Ideas to scale up from a single vacation rental bringing over $26,000/month

[Anonymous]

Anonymous wrote:These are tiny homes near national parks where there’s very little lodging. There are a few of these near Badlands/Mt Rushmore SD.

Ahhhh, we saw this near Zions national park - there's a number of tiny home and glamping vacation home properties within 10-15 miles of the park entrance.

Looks pretty miserable in the summer tho. Many of them didn't have air conditioning!

[Anonymous]

Anonymous wrote:My business partner and I came up with a unique short-term vacation rental idea and hired a general contractor to build it from scratch. It took 10 months, and our all-in costs were $528,000. We used our personal cash, no loans. It only has 2 full bedrooms and 2 other sleeping areas for a total of 8 guests. We hoped our average rate would be $350/night, yet, three months after construction, we've been 100% booked, averaging over $860/night and its trending up. Our expenses are less than 20% of the revenue. Neighborhood occupancy 10miles around us is just 46%, which is very low compared to other locations where we could copy-paste the structure.

Since this is the most significant opportunity I've ever come up with, I want to scale this up all over the US. It seemed that the next best step was to cash-out refinance? So we did that. The property was appraised at 87% of our all-in-costs, and the refinancing gave us 75% out. After all the closing costs, we have the 60% of the funds needed ($316,000). And since construction takes about 10 months, the first property would provide $26,000*80% = $208,000. Adding both together = we have the exact amount to do the second property without using personal cash.

How can we scale this faster? I would love to quit my day job, and do 5-7 of those structures, each in a different state, in the next 12 months. This will prove the model even more. We thought about construction loans, but we don't have the 2-year business tax history that most lenders require.

There are risks. My town we had a super host who drove everyone nuts. The neighbors did a Catch 22 on him. Building department charged him for operating a hotel without a license. But he could not get a license. They then pulled CO for house. He then went and rented anyhow but town now had a $1,000 a day penalty.

We have rentals in town I rent. But this person really maximized and made it a hotel. So there is always that risk

[Anonymous]

One of my family members does a similar concept with residential housing (not short term rentals- only long term). Builds from the ground up, works with permitting, loans, etc. it’s a really, really good area bc available housing is low. He’s building another set of townhomes now, which have been rented since before the concrete was even poured. They are putting down a one month non refundable deposit, to rent a home 9 months from now.

[Anonymous]

Anonymous wrote:
This last phrase is evidence you are lying. I have a website for my own rentals and at best 1-2 bookings a year come through google search or Facebook. Airbnb/vrbo is 95%. Unless you are Hilton you won’t attract much traffic to a new single vacation rental site.

Do you also spend $50/day advertising your website across Google, Facebook, Instagram, TikTok, YouTube?

Do you also run last-minute 40% off deals for unsold nights to over 15,000 social media followers?

Do you also have a cheaper rate on your website vs 3rd party platforms?

Do you also have over 10 quality backlinks from various bloggers, influencers, and non-profits?

Does your website also rank in top 10 in google for specific queries in your area that have over 500 in search volume?

etc

But I hear you, since most of this will only work with a unique property.

[Anonymous]

Anonymous wrote:The author of this thread is lying. I am very familiar with vacation rentals business and annual reports from Airbnb most profitable types of listings. None are generating 800/day 80% of the year.
These are usually things with low entry costs like house boats, restored lighthouses etc. But for latter you really need to work with local authorities to make it work.

I don’t work with anything that’s too far from major metro centers and can’t be rented as a regular long term apartment with rental license. Rather have smaller returns than higher management costs or regulatory risks

I guess we're doing something right, that it doesn't seem real ❤️

[Anonymous]

Anonymous wrote:

Anonymous wrote:
This last phrase is evidence you are lying. I have a website for my own rentals and at best 1-2 bookings a year come through google search or Facebook. Airbnb/vrbo is 95%. Unless you are Hilton you won’t attract much traffic to a new single vacation rental site.

Do you also spend $50/day advertising your website across Google, Facebook, Instagram, TikTok, YouTube?

Do you also run last-minute 40% off deals for unsold nights to over 15,000 social media followers?

Do you also have a cheaper rate on your website vs 3rd party platforms?

Do you also have over 10 quality backlinks from various bloggers, influencers, and non-profits?

Does your website also rank in top 10 in google for specific queries in your area that have over 500 in search volume?

etc

But I hear you, since most of this will only work with a unique property.

I would have to make it my full time job doing all of this, and a single vacation rental won't be worth it, even if making $26K/month. It's a level of a corporate campaign to get serious government contracts etc.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The author of this thread is lying. I am very familiar with vacation rentals business and annual reports from Airbnb most profitable types of listings. None are generating 800/day 80% of the year.
These are usually things with low entry costs like house boats, restored lighthouses etc. But for latter you really need to work with local authorities to make it work.

I don’t work with anything that’s too far from major metro centers and can’t be rented as a regular long term apartment with rental license. Rather have smaller returns than higher management costs or regulatory risks

I guess we're doing something right, that it doesn't seem real ❤️

Good for you. Wait till local authorities come after you. I also thought I was making cool 40K/month in my town on 800K investment. But time changes, and it's now strictly regulated. When you generate that much money, someone comes after you at some point.

[Anonymous]

Anonymous wrote:My guess is it’s a tiny house or yurt or treehouse.

those don't cost $500k to make.

[Anonymous]

Anonymous wrote:

Anonymous wrote:
This last phrase is evidence you are lying. I have a website for my own rentals and at best 1-2 bookings a year come through google search or Facebook. Airbnb/vrbo is 95%. Unless you are Hilton you won’t attract much traffic to a new single vacation rental site.

Do you also spend $50/day advertising your website across Google, Facebook, Instagram, TikTok, YouTube?

Do you also run last-minute 40% off deals for unsold nights to over 15,000 social media followers?

Do you also have a cheaper rate on your website vs 3rd party platforms?

Do you also have over 10 quality backlinks from various bloggers, influencers, and non-profits?

Does your website also rank in top 10 in google for specific queries in your area that have over 500 in search volume?

etc

But I hear you, since most of this will only work with a unique property.

if you scale up, it will not be unique anymore

[Anonymous]

Anonymous wrote:if you scale up, it will not be unique anymore

Yeah... In our best-case scenario, we scale as quickly as possible to get to 100 of those structures (1-5 per state), then package up this $30m/year 80% profitable business and sell to investors for $200m before competitors copy us too much and lower prices. I would give this scenario a 2% chance of actually happening, but we will do everything possible to get there

So far it seems like private investors are the best next step.

[Anonymous]

Anonymous wrote:

Anonymous wrote:if you scale up, it will not be unique anymore

Yeah... In our best-case scenario, we scale as quickly as possible to get to 100 of those structures (1-5 per state), then package up this $30m/year 80% profitable business and sell to investors for $200m before competitors copy us too much and lower prices. I would give this scenario a 2% chance of actually happening, but we will do everything possible to get there

So far it seems like private investors are the best next step.

how much of the potential $200m do you think the private investors will require?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:if you scale up, it will not be unique anymore

Yeah... In our best-case scenario, we scale as quickly as possible to get to 100 of those structures (1-5 per state), then package up this $30m/year 80% profitable business and sell to investors for $200m before competitors copy us too much and lower prices. I would give this scenario a 2% chance of actually happening, but we will do everything possible to get there

So far it seems like private investors are the best next step.

how much of the potential $200m do you think the private investors will require?

If we give up half the company now (49%) for a $4m investment - it will give us 6 new structures in 12 months. Then, we can refinance all 7 with a business appraisal that takes the profits into account. Ideally, that ($5m) + income from 7 ($2m) would give us enough to do another set of 10-12 new properties, without further dilution. Rinse & repeat. So 1 -> 7 -> 18 -> 40 -> 86 -> 150+ = sell
Obviously wishful thinking, rosy glasses, etc. But it's not in the realm of the impossible.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:if you scale up, it will not be unique anymore

Yeah... In our best-case scenario, we scale as quickly as possible to get to 100 of those structures (1-5 per state), then package up this $30m/year 80% profitable business and sell to investors for $200m before competitors copy us too much and lower prices. I would give this scenario a 2% chance of actually happening, but we will do everything possible to get there

So far it seems like private investors are the best next step.

how much of the potential $200m do you think the private investors will require?

If we give up half the company now (49%) for a $4m investment - it will give us 6 new structures in 12 months. Then, we can refinance all 7 with a business appraisal that takes the profits into account. Ideally, that ($5m) + income from 7 ($2m) would give us enough to do another set of 10-12 new properties, without further dilution. Rinse & repeat. So 1 -> 7 -> 18 -> 40 -> 86 -> 150+ = sell
Obviously wishful thinking, rosy glasses, etc. But it's not in the realm of the impossible.

I don't see anyone giving you $4mm at this point for 49% of the business which is a few months old and you had equity of 0.5mm in it.Super high income needs to be "stabilized" e.g. last for a few years for anyone to believe in it. Appraisal of you "structure" based solely on income stream won't be likely, particular if they know anyone can build just the same fir 0.5 mm they won't give you $4mm for your project.

You need to finance yourself and grow slowly.

Or steal from US government or something similar to get broader initial capital base

[Anonymous]

Anonymous wrote:

I don't see anyone giving you $4mm at this point for 49% of the business which is a few months old and you had equity of 0.5mm in it.Super high income needs to be "stabilized" e.g. last for a few years for anyone to believe in it. Appraisal of you "structure" based solely on income stream won't be likely, particular if they know anyone can build just the same fir 0.5 mm they won't give you $4mm for your project.

You need to finance yourself and grow slowly.

Or steal from US government or something similar to get broader initial capital base

thanks, you're probably right...

[Anonymous]

Anonymous wrote:

Anonymous wrote:

I don't see anyone giving you $4mm at this point for 49% of the business which is a few months old and you had equity of 0.5mm in it.Super high income needs to be "stabilized" e.g. last for a few years for anyone to believe in it. Appraisal of you "structure" based solely on income stream won't be likely, particular if they know anyone can build just the same fir 0.5 mm they won't give you $4mm for your project.

You need to finance yourself and grow slowly.

Or steal from US government or something similar to get broader initial capital base

thanks, you're probably right...

Well, I refinanced many properties; things like vacation rental rental income is not even taken into account by commercial banks appraisers. It's not a stable income. They look into long term stabilized income, like what would be the downside rental income if it's rented long term to a single tenant. That is their baseline for financing.