How To Dominate the Luxury Short-Term Rental Market with Rachel Gainsbrugh

My guest today is Rachel Gainsbrugh. Rachel is the owner of Short-Term Gems, a Luxury Airbnb Coach, and has been investing in luxury short-term rentals for the past 2 years, resulting in a portfolio of over 18 cash-flowing properties, owned. She has also been seen on Netflix and BiggerPockets, and she is a contributing author to a new book, Hospitable Hosts, to be released in the Spring of 2022. Rachel is passionate about helping others find their way by making simple the complex process of investing.

We begin the episode with Rachel sharing her background story and how she got into short-term rentals. She shares that she loves numbers, but early on, financial literacy was not part of the equation. She learned some hard lessons after graduating from grad school with a crushing debt that she had to pay. After getting rid of it, she and her husband started out investing in real estate. They turned over all the stones, multifamily syndication, long-term rentals, industrial, and commercial, but when they found short-term rentals, they knew that was the real deal, and they got into this niche.

We then talk about how Rachel has created luxury short-term rentals while not in the market. She shares that a good portion of her portfolio is within communities where they see travelers not necessarily for vacation purposes but primarily for business purposes. According to Rachel, there are over seven uses of short-term rentals, and anyone can use them to generate income depending on the location of their property. For her properties in the suburbia market, most of her primary guests are individuals who have been displaced from their homes due to disasters such as house fires or floods. House repair can take from 6 to 12 months, and Rachel is a provider for insurance companies looking to place such families in a home similar to their normal standard of living. This situation is a huge use of short-term rentals outside the vacation market.

Next, we talk about how to find out short-term rental regulations and why you need regulations. Rachel says you can find them through a google search by searching for the short-term rentals ordinance of the area to get the government municipality code. According to Rachel, regulations come in so many shapes and sizes, and they depend on the zone for that particular property, and you have to read them to understand the requirements. It’s also important to note that HOAs often trump any regulations, and for Rachel, she follows two rules when investing in HOA communities. First, it must be a resort community, and the dollars she is spending on a monthly HOA are going towards perks such as swimming pools and boat slips. Second, 50% of the properties owned in that location must be short-term rentals; otherwise, she is not interested.

We then talk about what the word luxury means in Rachel's brand and her criteria for acquiring short-term rental properties. According to Rachel, each market is different, and night rates for luxury ranges from $700 to $2500 per night. Their purchase price for their properties from 2019 to 2021 was between 175k to 462K, and at the end of last year, they secured a property for 1.3M. Rachel also shares that she finds property through MLS, and she doesn’t look at anything less than five rooms. This has enabled her to stand out and pop out from the crowd, giving her leverage in dealing with a different demographic and avatars.

Lastly, we talk about the processes that Rachel has in place to minimize the amount of time she has to spend managing her rentals. Rachel shares that she uses a dynamic pricing tool, PriceLab, that prices her rentals day-to-day based on occupancy of other short-term rentals, occupancy of hotels, and events happening in the area. It uses AI, and she has to train it and tweak it from time to time to stop it from going too low. Pricing your property appropriately is really important, and the goal should not be 100% occupancy. For Rachel, her goal is around 65% to 75% occupancy, and that is where she makes more money. At 85% occupancy, she starts to lose money because her product diminishes. Other software includes a channel manager software to manage calendar conflicts, remote lock to provide codes to clients, noise monitoring software, and auxiliary cameras.

Make sure you don’t miss another amazing episode of the Just Start Real Estate Podcast with Rachel Gainsbrugh and get valuable information on how to dominate the luxury short-term rental market successfully!

Notable Quotes:

“Short-term rentals occupancy rate should be 50% or higher, if it’s 30%, that is a high-risk investment, and it tells you no one is coming to that area.”