#FinancialDueDiligence #ComplianceChecks #FinancialAnalysis #LocalContacts #BusinessStrategy #RevenueOptimization #PropertyInvestment #FinancialManagement #PoconosSTRConference #ThePumpkinPlan
Nestled in the picturesque Pocono Mountains, the recent STR Conference illuminated pathways to success in the hospitality industry. With Monroe County's record-breaking Hotel Occupancy Tax collections as a backdrop, attendees delved into strategies for leveraging the region's natural charm in rental properties.
Led by keynote speaker Bill Faeth, attendees learned the importance of prioritizing exterior appeal in property selection and negotiating advantageous financing terms. Bill's steps for finding the perfect property emphasized patience and diligence, setting the stage for a fruitful investment journey.
Let's talk about everything that was discussed during the conference:
a. The Hotel Occupancy Tax is a levy imposed on guests staying at hotels, motels, or other lodging establishments within Monroe County. This tax is typically a percentage of the room rate and is collected by the county government. In 2023, Monroe County collected over $14,000,000 in revenue from this tax, indicating a significant contribution to the county's finances.
The fact that hotel occupancy taxes collected in 2024 are expected to once again exceed $14,000,000 suggests that the hospitality industry in Monroe County remains robust and continues to thrive. This consistent revenue stream is beneficial for the county as it provides funding for various public services and projects, such as infrastructure improvements, tourism promotion, and community development initiatives.
The expectation of continued high tax revenue reflects positively on the local economy, indicating sustained demand for lodging accommodations and tourism activities in the area. It underscores Monroe County's attractiveness as a destination for travelers, which in turn supports businesses, job creation, and overall economic growth within the region.
b. Short Term Rentals (STRs) play a significant role in driving consumer spending and contributing to the local economy of Monroe County. When visitors stay in STR accommodations, they not only pay for lodging but also spend money at local businesses, contributing to the overall economic activity in the area.
One notable aspect of this economic contribution is consumer spending at local stores. The convenience of staying in an STR often leads guests to shop for necessities and amenities at nearby retail outlets. In the Poconos region, three stores stand out as top destinations for such spending:
1. Walmart: As a one-stop-shop for a wide range of products, Walmart attracts both locals and visitors alike, offering groceries, household items, clothing, electronics, and more.
2. Home Depot: With a focus on home improvement and construction supplies, Home Depot appeals to homeowners, contractors, and visitors looking to enhance their rental property or undertake DIY projects during their stay.
3. Weis Markets: This grocery store chain provides a convenient option for visitors to stock up on food, beverages, and other essentials during their stay, supporting both short-term renters and local residents.
The prominence of these stores underscores the symbiotic relationship between the hospitality industry, represented by STRs, and the retail sector in Monroe County. As guests patronize these establishments, they generate revenue and support local businesses, ultimately contributing to the economic vitality and prosperity of the community.
c. 77% of STR Hosts only have 1 property. This provides insights into the structure and dynamics of the hospitality industry in Monroe County. Here's a deeper exploration of what this statistic suggests:
1. Small-scale Operation: The majority of STR hosts operate on a relatively small scale, managing just one rental property. This indicates that many hosts are likely individuals or families who have chosen to rent out a spare property, a vacation home, or a portion of their primary residence to generate supplementary income.
2. Local Entrepreneurship: Hosting a single property reflects a form of local entrepreneurship, where individuals capitalize on the demand for short-term accommodations in the area. These hosts play a crucial role in diversifying the lodging options available to visitors and contributing to the local economy.
3. Personalized Service: With a focus on managing a single property, hosts can often provide more personalized and attentive service to their guests. They may be able to offer tailored recommendations, respond promptly to inquiries and issues, and maintain the property to a high standard, enhancing the overall guest experience.
4. Community Engagement: Single-property hosts are more likely to have a strong connection to the local community. They may live nearby or have deep roots in the area, allowing them to offer unique insights into local attractions, events, and amenities, thereby enriching the guest experience and fostering a sense of community engagement.
5. Lower Barrier to Entry: Operating a single STR property may have a lower barrier to entry compared to managing multiple properties or larger-scale operations. This accessibility can empower individuals with entrepreneurial aspirations to enter the hospitality market and benefit from the potential financial rewards it offers.
d. Average Bedroom count for STRs in the Poconos is 3 bedrooms. Here's a deeper explanation of what this statistic signifies:
1. Accommodation for Groups: A 3-bedroom layout suggests that many STR properties in the Poconos are designed to accommodate groups or families traveling together. This configuration allows for a comfortable stay for multiple guests while providing privacy and space for each individual or subgroup within the traveling party.
2. Appeal to Families and Larger Groups: Properties with 3 bedrooms are often sought after by families, extended families, or groups of friends seeking a vacation rental experience. These travelers may prefer the convenience and cost-effectiveness of renting a single property that can accommodate everyone under one roof, rather than booking multiple hotel rooms or smaller accommodations.
3. Flexibility and Versatility: A 3-bedroom layout offers flexibility and versatility in catering to different types of guests and travel preferences. It can accommodate various guest configurations, such as couples, families with children, or groups of friends, making the property appealing to a broader range of potential renters.
4. Value Proposition: For travelers seeking value for their money, a 3-bedroom rental property in the Poconos may offer an attractive proposition. It provides ample space and amenities compared to smaller accommodations, allowing guests to enjoy a comfortable and convenient stay without compromising on quality or comfort.
5. Market Demand and Supply: The prevalence of 3-bedroom properties in the Poconos suggests that there is a significant demand for this type of accommodation among travelers to the region. Hosts and property owners may strategically invest in or develop properties with 3 bedrooms to align with market demand and maximize occupancy rates and rental income.
e. The Median STR property Value in the Poconos is $295,000 and the average revenue is $39,000/ year.
1. Property Value:
The median property value of $295,000 indicates the middle point of the distribution of property values in the Poconos STR market. This suggests that there is a diverse range of property values, with some properties priced higher and others priced lower.
Properties in this price range may vary in terms of size, amenities, location, and overall condition. They could include anything from cozy cabins to spacious vacation homes, each appealing to different types of renters and offering varying levels of luxury and comfort. 2. Revenue Generation:
The average annual revenue of $39,000 indicates the typical income generated by STR properties in the Poconos over a one-year period. This revenue encompasses income from rental fees charged to guests, minus any associated expenses such as maintenance, utilities, cleaning fees, and property management costs.
This figure reflects the earning potential of the average STR property in the Poconos and serves as a benchmark for property owners and investors evaluating the financial viability of their investment.
Factors influencing revenue generation include property location, size, amenities, occupancy rates, seasonal demand, pricing strategy, competition, and the effectiveness of marketing and management efforts.
3. Investment Considerations:
Property investors and owners can use these figures to assess the potential return on investment (ROI) and the overall profitability of STR properties in the Poconos. By comparing the median property value to the average revenue, investors can gauge the income-generating capacity relative to the initial investment.
Understanding the relationship between property value and revenue helps investors make informed decisions regarding property acquisition, pricing strategies, operational expenses, and revenue optimization techniques.
4. Market Trends:
The median property value and average revenue figures reflect broader market trends and dynamics within the Poconos real estate and hospitality sectors. Changes in property values, rental rates, occupancy rates, and tourist demand can impact the financial performance of STR properties and influence investment decisions.
f. 52% of hosts are Airbnb Superhosts. What does this mean?
1. Recognition of Excellence:
Achieving Superhost status on Airbnb is a prestigious acknowledgment reserved for hosts who consistently provide exceptional hospitality and receive high ratings and positive reviews from guests.
The fact that over half of the hosts in the Poconos have attained Superhost status indicates a strong culture of excellence and dedication to guest satisfaction within the local hosting community.
2. Enhanced Guest Experience:
Superhosts are known for their commitment to providing outstanding guest experiences, which can include prompt communication, cleanliness, attention to detail, and personalized touches.
The prevalence of Superhosts in the Poconos suggests that guests visiting the area are likely to encounter a high standard of accommodation and hospitality, contributing to positive guest reviews, repeat bookings, and overall satisfaction.
3. Trust and Credibility:
Superhost status enhances the credibility and trustworthiness of hosts in the eyes of potential guests. Guests often prioritize booking with Superhosts due to their proven track record of delivering exceptional stays.
The high percentage of Superhosts in the Poconos instills confidence in travelers considering vacation rental options in the region, reassuring them of the quality and reliability of the accommodations available.
4. Professionalism and Accountability:
Maintaining Superhost status requires hosts to consistently meet or exceed Airbnb's rigorous hosting standards, including maintaining high ratings, accepting a high percentage of booking requests, and adhering to Airbnb's policies and guidelines.
The commitment to professionalism and accountability demonstrated by Superhosts contributes to a positive reputation for the Poconos as a desirable destination for travelers seeking exceptional short-term rental experiences.
5. Community Collaboration:
Superhosts often play an active role in fostering a sense of community among hosts, sharing insights, best practices, and resources to support one another in delivering exceptional guest experiences.
The presence of a significant number of Superhosts in the Poconos likely fosters collaboration, knowledge-sharing, and a collective commitment to elevating the overall quality of hospitality in the region.
g. 87% of hosts live within 4 hours of the property they rent out. Here's what this statistics could signify:
1. Local Ownership and Management:
The high percentage of hosts residing within a 4-hour radius of their rental properties indicates a strong presence of local ownership and management within the Short Term Rental (STR) market.
Local hosts are likely to have a deep understanding of the region, its attractions, amenities, and local regulations, allowing them to provide valuable insights and recommendations to guests and ensure a seamless and enjoyable experience.
2. Hands-On Management and Maintenance:
Proximity to rental properties enables hosts to maintain a hands-on approach to property management and maintenance. They can easily address guest inquiries, manage check-ins and check-outs, and promptly address any maintenance issues or emergencies that may arise.
Hosts who live nearby can personally oversee the cleanliness, upkeep, and presentation of their properties, ensuring that they meet high standards and deliver a positive guest experience.
3. Accessibility and Responsiveness:
Living within close proximity to their rental properties allows hosts to be highly accessible and responsive to guest needs and inquiries. They can quickly address guest concerns, provide assistance, and offer recommendations for local attractions, dining options, and activities.
The ability to offer prompt and personalized communication enhances guest satisfaction and contributes to positive reviews, repeat bookings, and word-of-mouth referrals.
4. Community Engagement and Connection:
Hosts who live nearby are more likely to be actively engaged members of the local community. They may participate in local events, support nearby businesses, and contribute to the overall vibrancy and cohesion of the community.
Their involvement in the community fosters a sense of trust and authenticity among guests, who appreciate the opportunity to connect with local hosts and experience the destination through the eyes of insiders.
5. Investment in the Local Economy:
Hosts who live within close proximity to their rental properties are likely to reinvest their earnings back into the local economy. They may patronize local businesses, hire local contractors and service providers, and contribute to the economic vitality and sustainability of the region.
a. Starting from the Outside In:
When purchasing Short Term Rental (STR) properties, Bill emphasizes the importance of considering the property's exterior appeal as a primary marketing point.
Features such as proximity to lakes, ski slopes, or private water features significantly enhance the property's attractiveness to potential renters.
Bill's emphasis on "buying the outside" underscores the idea that while interior renovations are feasible, transforming an unattractive exterior into a profitable STR property can be more challenging and costly.
b. Negotiating with Banks:
Bill advises STR investors to assess their bankability before seeking financing, leveraging their financial standing to negotiate favorable terms.
Recommends consulting multiple local commercial banks, credit unions, and national banks to explore various mortgage products tailored to investment purchases.
A knowledgeable real estate agent can offer valuable recommendations and assistance in navigating the financing process.
c. Steps for Finding the Right Property:
Patience is key when searching for an STR investment property, with Bill stressing the importance of not rushing into a purchase decision.
Establishing clear criteria based on factors like location, size, and style helps guide the search process and prevent impulsive decisions.
Searching daily and partnering with a skilled real estate agent who understands the market dynamics can uncover hidden gems that meet your criteria.
Bill advises against compromising on essential property specifications, urging investors to stick to their must-have criteria to ensure long-term satisfaction and profitability.
d. Guide for Increasing Rental Bookings:
Instead of reducing daily rates, Bill suggests offering exclusive promotions, such as a 21% discount, to subscribers who have saved your listing.
Professional photography is essential for showcasing the property's features and capturing the attention of potential guests. Working with experienced media professionals can elevate the listing's visual appeal and set it apart from competitors.
Enhancing the consumer experience is crucial for attracting and retaining guests. Bill recommends identifying ways to make the property feel luxurious and exceed guests' expectations, thereby fostering positive reviews and repeat bookings.
e. Book recommendation from Bill: "The Pumpkin Plan" by Mike Michalowicz
The central concept of "The Pumpkin Plan" revolves around the idea of focusing on your best clients or customers, nurturing them like prized pumpkins in a field, and systematically pruning away the less desirable aspects of your business to foster exponential growth. Michalowicz emphasizes the importance of identifying and cultivating your most profitable and loyal clients, rather than spreading resources thin trying to cater to everyone.
Through real-life examples, case studies, and practical insights, Michalowicz provides actionable steps for implementing the Pumpkin Plan methodology in your own business. These steps include:
Identifying Your Best Clients: Analyzing your client base to pinpoint the most profitable and enjoyable clients who are the best fit for your business.
Nurturing Your Best Clients: Investing time, resources, and personalized attention into building strong relationships with your top clients, providing exceptional value and service to ensure their satisfaction and loyalty.
Pruning Your Business: Streamlining operations, eliminating inefficiencies, and focusing on your core strengths and offerings to optimize performance and profitability.
Planting Seeds for Future Growth: Strategically expanding your client base by attracting new clients who mirror the qualities of your best clients, thereby perpetuating the cycle of growth.
A. Due Diligence:
Conducting thorough research is crucial before investing in a Short Term Rental (STR) property. This includes:
Ensuring the property can be legally rented out, considering any zoning regulations or homeowners association (HOA) restrictions.
Understanding any applicable HOA fees, registration fees, and rules regarding the number of vehicles and occupants allowed.
Checking the property's occupancy limits and policies regarding day guests.
Determining the township in which the property is located and understanding any relevant permit fees and inspection requirements.
Reviewing the Short Term Rental Ordinance of the area to ensure compliance with local regulations.
B. Compliance with Township Rules and Regulations:
It's essential to ensure that the STR property complies with all rules and regulations set by the township. This may involve:
Checking the septic capacity to ensure it can accommodate the expected number of guests.
Identifying any renovations or improvements that require permits and ensuring they are obtained.
Adhering to parking regulations, such as no parking on grass or roadways, to maintain safety and compliance with local ordinances.
C. Financial Analysis:
Reviewing financial data available on websites like AirDNA can provide valuable insights into the potential profitability of the STR property.
Analyzing rental rates, occupancy rates, and demand trends can help assess the property's revenue-generating potential and inform investment decisions.
D. Local Contacts:
Establishing relationships with local service providers is essential for maintaining and managing the STR property effectively. This may include:
Hiring cleaners to ensure the property is well-maintained and ready for incoming guests.
Engaging landscapers to maintain the property's curb appeal and outdoor spaces.
Securing reliable general maintenance and snow removal services to address any property maintenance needs promptly.
By thoroughly conducting due diligence, ensuring compliance with regulations, analyzing financial data, and establishing relationships with local contacts, investors can mitigate risks and maximize the success of their Short Term Rental investment endeavors. These steps lay the foundation for a well-informed and strategically managed STR property venture.
What to do after purchasing
Apply for Township Permit:
Obtaining a township permit is essential to ensure that your Short Term Rental (STR) property complies with local regulations and zoning ordinances.
The permit may involve a review of safety standards, occupancy limits, and other factors to ensure the property meets the required standards for short-term rentals.
Apply for PA Department of Revenue Tax Certificate:
Acquiring a tax certificate from the Pennsylvania Department of Revenue is necessary for remitting taxes on rental income generated from the STR property.
This certificate ensures compliance with state tax regulations and facilitates the proper reporting and payment of taxes on rental earnings.
Apply for Monroe County Hotel Use Tax Certificate:
Securing a hotel use tax certificate from Monroe County is essential for collecting and remitting hotel occupancy taxes on behalf of guests staying at the STR property.
This certificate enables hosts to comply with local tax regulations and contribute to the funding of county services and initiatives.
Notify HOA about Renting:
Informing the homeowners association (HOA) about your intention to rent out the property ensures transparency and compliance with any relevant HOA regulations or restrictions.
Some HOAs may have specific rules or guidelines regarding short-term rentals, so it's essential to clarify expectations and obtain any necessary approvals.
Decide on Property Management:
Determine whether you will self-manage the STR property or hire a professional property manager to oversee operations.
Consider platforms like VRBO or Airbnb for listing your property and managing bookings.
Obtain a sales tax number if required by state or local regulations for collecting and remitting sales tax on rental transactions.
Make Necessary Updates or Renovations:
Address any required updates or renovations to ensure the property meets safety standards and guest expectations.
Obtain permits for renovations as necessary to comply with building codes and regulations.
Show Your Home and Take Professional Photos:
Present the property in its best light by staging and showcasing its features to potential guests.
Hire a professional photographer to capture high-quality images that highlight the property's amenities and appeal.
Be a Good Neighbor:
Maintain positive relationships with neighbors by being considerate of noise levels, parking regulations, and property maintenance.
Ensure proper disposal of trash and adhere to any pet registration requirements or leash regulations imposed by the HOA.
Verify septic system capacity if the property has four or more bedrooms to ensure compliance with local regulations and prevent overloading the system.
By following these steps after purchasing an STR property, owners can ensure legal compliance, maximize revenue potential, and create a positive guest experience while maintaining harmonious relationships with neighbors and community members.
See the tables below for the STR Ordinances by Township:
Disclaimer: Information sourced from the March 2024 Poconos STR Conference. Please do not rely solely on information provided here always ensure you do your own due diligence by calling the Townships and HOAs in which the properties you are looking to purchase reside to confirm current STR rules and regulations.
The Pocono Mountains are vibrant vacation destination! Why does a vibrant destination need Short Term Rentals?
1. Vacation rentals are the agile lodging inventory in the overnight economy.
2. Vacation Rentals are adding authenticity to the overnight experience.
3. STR Spending is higher and goes to the community, not through the community.
Vacation rentals in the Poconos are a valuable addition to our local economy and allow visitors from all over the chance to experience all the wonderful beauty that the area we are lucky to call home has to offer.
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