Last updated on April 14th, 2020
Today’s Guest is Alexander. He runs 1 Airbnb listing in Redwood City – at the heart of Silicon Valley in California. The listing is called “Cozy 1 BR Pool house with bdrm loft“. It’s a self-contained one-bedroom pool house. The average occupancy rate is 80%. Nightly rate is 160$, so it’s generating over $3,500 per month before tax.
J: When did you start and why did you start?
Alexander: Sure I have had a painting cleaning business for 16 years and what I do is very much tied in with real estate rentals, people buying selling, moving renting and what I would do for the last you know 16 years is making a place look perfect after the family. We would move out, right. And I was doing a job in Redwood City for a very young couple. And I’m 41 Yeah, this young girl was probably 10 years younger, and they had a little baby, you know, went to their house and I was gonna give them a quote for painting and cleaning. And I asked her, so what do you guys run this place for? I always asked to know because my wife and I had the house in our backyard. We always rented for yearly rentals, we bought this house in 2009. And at first, we were a little skeptical to rent it out because we wanted our privacy and we were young. And then we started realizing quickly that we have a lot of bills and the money can be great. So we rented it for a year to an older woman grandmother, right for a very low amount just to test the waters out. Yeah. And after she moved out, we got a young Facebook kid because Facebook’s headquarters are in Menlo Park, which is 5-10 minutes drive from here. Yeah. And so the Facebook kid was wonderful and he was great. He stayed a year and a half. And when he left is when I went to that young woman’s house, and I asked her what she rented for. And she had a one-car garage that they converted into a little studio unit. And their unit was much smaller, you know, less desirable neighborhood. It just wasn’t anywhere as nice is our unit. Yeah. And she told us that she was making over $3,000 a month. This is years ago. This is one that the unit should have rented for 1300 dollars. Yeah, and I could not believe that they were getting so much money. And so I came home super excited after asking so many questions. Then, I told my wife and she goes, No way. We’re not gonna have a hotel in our backyard.
So I knew that that was my biggest hurdle was my wife. I had worked on her And the ideas and answering all of our questions and the details for six months. And finally, she agreed to do it. So we started buying furniture for Airbnb. And when we finally had it set up, which was really easy to do, just like anything new in life when you’ve never been on Airbnb or been on the website, it’s confusing for the first person but when you really sit down and set it up, it’s very, very quick, very user friendly. But for the first two or three weeks ahead, and this is exactly what you probably want to know we were nervous we had put money into buying a couch, a TV, paying for cable, buying all the toiletries in the class where the kitchen was so after good weeks and not getting a hit. We were a little nervous. and we were starting to get scared. And then all of a sudden our first hit came. Yeah. And it was a woman from Turkey. And she said, Hey, I, I’m moving my husband and we were going to be working for a tech company. And we’d like to rent your place for seven months.
J: Is it common to have like long term guests in your Airbnb?
Alexander: Yeah, so we’ve been very fortunate there. It very much depends on your situation. Our rental is across our backyard and owning a painting, cleaning business and being in the hospitality industry. It made it very easy for us to get long term guests. There are people who rent rooms on their house or just have a small apartment with as homey as our pool house. They may not get the same long term rentals that we’ve had for us.
Yes, most of our renters are little long term and currently, we have someone that is remodelling their house in a neighborhood and they rent our place for three months, you start to come up with it as a new renter, or sorry, as a new Airbnb host, you start to come up with who would rent my place who would want to be here for six months? Who would want to be here for two months? And the answer truly is you don’t know. It’ll be your neighbor’s grandmother. It’ll be your neighbor of the block and you’ve never met, just had a grandchild in the area and they want to come to stay, but they don’t want to stay with their son and their daughter in law because it’s too close and too personal. So they want to be close, but they don’t want to be in a hotel. Right and get screwed by all the hotel taxes and occupancy taxes and parking taxes. So yeah, most of our rentals, renters and guests have been long term, I’d say a minimum of three weeks and most of the months.
J: Are you just on Airbnb? Or do you use any other channels like Homeaway
Alexander: so we have only done Airbnb. Because of a few reasons why my wife and I years ago started a VRBO and we had a bad experience. Another reason for using Airbnb is because they do have a large platform for helping out they do have a million-dollar policy to help out. If something gets broken, They are a great middleman for solving things and they have resources. The third reason why we love Airbnb and haven’t tried anyone else is they have worked out a deal with our city so that if someone stayed less than 30 days, they were will facilitate and directly take out of the situation of the equation, the occupancy tax, which is also known as the hotel tax, which is 12% or area. And all of the other sites have not done this yet. The first couple of years. Airbnb hadn’t worked out any deals with any cities. But recently in the last six months, they had worked out a deal with Redwood City so we don’t have to come into Redwood City with paperwork and say I’ve had this many guests for this much time. How much do I owe? It just comes out of the equation and it’s really easy on our end.
Paying 400 dollars per month to rent an apartment, and making 300 dollars profit before cleaning and utility fees.
J: What’s the typical demographic of the guest.
I would say most of our guests are younger, and I wouldn’t say you know, teenagers or 20. I would say most people are young families, I would say probably about your age, late 20s to early to mid-40s. But not to say we haven’t had a few grandparents or haven’t had a few 50s or 60-year-old but most people are families looking to relocate, or people coming to try and start a new business in Silicon Valley. Or people coming to visit college-bound children so they might have people at UC Berkeley or Stanford. And then also there is people just come in to visit family in the area, which is also a big one. But really, it’s just amazing that you never know why they’re coming or who they’re coming to see until they tell you, but there is a lot of opportunity in our area. I have looked recently on a map to look at my competition and I was shocked to find there are tons of new listings. I mean, I would say, forty new listings in my area from the last time that I looked at it a year and a half ago. Because there are more listings, obviously, that’s gonna affect the price. So I should be technically lowering my price by about $20 a night, but I have yet to do that because we are lucky enough with having enough booking.
J: Do you personally block your calendar for a certain purpose like for your private use?
Alexander: Yeah, actually, the people that we are renting to right now, for three months, are remodelling our house – I blocked a week after they’re leaving. The reason why I did this is that they have young children. They have pets. And I could tell just in the first week that they were saying that they’re going to be very hard on my property, meaning I’m going to need a day to fully do touch up paint, running needed day for carpet cleaning, and I’m probably going to need two days of cleaning. I know that sounds excessive. But I didn’t want to have someone book two days after they’re leaving, and not be able to return my property into the pristine condition that it deserves to be in for the next guest. We also my wife and I will book things in the summer if family members are coming to town and we want them to stay with us. That’s what gives us the flexibility to Airbnb for us allows us to make more money monthly for our client or for our family, which pays our high mortgage in the Bay Area. A mortgage in the bay area can be anywhere from 4,000 to 12,000. And if you have an average job, it’s a lot to pay so Airbnb gives us the flexibility to use our pool house and allow family members to stay there and us to use it but it also allows us to make more money monthly than we would have for regular rental.
J: What’s your occupancy rate? You’d say? Because right now I can see that you’re fully booked for the next two months.
Alexander: currently booked more than I would say that we are easily 75 to 80%. That would be the best. Because I know that most, we usually have renters for two to three months at a time. Yeah, two times a year. And on the other times, we’re still booked three nights a week. So I would say we’re doing very good.
J: I saw that your price was higher on the weekend. How did you price them?
Alexander: Oh, yeah. So here’s the funny thing. I set up those prices three years ago. On the weekend, and I didn’t know what I’m gonna do. Just like just choose some numbers The best I could and I have yet to change those because they still worked for the last three years. Every time I start when someone doesn’t stay with us for two weeks and I start getting worried and I’m about to lower the price. Someone books it for three months and they don’t like it. Please. So I chose Friday and Saturday nights to be higher prices just like hotels do. Then Monday, Tuesday, Wednesday, Thursday, are cheaper. But really, now that I’m saying this out loud, I’m kind of doing it backwards because in Silicon Valley, all of these fancy hotels that we raise for $700 a night for Monday through Friday for the tech workers, and then the weekends when they all are gone. They dropped to $200. So maybe I should be doing mine backwards, but so far, it’s been working.
If you enjoyed reading this episode, why don’t you check out Renee’s story and Umar’s story!