrictions and see what the owners have in place already. To be competitive, the home must not only be fully furnished but have the highest quality designs and products, too. Shalom and Jonathan have learned over the years which small things will contribute to the value of the home, such as having a USB charger in a lamp next to a bed or providing a colander for the kitchen.
Their loose formula for calculating costs is $6K for a 1 bedroom property with an additional $3K for each additional bedroom, generally between $10-14K in total to get a home up and running. Once it’s being rented out, owners should expect to pay $100 a month on maintenance to keep it in great shape as well as $100 a month to replace consumables, such as shampoo and toilet paper. Some localities charge taxes on top of the standard hospitality fees.
AirSimplicity will take care of every aspect of managing the property, such as arranging cleaners and maintenance work, lawn care and snow removal, and any issues that pop up during a guest’s stay. They charge 20-25% of the nightly fee, which is typical for short term rental property management. If the property is located in a particularly remote area, the fee may need to be higher to ensure they can assemble a full team to service it. The only things AirSimplicity can’t do are pay utilities or mortgage; while they can help owners with the permit process, they can’t submit the request on their behalf. If there’s a big renovation needed, they will contact the owner for permission, but they will otherwise oversee the project themselves.
Key Points to Keep in Mind When Considering Short Term Versus Long Term Rental
It’s always riskier to operate a short term rental compared to longer length leases. Owners should be aware of the restrictions and regulations in their area before investing in a property with the intent to use it as a short term rental. Shalom and Jonathan recommend calling up city council or zoning personnel to get an idea if rules will be changing any time soon. They also stress the importance of having a backup plan, such as switching to a mid or long term rental or even selling. Their worst case scenario occurred when COVID forced them to scramble to get renters in place with longer leases. None of their clients lost money, though some were only able to break even.
While the returns on short term rentals tend to eclipse mid and long term rentals, it’s important to remember the costs involved, too. The initial investment in getting the home to a competitive point is significant, and recurring costs for upkeep are considerably higher, too. AirSimplicity is transparent about their fees, and they don’t want owners getting caught off-guard when they are charged for snow removal and other seasonal maintenance.
There are seemingly counterintuitive rules of thumb for short term rentals that show how different they are from mid and long term rentals. For example, it is often more profitable to convert two separate units into one big one for short term rentals. This is because bigger properties tend to be more niche and can command a higher rate than a smaller one that is easier to find.
Shalom and Jonathan make sure owners understand the nuances involved with short term rentals before getting started and help owners every step of the way.
Connect with Shalom and Jonathan
If you’re interested in learning more about the services AirSimplicity offers, reach out to them. They are happy to help owners assess if short term rentals are the right move for their property, and will even help connect them to other property managers if it isn’t the right fit.
And if you’re interested in your own investment property, reach out to me and my team will help you figure out the best move for you. Check out our free resources for people who would like to buy a rental property in Denver.