Welcome back to another episode of Into The Airbnb, where we talk with Airbnb hosts about their short-term rental experience. Today's guest is Scott Aaronson from Detroit, Michigan, who owns and manages eight listing start in Detroit. Today, Scott will share with us about his personal experience on short-term rentals, Airbnb as well and also some useful insights for people who might be interested in hosting in that area. This episode is sponsored by Airbtics, the only one analytics dashboard for short-term rental investors managers, where you can find the precise Airbnb data such as occupancy rate, revenue, average daily rate and so on. So, without further ado, let's get into it! Can you tell us how did you get started on Airbnb?
Yeah. So I started in buying properties in 2010 or 2012, after the 2008 crisis. Then I thought I saw the Airbnb thing, I think in 2018, and then I converted one of my units into Airbnb to see how it will do in Royal Oak. Then it did well, so I started converting more and more and now here I am a few years later going on the eighth one.
Oh, so you've been doing short-term rentals since before Airbnb?
Yeah, yeah. Since 2012, I think or two thousand somewhere around there, 2013.
2013, great. And how did you manage them before Airbnb? Did you have a website for them? Craigslist?
Oh, sorry. No, I've been doing long-term rentals since 2012. But I also have a youth hostel and some other in a house where I'd have people do month to month, I just advertised on Craigslist.
Okay, okay. I understand, great. So in the area you're hosting in Detroit, how is the seasonality like?
Pretty dead in the wintertime, less dead in the summertime.
And in those seasons, how is your average occupancy rate like?
Lately, it's been a lot lower. I would tell people be careful coming into this market because it's starting to get oversaturated with Airbnb. So yeah, I would say maybe, you know, 50 to 60% occupancy now.
Is this the low season or high season?
It starts in end of April, it starts the high season.
Okay, so 60%. Are you thinking of expanding your listings to other places or just being there?
I am thinking about potentially going other places. But I don't know where yet. Maybe Pennsylvania, maybe South Central America like Nicaragua or things that will support my lifestyle, but I'm definitely not going to expand any more listings here. The pricing is too expensive for the amount of money that you get with Airbnb, it's good if, you know, it's good if you purchase. If you're like me and you bought Airbnbs and you bought houses in 2010, 10 years ago, it's really really good, but I don't see it as being really that good right now.
I see and for those eight eight listings you have right now, what is your pricing strategy?
I have a minimum and then I use PriceLabs and they do an algorithm for me with a determined based off of, you know, they do the algorithm and other stuff. Probably similar to this Airbtics things
Oh, I see. Do you sometimes do manual pricing like your own research and stuff?
No, I just set a minimum. I set a minimum and I mean, maybe sometimes, there's a couple of times like new years where I set the prices or there's a big festival on May, I set the prices. Outside of that I just use PriceLabs
Have you tried the Airbnb smart pricing feature? And how was your experience with it?
Yeah, like most people. Most people will tell you that the Airbnb smart pricing features is pretty bad. They really encourage you to put your prices significantly lower than the market rate.
Have you had any experience with it?
With smart prices? I'm sure I've used it before, but not for very long. I pretty much went to PriceLabs pretty quickly.
Okay, yeah, I see. And what about the demographic of people you get in your listings? Are they tourists or close to each other? Do you get the same kind of guests?
You asked me what type of guests I get? In the winter, you know, it's a mixture people. Sometimes it's locals that want to come in and, you know, I'm by areas like Royal Oak, which are like little suburban hotspots with bars and restaurants. So the weekend, they get a lot of people that want to go out to local bars and then drive home, just have a local place. But you know, a lot of business travellers, some people coming to visit family, you know, all that type of stuff.
And if you don't mind sharing, what would be your return on investment, like your yearly return on investment?
Oh, gosh, it's pretty high. Really, really high, but I'd say this with a bit of caution because I don't think that you could replicate it now. I mean, my return on investment is really, really high because I bought in Detroit in 201. So like, I can tell you, you know, for instance, I'll give you an example. This is revenues, I can make about 9 to 10. In the summer months, I make between eight, you know, I can make? Well, I'll just tell you in percentage of revenues, well, I can make, you know, the top earning if I'm really doing a lot, I can make between seven and $10,000 a month off of a property that cost me 190,000, that's revenue, so there's expenses, obviously. A property that costs me $190,000 to purchase. So, you know, do the math on that, even if, you know, for me, I'm the 30 to 40% range, but like, don't get the wrong idea because that property that I bought for 190 now, it's probably you know, you're gonna have to buy it for 550 to 600. So it's like, you know, all of a sudden that return goes down significantly, you take that return down to levels that, in my experience probably, wouldn't be that great for the amount of work involved and the amount of hassle and risk on your property and all that type of stuff.
Right, I understand completely. And in all these years being an Airbnb host, what have been your top challenges?
Top challenges are always... Well, for me, personally, it's been maintenance of the units, especially now it's very hard to find people that can help. I think I was surprised with the amount of wear and tear that goes on to Airbnbs. There's some advantages, like, you know, your units are cleaned every day, so you know, that everything's cleaned and but like your units will get tore up a lot quicker than like, you know, I'm looking at rehabbing units that I've rehabbed just a couple years ago because everything's broken and so part of my challenges have been finding good contractors that do the correct job on stuff, so things don't break after a couple years. Then the second one is fixing all the errors in the beginning from when I didn't have good contractors
Is it easy to find crew for your listing there? For example a cleaning crew, plumbers, things that you'll need?
Cleaning crew is easy. Cleaning crew isn't a big dea, but everything else is very very challenging. You know, It's less challenging for me because I've been in the market for a long time and I have a couple million dollars with real estate now. I have maybe a dozen places. I have a youth hostel in Hamtramck, you know, a 25 bedroom hostel in Hamtramck. I have enough properties where I can build these relationships with people that want to work with me, and I give people enough business. Like if I have a plumber, I'm giving him enough business between all my properties, where like, you know, I call him more than once a month, so he knows who I am and we've been doing this for so long that we have that relationship where he wants to keep you happy. If you're coming into the market and you want to buy one Airbnb and you have to deal with this type of shifts, it's gonna be a lot more challenging for you because you don't have that economy of scale.
I understand completely. So, lastly, any tips that you'd like to share for other Airbnb host?
Yeah. Know your market. Well, you know, that's the number one rule for buying real estate in general buying or arbitrage. Again, I don't do very much arbitrage, but you got to know your market, what that means is like, don't just go to a random place that you don't know anything about because you'll look at numbers and you see a good return. I think if you do that, you're setting yourself up for failure. If you want to go into a market, the best way to do it is to really, really know that market. So like, if you're able to do it, if you're in the right position with your family and whatever, go there, live there for a couple months, see what it's like to be in that area, you know, see what type of travellers are. Then after that period, once you really understand the culture in the area and then start looking at investments. Like a perfect example is Detroit, you go on the wrong year, I mean, there are areas of Detroit that look really, really nice, but like, if you don't know the nuances of the neighbourhood, especially in the city of Detroit, if you don't know the nuances of the neighbourhood, you could really easily get screwed. So, you know, knowing the neighbourhood; or another option is if you don't know the neighbourhood and you can't go and move there, partner with somebody that does. Partner with a co-host or partner with someone that can guide you and say: "Listen, you don't want to buy an Airbnb on this street. If you buy an Airbnb on this street, your house is gonna get broken into or you're gonna get partiers or you don't want to accept these types of guests. So just know your market, really put in a lot of focus. There's another saying in real estate that people don't make money selling, they make money buying. So make sure that you're, you know, you got to make sure you're getting a good value for your time. Sometimes with markets when they're overpriced, you really can't get that value and if that's the case, you should don't just get whatever you can just maybe consider waiting until the value changes.
Great. I understand and for the people who already own houses in Detroit, like you who have been a property owner since 2013, I guess, would you recommend them to still do Airbnb there, so they can get like a higher revenue?
I'd recommend that they sell me their Airbnb units. Give me a call, my name is Scott Aaronson, I'll buy your Airbnb units and go retire somewhere, you know, you don't need to do this, this hardwork. No, I was joking. If your question is, if you already have property in Detroit, should you sell it? Or should you turn it into Airbnb? Is that your question?
Yes.
I think that Airbnb can be a very powerful tool where you can make a lot of money, you know, but I would caution you that it's a business and if you're going to be in the Airbnb business, what I tell everybody is, if you're going to be in the Airbnb business, be in the Airbnb business, it's not a good passive investment. This is not passive income. You know, it's don't go in, you know, in your better with economy of scale, so don't go in there with one property and expect it to be hands off. If you're going to be running it and not having a co-host, expect to get those calls to deal with people that are not able to get in your Airbnb, expect to have to deal with that. And if you don't, then you either get a co-host to manage everything and expect to give the co-host 20 to 30% of your profits or not your profits, your revenue. Or get into the long-term game, there's a lot less stress and demand.
Great. So that'll be it for today. Thank you for sharing your story and some tips with us!
Cool. You're welcome.
Thanks for listening to into the Airbnb. We're looking for hosts and other people in the short term rental industry to interview. If you have what we need and would like to share your experience in this podcast, please send us only four is a pm
