My Rental Property Has Zero Appreciation: Should I Hold or Sell? (Rookie Reply)

0:00If you have equity sitting in a property right now, we are going to show you exactly how to put it to work and which tool to use to do it. And if you've been thinking about launching your first short-term rental, we're covering what it actually takes to get up and running and to stand out on Airbnb from day one. Plus, what do you do when you bought a property a year ago and it hasn't appreciated one single dollar? We'll give an honest review on this.

0:31This is the Real Estate Rookie Podcast. I'm Tony J. Robinson. And I'm Ashley Kerr. And with that, let's get into today's first question. So question number one says, I'm trying to decide my best course of action into the rental game. I have a lot of equity built up in my primary home, and I'm debating whether I should do a cash-out refinance or take out a HELOC. Interest rates were about the same, but the HELOC has a 15-year max term. I tend to hear more people take the cash-out refinance option when keeping a property as a rental. Is this just to keep payments lower or are there other benefits?

1:05My goal is to have money for a down payment on my next property as well as some rehab money. Well, first, I think let's just quickly define the differences between a cash out refinance and a HELOC. If you have equity in your primary residence, there's a few ways you can tap into that. One way is to sell that property, right? You just sell it. And then whatever the difference is between what you owe on that property and what you sell it for minus any closing costs, you walk away with that amount, which you can then go deploy however you want. Another way to tap into that is doing what's called a cash out refinance, where you're able to tap into some, generally not all, of that equity by replacing your existing loan with a new loan.

1:47And the difference between your existing loan amount and your new loan is what you get to take. Now, when you do that, typically, your loan terms will change, right? So it could mean your interest rate will change to whatever days or whatever today's rates are. Sometimes your payment could go up. You know, if rates are higher, sometimes your payment could go down. I refinanced my primary residence when rates were super low, my payment went down. But for a lot of folks, maybe your rate might go up or might stay the same. So that's one way. And then the third option is the home equity line of credit.

2:21this is where your original loan stays in place, right? So the first mortgage that you have, that remains there. And then you're basically, you can think of it almost like as like a credit card, but it's the equity in your home that they're using as collateral. So you get this line of credit that you can use or not use as you choose, and you only pay for the amount that you actually use. So those are really the core three ways. I think for me personally, if you've got a really good interest rate in place right now, I would probably leave that there. So I would avoid doing a cash out refinance.

2:55I know you said, it seems like you said interest rates were about the same. So maybe there's not a whole heck of a lot of difference there. But if you like where you're at, I might leave that there. And I actually like the HELOC because A, it doesn't increase your mortgage payment on your primary residence. And then you can go deploy that HELOC, maybe marry that with some hard money. And you can go out and start finding some rehab projects to where you can hopefully increase the value using what's called the BRRRR strategy, where you buy it, you renovate it. And through that renovation, you increase the after repair value, increase equity of that home.

3:27And then you can refinance from the back end, hopefully recoup some of that HELOC capital that you spent. And I know plenty of folks who have built their entire portfolios off the backs of one HELOC. A HELOC, some hard money, and some rehab projects can go a very, very long way. So I actually went to the bank this morning to do a refinance. It was on a commercial property, took out some extra money. We pretty much had the property paid off until this morning when we took more money out of it. But while we were there, the lender was just like, we have this great rate going on right now for HELOCs.

4:04And this is where if you are going to get a HELOC on your property, you should watch for this where banks are doing promotions. So a lot of small local banks will do this credit unions and their promotion was like four percent interest rate um for six months and then it would go variable um rates and go higher than it said expected between six to eight percent but the the introductory rate is they said they just released it um it's competitive towards other banks they haven't really looked but if you are going to do a HELOC, watch for that where you can get that introductory rate. And Tony, you just did this, correct, on a HELOC where you got an introductory rate.

4:46What was that interest rate and for how long? Dude, I want to say it was 5.99 % for the first six months. But yeah, and then it kind of goes to a traditional variable rate. So think about it, that if you have a plan and you want to use a HELOC to fund your down payment. If you can find a way to pay off that down payment within six months. So like maybe you know that over the next six months you're maybe you're getting a bonus at work or something like that but you want to buy this property now and you have a plan in place or you have additional discretionary W-2 income that you can funnel. So instead of waiting to actually buy your property till you have it saved, you want to use your line of credit and then funnel money to your line of credit to rapidly pay it off.

5:35I don't like it when people use their line of credit and plan to pay it off over the next 10 years. I like the idea of a line of credit to be money that is used for a short period of time and then it is paid off and then is recycled and reused for something else too. If you don't have a plan in place to pay it off rapidly, that's when I would actually go and do the refinance. But it depends, you know, what your interest rate is. And maybe you don't want to lose that interest rate where you have on your current property and you want to go ahead and use that HELOC. But definitely shop around with different banks.

6:12The lender also said to me that they had such a slow first quarter. He's like, please let me know if you are buying anything. We can make deals happen because we just need them. We need the business, we have so much capital sitting. Like if you need to refinance anything, you need to, you're going to buy anything. Like we're getting really, really competitive because we had such a slow first quarter. So like bring me anything you have and, you know, we'll try to work something out for you. So that was like, that has never, ever happened to me before where a lender is like begging me to bring him business.

6:50It's always me reaching out to the lenders and saying, I got this deal, you know, what do you got? And blah, blah, blah, stuff like that. But I think that's a smart thing to remember is that, you know, for lenders, their product is the money, right? And they have to sell their product in order to be a viable business. So I think it's important for us as the investors to realize that lenders want to lend out their money, right? They're incentivized to do that. So I also think that's a benefit of going with like smaller local banks where you can have that conversation and they can hopefully kind of point you in the right direction.

7:22Coming up, someone is about to launch their very first Airbnb and wants to know how to do it right from day one. Tony is going to break that down right after this. Every property, development, and parcel has a story. Revalo helps you start finding those stories faster. Revalo is a new real estate parcel app built to help investors, brokers, developers, property owners, and real estate professionals search ownership boundaries and property information across 158 million parcels. Instead of digging through fragmented records and clunky, outdated GIS tools, Revolo gives you a faster, clearer way to understand what's happening on and around a property.

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9:30They offer landlord insurance built for real estate investors, including short-term rentals. And if you're a BiggerPockets Pro member, you'll also get 5 % off your landlord insurance premiums. Visit biggerpockets.com slash landlord insurance to learn more. Welcome back. Okay, here's our next question from the BiggerPockets forums. I'm about to launch my very first Airbnb listing, and I'd love to hear from those who've been in the short-term rental game. This is a furnished finder apartment in a well-located area, and I've taken care of the basics, cleaning, photos, Wi-Fi, etc. But I want to go the extra mile to ensure great guest experiences and maximize occupancy.

10:08What amenities or touches have made the biggest impact on your reviews? How do you handle check-ins and checkouts efficiently? Any tips on pricing strategies or dynamic pricing tools? What should I do or avoid in my first month of hosting? And how do you manage communication and automate guest messages? So, Tony, you are the short-term rental expert. I am second expert on the show. So let's go question by question. I'll ask you each one of them and kind of give me your best. So they want to go the extra mile. First question is, what amenities or touches have made the biggest impact on your reviews?

10:47Yeah, I think part of this will vary from market to market depending on who your guest avatar is. If you're launching a property in Scottsdale that's catered towards bachelorette parties, that's very different than a property that's outside of Disney World that's catering toward families, which is very different than a property in the Poconos. It's a couple's getaway. So I think the amenities that you offer really need to reflect the guest avatar that your specific property is targeting. Now, you said that it's a furnished apartment. And typically when I think apartments, I'm usually thinking more kind of, you know, metro or suburban type markets.

11:27And oftentimes in those markets, maybe you're getting more of the, you know, less of the vacation traveler, more of the utility business traveler. And what they're typically looking for is more so like a place to lay their head and like a place to work and things of that sort. So for me, I might focus more so on things that cater toward the remote worker, right, or the traveling business professional. Like what are the things that they might need? You know, a dedicated workspace, super fast internet, you know, maybe like a white noise machine so they can get some good sleep, you know, at the end of a long day.

12:00You know, business professionals, maybe it's like a steamer for their dress clothes, right? So just think about the things that someone in that category of traveler might need and try and speak to those. I would say for me, like the biggest thing is cleanliness. Like people comment how good of a job my cleaners have done. and then really the second thing would also be like the mattresses and the pillows like that's like to be very specific those are like things that people have called out not like oh the coffee maker or you know like other items in the house like they talk about how beautiful the design is or how nice the woods are things like that but to be very specific to talk about furniture or anything like that the only thing they talk about is the beds the mattresses and the pillows, how comfortable they are.

12:47Okay. So our next question here is how do you handle check-ins and check-outs efficiently? Great question. So first Airbnb for, from the guest perspective, they can rate your overall listing, right? They can give you an overall rating for your property, but they can also rate you on different subcategories. And one of those subcategories is the actual check-in process. So it's important that you get this right because if it's, if it's a poor experience and then folks will rate you poorly on that and it'll pull down your ratings overall. For us, we try and automate as much of that as we can. So for us, we have on every single property, it's a keyless entry pad.

13:20And we set the code to be the last four digits of that guest's phone number. So it's super easy for them to remember. Hopefully most of us know our own phone number so that it's not one that you'll forget. And then we do a few things to streamline it even more. Number one is that we send them their check-in code multiple times before they check-in. Before, we would send it to them once, and then the day of check-in, they'd say, hey, where's my code? So now we send it to them a few days before check-in. We send it to them the morning of, and we also resend it right before check-in as well, right?

13:52So we try and over-communicate the check-in instructions so it's easy for them once they get there. They also get a link to a video that shows them how to use the keyless entry pad. And then even at some of our properties, we have a little QR code next to the keyless entry pad that links to a video that shows them how to use it. So we try and make it as easy for them as possible to get into the property. And then we also do our best to offer early check-in at no additional cost whenever we can. So our process is that once our cleaners finish clean, they'll notify us and then we'll immediately reach out to the guests.

14:24And our standard check-in time is 4 p.m. But if the cleaner finishes up at 1 p.m., then we'll immediately reach out to the guests and say, you know, hey, Ashley, just so you know, the property was finished a little bit early. We've gone ahead and updated your checking codes so it's active now if you want to get a head start on your vacation, right? So that's how we try and build some goodwill at the beginning of our say. So it's a little bit of automation or a lot of automation and then a little bit of communication to make it easy for them. So then the next question is any tips on pricing strategies or dynamic pricing tools?

14:54Big thing I'll say is use a dynamic pricing tool from day one. Don't try and price manually. Don't use Airbnb smart pricing tool. Use a tool like Price Labs, that'll be the best bang for your buck to make sure that you're maximizing occupancy on days when demand is high or maximizing revenue, I should say, on days when demand is high and maximizing occupancy on days when demand is low. When I first started, I wasn't using anything. And then this was 2018. And I didn't even know about property management software, what dynamic pricing was. But I used to, I would go in and like set my basic rate of like, I don't know what it was,$90 a night.

15:32And then I would manually go in and put like, oh, on Christmas day, it's$150 or whatever. And like, I would have to remember going forward with the calendar to always update the calendar to reflect that before I even started implementing. Now I use Hospitable and I use their built-in dynamic pricing. Okay. So next question, how should I do or avoid, what should I do or avoid in my first month of hosting? And I think in the first month, you want to try and do things that don't scale. And what I mean by that is, I got this from a book, I think it was called The Lean Startup. It's like an older book in the startup industry.

16:13But he talked about how a lot of these SaaS companies, when they first start, they do things that work when you have 10 customers that would never work when you have 10 ,000. So like, for example, they'll personally call every single one of those 10 customers to personally onboard them to get a better sense of how they're using the tool and what does it look like. You can do that when you have 10. You can't do that when you have 10 ,000. I would like to try and take the same approach when you launch a short-term rental, is when that first guest gets there, just call them and say, hey, you're actually our first guest checking in.

16:40We're incredibly excited to host you. Because you are our first guest, there's a chance there might be some things we need to improve upon. And if there is, please let us know. We'd love to have the opportunity to correct that for you. So, hey, hope you have a great day. Just give me a coffee and anything. Right? And so just like super white glove service for those first couple of guests. And if you can continue that on as you scale up your portfolio, even better. You know, as you get to a certain point, it does become a little bit harder to do some of those things. But I think the better relationship you can have with those first two guests, the better job you can get at extracting some feedback from them, then you can go and implement that into your listing or implement into your pricing strategy or implement into your guidebook or implement that into your own processes.

17:22But trying to identify those things that don't scale early on, I think will help a lot. Yeah, there's no way I'm calling someone. But what I did do when I like my cabin, so like our first several bookings, I tried to make a really great impression because I really wanted those five star reviews to start and to gain some traction. So handwritten notes, thanking them for selecting this Airbnb. be the very first guests ever. We did like champagne and, you know, like went over the top and like did let them know you're a first guest ever, whatever. But then, um, for everyone for probably like the first 10 bookings at each.

17:58And I still do this occasionally, not all the time because it's gotten to be a lot of bookings now, which is great, but fresh flowers on the counter, um, water bottles, some sports drinks in the fridge. Um, so a little bit of snacks, um, just little things like that. Sometimes I would like go down and get from the local bakery, get like a pie or something from the bakery and like write in the little note, I left you a treat in the fridge or something like that. But sometimes things like that get tricky with allergies as to, you know, what you can give someone and things like that. But yeah, very important.

18:34I think their very first days, because there can be hiccups, you don't know about them. But also, So this is kind of like building the foundation and your traction are those very few stays for your reviews. And then there was one more question they had, and it was, how do you manage communication and automate guest messages? I think you hit it already, Ash. It's just like having the right software. We both use Hospitable. That's like, I think, one of the best tools for newer hosts to use. A lot of functionality out of the box, but not so much that it's overwhelming. There are other tools out there that I think have maybe more customization, like Guesty is one of those that's super well integrated, has a lot of different bells and whistles, but maybe for the host that's just starting out, they might be overwhelmed by that.

19:19So I think Hospitable is a great mix of functionality with ease of use for the folks who are just getting started, and you can automate the vast majority of your communication when you do it that way. Whenever someone asks me about Hospitable and its features and stuff, the first thing I always think about is how the AI will message for you. And my brain just like can't get past that. It's like I black out anything else because it's like, that is just the best benefit to me is to it reads all your past messages. It pulls in any document you submit to it about your property, you're listing everything.

19:50And it just messages for you and does it way nicer and well, more, well, better written, however I would say that, then I would do it because I can't talk let alone write something out. There's also a button, like if there was something that I need to actually explain, I will write it out and then I will hit the little improve button and the AI will make it form into nice, complete sentences. But it also saves me time because I can literally just input the key points I want to make and then it forms it into nice customer service, friendly messages to send. All right, we have one more question and this one is for any rookie who has ever looked at their property after a year and wondered if they actually made the right decision.

20:34We'll tackle that right after this quick break. If you think property management is expensive, try mismanaging a vacancy or an eviction or a maintenance issue that turns into a five-figure problem because no one caught it early. That's expensive. A good property manager isn't overhead. They're protection against small mistakes turning into big losses. And that matters more than ever in this economy. That's why I like Mind. Unlike other property managers, Mind manages your property like an investment. They obsessively measure the things that matter for your bottom line. Things like occupancy, delinquency, and net promoter score.

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