How to get 100% occupancy in your condo on Airbnb
In this episode Andrew la Fleur discusses renting out your condo on Airbnb with a condo investor and Realtor Lillian Hanna. Lillian has first hand experience as an Airbnb landlord in her downtown condo. What are the potential risks and rewards of using Airbnb? What are the important things to know for condo investors and mistakes to avoid? Learn from Lillian’s experiences on this episode.
LILLIAN HANNA INTERVIEW HIGHLIGHTS
2:17 What is Airbnb?
6:49 How did you get started in Airbnb, and how has it been for you?
11:25 Different ways you can do with Airbnb.
13:38 What’s your advice in terms of the buildings potentially to buy?
18:40 What has been your occupancy rate? and revenue?
20:55 What do the numbers look like for you? Your unit, is it a 1 bedroom unit?
22:17 What was your top month in the past couple years, in terms of revenue?
22:55 What’s the lowest revenue you’ve had?
24:45 The other big question is going to be, how much work is it?
28:53 Was there any mistake you learned when you were starting the Airbnb?
31:55 Advice for the condo investor, who is thinking about doing the Airbnb model
Andrew la Fleur: Airbnb is potentially a lucrative opportunity for condo investors, but is it right for you? We’ll talk to somebody who has first hand experience as an Airbnb landlord on today’s episode.
Announcer: Welcome, to the True Condos podcast with Andrew la Fleur. The place to get the truth on the Toronto condo market, and condo investing in Toronto.
Andrew la Fleur: Alright. It’s my pleasure to welcome to the show, Lillian Hanna. Lillian is a realtor, real estate agent, with Century 21. Lillian, thanks for coming on the show.
Lillian Hanna: Thanks so much for having me, Andrew.
Andrew la Fleur: Yeah, it’s great. Why don’t you tell everybody a little bit about yourself, what you do, how you got started in real estate, that sort of thing?
Lillian Hanna: Alright, Yeah. So, I actually, have been in real estate for the past five years. Over the years, I’ve been able to work with a lot of buyers and sellers. Actually, a big portion of my business has been in the downtown core, working with buyers and sellers, purchasing big construction condos, resale condos, and also selling them. I also have experience with managing and hosting vacation rentals, which is why I’m here today. I actually now share my experiences with my buyers on, if they want to be renting their places out, on a short-term basis.
Andrew la Fleur: Yeah, exactly. That’s a great segway, there. We obviously want to talk to you, and that’s why we were having a conversation the other day about different things, and it came up that you are an Airbnb landlord yourself in a downtown condo. So, it’s a big question I get from a lot of investors is, the Airbnb model. Is it something they should be doing, or not? What buildings allow it, or not? I thought, you know what, why not get somebody in who actually has real firsthand experience, themselves, with Airbnb, in their own condo downtown, and get your take on it, and just hear your story about how it’s worked for you? Pros, and cons, and that sort of a thing.
So, first of all, maybe just to lay the groundwork, everybody probably knows what Airbnb is, but just in case there’s somebody out there listening who doesn’t know what Airbnb is, could you just tell us what is Airbnb?
Lillian Hanna: For sure I can. Yeah, so Airbnb is really one of many other companies that offer a service, basically it’s an application in the website as well, that users, guests that come in throughout the year to visit Toronto, or any other countries for that matter, and they’re looking for an alternative to hotels, who might be quite more expensive than these Airbnb suites. They go look at these sites they look on the let’s say they have a concert, or some of sort of event that they are taking a part of in the down town court. So, they look on these websites, and they check to see availability. Just like a hotel website really. They can just check the availability. They can see the reviews of the particular unit, and they can see the amenities, and they can see parking, if it’s available, and all of that. They can see pictures, and from there, they can actually go ahead and reserve a unit. They’re usually more for shorter term stays, but really and truly the actually host, so myself, I host an Airbnb downtown.
I actually set my own [inaudible 00:03:44]. I’ll post my own pictures. I’ll set my own profile. I will let people know about what’s great about my place, and why they should stay at my place. Other guests can actually see the reviews that I have on my unit, to see other guest [inaudible 00:04:02]. Like how did they enjoy staying with me. So, definitely reviews are extremely important. So, yeah, usually you’ll find that [inaudible 00:04:12] are more safer for a weekend, a few days, a month. Some people stay for four months in one Airbnb. It just depends. But as the host, you can actually set the parameters. You can set the minimum time. For example, for me, I did not want guests staying for a one night stay. For me, I actually set my minimum for three nights actually. So, if somebody was trying to book for one night, the system would not allow them, for my particular unit.
You have different durations for sure, and what’s great is the whole idea behind it really, Airbnb is trying to allow owners of units, it’s not necessarily just condos, but also homes. They want to create some sort of extra income for the owners in case they’re away on vacation, or they just don’t need all their space. Let’s say they wanted to just rent out one room, or in the case of a house, maybe they don’t need the basement, so maybe they’ll rent out the basement, and make maybe, I don’t know, $50.00 – $60.00 a night. It is nice for individuals who do not particularly need their whole space. They can actually share their living space for some of the other weeks, for extra money.
Andrew la Fleur: Yeah, yeah, so that’s great. It’s a great summary, and a great overview of what Airbnb is and what it does. It’s allowed property owners access to sort of this short term rental market, that otherwise was very fragmented. It existed before on [Cogeegee 00:06:00] and other sites, and Craigslist and things, and other models that came before Airbnb, but Airbnb has really become the biggest player in the world for this market, and obviously the appeal for the condo investor in Toronto is the idea that, if you put your property on Airbnb, the idea is you could potentially get a lot more rental income, renting it out by the night, than you could by the month. So, tell us about your experience. You told us a little bit there, of what you prefer, you don’t want to just do night by night. You have minimum night stay. So, tell us about your experience. Where is your condo? I don’t know if you can tell us about the exact building itself or not, but when did you buy your condo, and how did you get started in Airbnb, and how has it been for you?
Lillian Hanna: Sure. For me actually, I had purchased my property as an investment unit. This was actually a couple years ago now. For a few time, I was working with a few other investors who were purchasing condos, kind of all over the city, and I was kind of like walking through the process with them, of just kind of deciding which investment strategies do they want to go with. Do they want to go with the fully furnished unit, but they do list on bnb or other platforms? They could even list it. It doesn’t necessarily have to be Airbnb. It could be Craigslist, or Cogeegee or what not, but some chose to do fully furnished, with the host actually making more money, and others just deciding, “You know what? We’re not really interested in furnishing. I do not have the extra cash to actually furnish the unit. Let me just leave it unfurnished, and we would work out the numbers. I would let them know what to expect, if it’s unfurnished, and what’s expected if it is actually furnished.
I’ve been going through that process with a few of my clients. Some of them actually decided to go with Airbnb, and I really worked with them closely, and I kind of watched what they were doing, and giving my input on different companies that can come in. For example, I have a company that I use for murphy beds. They come in, and they actually custom make murphy beds for smaller units, to actually have more space in their actual unit. So, I would recommend some of the service providers that I worked with in the past, and I saw these units come together, and then I saw that they were doing very, very well, in terms of a short term stay.
So, I said, “You know what? Why not give it a shot for myself, and see how it goes?” I actually only had about five days to furnish the actual unit, which was very interesting.
Andrew la Fleur: So, you mean you had five … Sorry, so you mean you bought the unit, you closed on it, and then five days later, you had your first Airbnb person coming in?
Lillian Hanna: So actually, what happened was, I had purchased the unit in March, and then I actually closed in May. So, I said, “You know what? I really don’t want any sort of downtime. So, what I did was I actually created an Airbnb account. I uploaded some pictures, and then what happened was, I actually was fully booked. By the time I actually received the keys to the rental, by May, I was actually pretty much at 100% occupancy from May to September.
Andrew la Fleur: Wow.
Lillian Hanna: I had pretty much zero downtime at all.
Andrew la Fleur: In the first few months, that’s great.
Lillian Hanna: Yeah. I just hit the ground running with that.
Andrew la Fleur: This was when? This was, you bought it two years ago, you said? About two years ago?
Lillian Hanna: Yeah.
Andrew la Fleur: So, 2015?
Lillian Hanna: Exactly, yes.
Andrew la Fleur: This is a condo in the entertainment district, we’ll say. Is that accurate?
Lillian Hanna: Right. It’s in an entertainment district. I won’t really say exactly which one it is. If you want to know the particulars of it, I can definitely let you know, but definitely the location is the very, very great location. It’s in an entertainment district. So, as you can imagine, the demand is extremely high, because you do have … I have the Waldron Center and the Metro Toronto Convention Center really close by. I actually just got a request this morning, for somebody coming from the Philippines, and they have a [Rotary 00:11:24] convention, that they’re going to be attending in January, and they’d like to book my place for, I think, seven days or something, or something like that.
Anyways, they pretty much just state why they’re interested in coming to the city, and who’s going to be staying in there, and then it’s up to me to actually accept [crosstalk 00:11:22].
Andrew la Fleur: So, you have to actually approve them. So, you can, I believe there’s different ways you can do it, right? In Airbnb you can actually set it up so people can automatically book, without your approval or you’ve obviously taken the step to only allow people to book with your approval, so they have to … I guess they give you a little bit of a profile, or they fill out a form or something to tell you about themselves, and I imagine you can see their profile, and ratings, and so on?
Lillian Hanna: Yeah, so I can definitely. I will have that option for sure to automatically approve guests, because that’s just asking to really … You’ll run into some issues if you have the wrong people in there. So, I tend to ask them why they’re there. Obviously, how long they’re going to be there. Just to get to know the a little bit. Of course, their reviews are very, very important. Actually one time, somebody said, they were actually coming from Texas, I believe, and they said, “Oh, well, we’re going to be actually driving down from Texas, and there’s a tattoo convention at the Metro Toronto Convention Center, and your unit is really close to this, so we’re actually into it.” I actually didn’t believe that there was a tattoo convention, so I actually looked it up before I actually approved them. I don’t know, I’ve never heard of this before. Let me just check it out. There’s all sorts of conventions downtown that you wouldn’t even know exists, but yeah, it’s good.
Location is extremely important, and I definitely think that I have that as a bonus [crosstalk 00:13:11].
Andrew la Fleur: Yeah, yeah. So, being in the chain absolutely is. So, in terms of, sorry to cut you off here, but just in terms of location, going on that point. There’s obviously many great locations downtown, but not all buildings will allow Airbnb. How does it work in your building? If you’re talking to the condo investor out there, thinking about doing this, what is your advice in terms of the buildings to potentially buy in, to do an Airbnb, versus buildings to avoid?
Lillian Hanna: Yeah, so actually, many condo owners are under the impression that they can rent out the place for any duration of time. What they may not know actually, is that each building has their own set of rules, when it comes to the minimum [inaudible 00:14:03]. For example, one condo, and again, every condo is completely different when it comes to this. One of them can have a minimum rental period of one month. For example, if they list their place on Airbnb, then they have to put that as one of the rules in their profile, that nobody could be actually requesting a reservation for one week, or one night, or anything less than one month. So, you do have to know the rules and regulations behind your condo corporation.
For example, for mine, they do actually allow for transient rental. In my building, they actually have their own set of [inaudible 00:14:54] they rent out on a short term basis as well. That’s kind of what attracted me to this particular building. You have to know what your rules are for the building, because-
Andrew la Fleur: You certainly don’t want to buy into a building thinking you’re going to Airbnb it, and then you find out that they have a strict 12 month rental, or longer policy, right? So, it’s very important to do your homework on that.
Lillian Hanna: Definitely, and definitely consult with your real estate agent as well, because ultimately it’s not going to really, let’s say you’re looking at a listing, a condo listing for resale, it’s not going to just be on that listing. It’s not going to indicate that it’s a transient, or it allows short term. It’s not going to actually list that on the listing. You would actually have to speak to the building management. That’s how it works.
For example, from my building management, what they have said is that, yes, you could rent it out for transient rentals, short term rentals, but the management doesn’t know in writing as to who is actually staying in the unit at all times, and that we actually, as owners, we communicate with the guests, what the rules of the building and the by-laws, and all that of the building, so that they are fully aware, so that they do not interrupt the enjoyment of the other unit owners, who are actually living there. We don’t want to disrupt them, so we do definitely have an obligation as owners to make sure that they know, that your guests, who are actually staying in your unit are actually going to follow the rules, or else you’re just going to get some serious issues.
I actually know of a host that ran into a really interesting situation, that I had never heard of before, but I’ll share it with you. This investor was managing, I think, a couple units in different buildings, and this particular investor, he didn’t really have any problems when it comes to booking the units. There were a group of friends that stayed at his place for the weekend, and they got a little bit too rowdy, and they actually created a huge mess in the lobby. The thousand dollar carpet was completely ruined in the lobby. As you can imagine, the owner got a very nasty phone call from management, saying that he’s violated the condo regulations, and that really that the minimum stay for his particular building was one year.
So, long story short, the buyer had to pay $1,000.00 for damages, and then he was actually sued $5,000.00. He actually said, if he did not pay that $5,000.00, which he did, it would have actually registered a lien on his property, which is quite costly, of course.
Andrew la Fleur: Yeah, yeah, so certainly one of the risks, as you said, getting into doing Airbnbs in a building that doesn’t officially allow it. That certainly goes to understanding the building, understanding the management, and understanding the policies, before you even think about doing it, and understanding the risks that some people will still do Airbnbs in buildings that don’t allow it, and they’ll take on that risk themselves, which can be, as you said, quite dangerous, if tenants come in and do something like that.
Let’s get into the numbers, if you don’t mind. Let’s talk about occupancy rates. In your experience doing it for a couple of years, what has been your occupancy rate? What percentage of the time is it actually rented out? Then, talk to us about revenue. How much money do you make renting it out on Airbnb basis, versus, tell us how much would that same unit rent out for, if you just rented it on a 12 month, unfurnished standard rental basis?
Lillian Hanna: Yeah. I think it all comes down to the vacancy rates. You definitely can get a stronger return on the short term rentals, but you also have to make sure that you’re following a system to make sure that your vacancies are quite low, because for example, if you’re getting $100.00 a night on Airbnb, but then you’re averaging less than 15 reservations for the month, then you’re probably better off renting it out unfurnished for one year.
You definitely have to have some kind of system in place to make sure that you have maintained your low vacancy. How I do that is, I was doing it kind of, I was testing a few different methods. In terms of what’s been working for me right now, is that I actually allow Airbnb’s system to automatically set the price per night, based on the availability, and the demand in the area. I’ve pretty much had pretty much 100% occupancy, which I know sounds too good to be true but really and truly, I’ve had that for the past couple of years, because I’m letting the system kind of do the work for me. If one night I have to go down to, let’s say $90.00 a night, but then another night it’s bumping it up to $250.00 a night, I know that it’s charging the guest $250.00 because there’s no inventory, and there’s some sort of major event happening in the city, such as this.
Yes definitely, you do have to follow a system. It doesn’t-
Andrew la Fleur: So, what do the numbers actually look like for you? Your unit, is it a one bedroom unit?
Lillian Hanna: It’s a one plus den.
Andrew la Fleur: It’s a one, plus den, 600 square feet, entertainment district. If you were renting that out for the past couple of years, on just a 12 month rental, what would that average, for the last couple of years per month be?
Lillian Hanna: I get on average, it would be about $2,000.00. I do not have a parking spot, so that does have a going rate there. That would be for the unfurnished. However-
Andrew la Fleur: About two thousand, okay.
Lillian Hanna: Yeah, and then [inaudible 00:21:33] the Airbnb model that I’m doing I can get between $3,000.00 to $4,000.00 or $4,500.00 per month.
Andrew la Fleur: Wow.
Lillian Hanna: Definitely the highest months that I get, revenue I get, is in the Summer. I definitely get the highest there, but definitely because I’ve had close to 100% occupancy the whole time, it has definitely been better for me to actually rent it out as a furnished unit, rather than an unfurnished unit. I’ve been able to actually cashflow [inaudible 00:22:13].
Andrew la Fleur: Big time. Yeah, so do you recall, what was your top month ever, in the past couple years, in terms of revenue? You said, was it like $4,500.00?
Lillian Hanna: Yeah, I would say about $4,500.00. Yeah, but keep in mind as well, [inaudible 00:22:32] the Summer months are great in the city, because obviously, you have a lot of events happening, and the weather is great. However, when you start getting into October, November, and right through to March, April, it is slower. The requests definitely slow down quite a bit.
Andrew la Fleur: So, what would be the slow months? What’s the revenue in the slowest month? What’s the lowest revenue you’ve had?
Lillian Hanna: I would probably get around, let’s say, I’d probably get half of what I would usually get in the Summer months. It’s still not too bad, but I can’t guarantee that every month in the Summer, is going to be occupied. That’s the main issue here. So, what I actually do during those slow months. There’s a lot that I did from November to April, I actually rented it out to just one person. What I did was, I still rented it out through Airbnb, which is great. It’s a great tool, but I actually put the minimum of those months. So, really nobody was allowed to be booking for let’s say, one month or one week. It was only that particular period of time that they could book.
Luckily, I actually had somebody that was coming from Turkey, and they came and they were studying English at that time. They actually ended up taking up the whole, all of those ones that I got higher than if I just kept half the month empty, for example. It worked out really well for me, and I really avoided the-
Andrew la Fleur: The down times. Yeah, you were able to just rent it out for the whole Winter at a lower rate. The other big question that people always ask is in terms of debating whether they should go Airbnb or not, assuming they’re in a building where they’ve researched it and it’s okay. The other big question is going to be, how much work is it? How much effort and time is required? How much management is going on? You’ve got people coming and going all the time. What’s been your experience with that? Is it a lot more work, than just a regular straight unfurnished rental, and is it worth the work, in your opinion?
Lillian Hanna: Yeah, I definitely would say it’s a lot more work, than just putting it on the market for one year, for example, because you’re actually having to … You’re hosting people. Whether you’re actually living in the unit, or not. For me, I’m not actually living in the unit with the guests. I give them the place, but that actually might even be a little bit more work than if I was actually living in there, and just renting out a room, or whatever the case is. It is a lot of work, because you actually have to [inaudible 00:25:44] set up. You have to make sure they have bedding. You have to make sure they have towels. You have to let them know about the Wi-Fi. You have to actually get Wi-Fi, get cable, and you have to make sure that the unit is fully equipped, for people to be very comfortable in your unit, because ultimately, that’s going to effect your ratings, and it’s going to get people to either never come back again, or come again.
It is a lot of work, and you do have to be, kind of ready to think on the fly. As far as if a guest messages you and says, “Hey, like …” and this actually happened to me at the beginning of when I first started. I didn’t have a system in place. I didn’t really have a cleaning provider, that I was very comfortable with. Anyways, I had a guest go in there and upon their arrival, they found that the towels were not dry. So, they kind of said, “Well, that’s not really nice. Why didn’t you do that? We should have clean towels.” They thought it was actually used towels, because they were a little bit damp.
The problem was, I didn’t go into the units before they actually arrived. I left the keys for them at the concierge. So, I didn’t know that towels were damp. They came in, and they noticed and they actually messaged me that. So, I said, “You know what? There must have been something that had happened with the cleaning provider, because obviously the place was very clean.” They had cleaned the unit, but I guess but the cleaning service providers didn’t wait until the towels were completely dry. I thought that was a given to make sure that the towels are dry before you hang them, however, you do have to be very specific now, that you have to set systems in place for even your cleaning providers. You have to give them a checklist. That was kind of some of my going things.
It was funny because I was actually on my way to the area. I was actually going out on a Thursday night. I actually ended up going to Winners and picking up some towels, and taking it to them. I mean talk about service, right? They actually really, really appreciated it, and that situation was [crosstalk 00:28:18].
Andrew la Fleur: That’s one of the examples that you said, as you’re learning and you’re setting up your systems, and getting your cleaning person coming in, in between each showing, making sure they understand, like you said, I know you told me before, you have this extensive checklist that the cleaning lady goes through. Do all of these things, every single time, in between guests, and now you’ve kind of got it working like clockwork, after working out some of those kinks. Were there any other mistakes? Like, think of the early days, or what other mistakes, or was there another story of a mistake, that you learned from in the early days when you were starting the Airbnb?
Lillian Hanna: Yes, for sure. Of course, in the beginning you’re so new and it’s normal to kind of have these mistakes. I ran into a couple of them myself. Well, this isn’t really my mistake, but the building did not turn off the heat. I guess they had been waiting a couple weeks before they had turned the heat on and it was kind of cold. My guest was like, “Oh, well, I’m freezing.” So, I actually had to actually go bring him a heater, so he’d feel a little bit more comfortable. You have to, I guess, anticipate all sorts of different situations.
Another thing is too, I didn’t really think this would even be an issue, but again, it was all something that I learned from as it kind of went on. From my first two guests, they were kind of like, they kind of set the tone for me. Okay, I need to actually, just clean everything. So, for example, my condo is really close to the [Lane Branski’s 00:31:05] top patio, and during the Summer it actually gets pretty loud. So, I actually didn’t think to put that as a little bit of a disclaimer in my listing, however, I did get a complaint that, you should have let us know that it would be a little bit noisy, or for example, there’s condos being built all around my place, so that was another thing, that if I had disclosed it to my guests in my listing, that there’s a little bit of noise. If you’re a light sleeper, this may not be the place for you. However, I will [inaudible 00:31:07] them with, “Hey, listen it’s one of the best locations in the city.” You have to expect noise, but I learned from a few negative responses and reviews, that I need to be very explicit and really disclaim everything, including things that are good or bad. You have to let people know what to expect, because it’s the worst when somebody’s expecting one thing, and then they get something totally different.
Andrew la Fleur: Right, and that goes to your ratings, and your ratings are so important. Like you said, if you get a couple of negative reviews or something, that can really effect the occupancy rate on your unit, as you’re renting it out. Just as we’re running out of time here, but as we’re wrapping up for this conversation. It’s been great chatting with you, Lillian. Any final parting words of advice for the condo investor, who is thinking about doing the Airbnb model in their condo? Any other parting words of advice for them?
Lillian Hanna: For sure. Definitely, you do have to, again, I’ll reiterate this, because it’s so important. You want to make sure that you’re not getting into any sort of trouble. Make sure that you’re consulting with your agent, and make sure that you’re consulting with the building management. Make sure what their rules are for the minimum rental period. So, like I said, if it’s one year, then you have to do one year. That does not mean, you can’t list it on Airbnb. Sure, you can list it, but you have to know that it’s one year, so somebody has to rent it for a whole year, or if it’s six months, same thing. So, just be very weary of that.
Also know that this model’s not for everybody. There’s higher risks, and you actually must have kind of a greater risk. Sorry. A greater appetite for a risk. You must actually be able to deal with certain things that come up. So, if you have higher vacancies [inaudible 00:33:07] parking [inaudible 00:33:10], or if you have some demanding guests, you have to be able to kind of work through those issues in a timely manner. You have to follow systems, among them a reliable cleaning providers, and all that so you can have less hiccups. Make sure you have excellent customer service. Be very, very prompt. I had lost a couple guests because I didn’t respond to their inquiry in a timely fashion, and they actually emailed me back, and they’ve already booked another suite, because I was a little bit too slow with that. So, make sure you have extra supplies at all times, so that you’ve not having to get them supplies mid trip.
Also, let your clients know the amenities in the building. Let them know the Wi-Fi password. Leave them a little note giving them everything they need to know. Letting them know where the garbage shute is. What the passwords are, all that stuff. The managers really appreciate that. Even leaving some maps for them. I know that, that is very helpful. Give them some restaurant suggestions in the area. That goes a long way as well. Also, just even before they arrive actually, send them a little note, and let them know where the location is again. Literally, a few final details. Give them [inaudible 00:34:41] airport. Let them know ways to get to your place. Definitely be very, very specific, and again, pre qualify your guests. That’s very, very, very important. That’s going to go a long way, if you could pre-qualify them. Lastly, it’s very, very important to consult with your realtor, and compare your investment options, and see if this is a model that you want to go with, or not. Those are kind of my tips.
Andrew la Fleur: That’s great. That’s great. Thank you so much, Lillian. It’s been great chatting with you about your experience with Airbnb. All the best with it in the future, and if people want to get ahold of you, or talk to you more about this subject, what’s the best way for people to reach you?
Lillian Hanna: So, yeah, you guys can call me or text me at (647) 284-2244, or you can actually email me at [email protected][inaudible 00:35:37]. Thanks so much, Andrew. I really appreciate you having me today.
Andrew la Fleur: Great. No, thank you for being here. Appreciate it, and I’ll talk to you again soon.
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