Dear hosts, Happy New Year! I hope you had a safe and fantastic celebration. I’m wishing you health, joy, and amazing guests for 2021. It’s that time of the year, so I’m looking back to see if La Casita in Puerto Rico was worth the effort. In today’s episode, 2020: A Year in Review for La Casita I’m going to dive into La Casita's 2020 finances. Was it a profitable year?
One of the reasons I believe you need to check your numbers more than once a year is to adjust and implement any changes in your business strategy.
You might decide to stop doing short-term rental and maybe get into the travel nurse market, or even focus on attracting longer-term guests. But you can only know this by diving headfirst into finances.
In today’s episode I’m going to discuss:
- How much we spent to build La Casita and maintain it through the year
- The mistakes I feel we made
- How much we actually earned from Airbnb
Listen up to “2020: A Year in Review for La Casita.”
Dear hosts, when Javier and I started La Casita in Puerto Rico we had dreams—visions of wonderful guests, a nice return on our investment, and some ease.
In Episode 94 Lessons Learned From Building the New Airbnb La Casita which aired in December 2019 I spoke about the market research we did, the nightly rate we wanted to charge, the amenities we planned to offer, our mindset, and how we wanted to set ourselves apart from the other short-term rentals in our neighborhood.
If I’d only known how much our mindset would be tested again and again during this last year! I think that’s one of the biggest lessons.
How Much It Cost:
Let’s start with how much we spent because inquiring minds want to know.
Starting out we did some construction on La Casita: a brand new bathroom as well as a new stove and refrigerator, lots of painting. We knew we wanted to do these upgrades before we even started.
Our biggest expenses for setting up the space were:
Bathroom construction: $1,900. This included the costs for construction materials and labor as well as hiring a plumber. We triple-bid this job and the original construction guy never showed up. But we were super happy with the team we got and they continue doing work for us.
It’s amazing to compare the cost between Puerto Rico and New York. You know a bathroom in NY would be over 6k. How do I know? Because I have done a couple of bathrooms at Eveland NYC and I never paid so little.
The total for painting the interior, exterior, rails, and doing cement work came to about $1,900.
We also had a very expensive issue arise unexpectedly after we opened La Casita: we had to purchase and install a new water pump. We hadn’t realized the water pressure was so horrid until reviews mentioned it; so to improve if we spent $1,700 between the plumber and the pump. Yes, that’s a lot of money when your nightly rate isn’t optimal.
Before we were even opened we had spent $10k; and by the time we started the year, it was over $12k.
Then in 2020, we bought a generator for $1,600.
These are all huge items, but thankfully they’re one-time expenses. We’re not buying another generator or water pump, ever. (Hopefully.) But we do need another air conditioner.
If you don’t have to buy any of these big-ticket items, you’ll save a lot.
Items to Set Up La Casita:
Then there were the many, many, many little items. From pillows to bath towels, from smoke detectors to iron, and much more. We saved a lot by taking advantage of Black Friday sales in 2019, but we still spent about $2,000.
Poor Javier! He was like, “Damn woman! When will this stop?”
But we both knew the bottom line was this: You need to spend money to make money. For example, we used an extra television we had in our home but you needed to manually turn on the set. So we bought a new smart television for the bedroom and used the older model for the living room. Try to use what you might have at home, but make sure it will work for your guests. Don’t be using your old barely-there sheets and towels. Just don’t.
In our expenses, I’m including things like our utility bills, insurance, replacing towels, broken glasses, and all those extra expenses that add up.
You might notice that I’m not including rent or a mortgage. We live in the bottom part of the house and the house is paid off. Oh my God, not having a mortgage is glorious. Let the angels sing. I know this isn’t the case all the time because my NY mortgage is a lot of money.
Our total expenses between construction and all the other expenditures for 2020 were almost 15k. Actually 14,991.15. Let’s not forget the .15 cents.
Dear hosts, that is almost 15k for a one-bedroom home that is less than $75.00 per night. Ouch. So is it worth it?
Starting December 28 of 2019 and still happening now, Puerto Rico has had a sequence of earthquakes and tremors. The largest was a 6.4 which occurred on January 7, 2020, at 4:24 am. Power was lost island-wide and some parts of the island also had no water.
Javier and I felt this earthquake and a few of the others that have continued to impact the island. Thankfully the house didn’t have any damage. We lost power but we had water.
And yes, we had guests checking out and arriving on January 7th. Earthquakes and guests don’t really mix well.
Guests During Earthquakes:
The arriving guests were coming from visiting relatives in another part of the island where there was no water. But even though they had no electricity during most of their stay, this couple gave us a glowing 5-star review and even left us some gifts. We provided them with extra solar batteries for them to charge their phones, etc, and because we have solar panels we had some electricity in our refrigerator so they were able to use it.
When we set up La Casita we decided to get a gas hot water heater and stove, instead of additional electrical appliances. This was a very good decision because even after the earthquake our guests had hot water to shower and were able to cook.
It doesn’t mean that every design decision was a good one.
Then on March 15th, the world stopped because of the Covid 19 pandemic and we had nine cancellations of reservations from March until May.
Javier and I decided to close down La Casita until we knew further; I just blocked days on the calendar, and before we knew it May was upon us and someone booked.
By this time Puerto Rico had implemented some strict regulations for short-term rentals, and as a result, we had also decided to change the way we hosted.
Hosting Changes Due to Covid-19:
Before March we used to accept one-night rentals because we live close to the airport. Now we have a 4-night minimum.
We also used to accept guests checking-out and-in the same day, but for safety and to adhere to regulations we moved to have two days closed between guests. We’re now keeping it to one day.
Part of the reason for this change is the more intensive cleaning protocols. Everything has to be taken down and washed, even if it wasn’t used. Every dish, pot, cup. Everything. Towels that aren’t used have to be washed.
It’s also easier for Javier to clean since sometimes I’m in New York and he has to handle the turnover by himself.
Of course, all of this affects the income. We’re not available 30 days of the month, which means less money; but it’s also about the quality of life.
There was something else that affected our pricing: a few non-stellar reviews. Our first review gave us a 3 on overall but 5 stars on everything else. Yes, 5-stars on cleaning, communication, check-in—everything but the overall question — that’s what folks really view, and they gave us a 3.
I was upset to say the least.
We kept getting 5 stars on everything but then 4 on overall. I didn’t get it. Believe me, we tried. This was one of the reasons for that almost 2k water pump.
Javier doesn’t really like for me to share the reviews with him because between the stained towels and sheets and cleaning half the beach that folks bring back for him it feels like ………no matter what we do is never enough and in those cases ignorance is bliss
At the time of this recording with 36 reviews our overall is 4.69.
The Party Guest:
We had one guest that gave us 1 star because even though we told them that they couldn’t have any parties or gatherings at the house they kept bringing people over and having loud music.
We live in a quiet residential neighborhood. Our neighbors know we do Airbnb, and we like to respect their quality of life. So that guest whose review stated, “Don’t book if you want to have a good time”? Well, let’s just say we don’t really want them back.
This is one of the reasons I highly recommend that you keep track of who stayed, payments, ratings, etc. I have a spreadsheet that I’ve kept since the first guest I hosted back in 2010. One of the things I use it for is to keep specific notes on whether I want each guest back and even include their rating review.
What I would do differently:
You live and learn, and some of the things I now know I would do differently are:
In La Casita, we only have an air conditioner in the bedroom, and I feel we should have added an air conditioner to the living room when we were building it. This not only affects our reviews but folks try to cool the entire apartment with this smaller unit, which we fear will break.
We’ve tried getting a new air conditioner but because of the pandemic, it’s harder to get appliances and even harder to find people to come and install them.
I have this amazing shower system in NY—guests love it and so do I. It’s fantastic; so I thought, ”Let’s add it to Puerto Rico!”
Because of the lack of water pressure, this same shower that gets stellar reviews in NY just doesn’t cut it in La Casita. For us to change it will be costly. For now, we're stuck with it, but we address the issue in our listing description and correspondence with guests
I’m not a designer, and I don’t play one anywhere on the interwebs. I prefer spending the money and having the place designed. I feel it lacks that style to make it pop and make it different.
I’m doing something in 2021 which I’ll talk about in a future episode to remediate this.
Income Prediction vs Reality:
Before we started La Casita, our income predictions were $1,500 to $2,000 a month. I talked about that in Episode 94 Lessons Learned From Building the New Airbnb La Casita.
In December 2019 we had been open for 15 days and we had earned $741, but that included some January income. In January 2020 it was $1,216.77 and for February 2020 we earned $1,410.75.
All hell broke loose in March with Covid 19 and we shut down La Casita after our March 17th guest left, so all we made was $758.54.
We were closed in April, and in May we only made $204.77. June was just a bit better at $336.78. Our revenue for July was $845.16, and in August it was $911.89. In September we went back down to $671.24, but in October we did great at $1,003. 71. November was a 2020 reality-check: All we made was $787.15.
And finally, in December we went back up to $1094.26 but that includes a couple of days for 2021 because the guests left on January 3rd.
Airbnb paid out was $9,982.58 but they paid us for some cancellation fees of $473.98.
The total from December 2019 until December 2020 was $10,460. Remember we spent almost 15,000, so we’re still short $4,500 from our initial investment.
Would we have made a profit if Covid didn’t happen? Yes, I believe so.
My Expectations for 2021:
Puerto Rico has some very strict restrictions; as of January 2021, Puerto Rico’s beaches are open for swimming only. There’s no laying on the sand and sunbathing.
There is also a curfew. Oh yeah, you need to be home by 9 pm and on Sundays, you’re required to stay at home. No hanging out, no going to the stores, nope. Calabaza, calabaza todo el mundo en su casa.
There is also a weekend dry law until January 7th which could be extended again.
The San Sebastian festival, or as they call it, “Sanse,” is one of the biggest festivals in Puerto Rico. It’s usually held in January, but it’s been canceled for 2021.
Cruises are not operating and many places are just closed down.
I know the vaccine is here, but I think restrictions will continue until the summer of 2021. I’m going to do an episode about my predictions for the year, but I’ll tell you now that I don’t think 2021 will be completely a washout.
Do we feel La Casita is Worth it?
Yes, I do. Even though we haven’t recouped our initial financial outlay, Javier and I have talked about it and we both feel La Casita is a sound investment. We know that we don’t want a long-term tenant there since we sometimes use the place for ourselves.
I believe we will start making a profit in 2021, but it all depends on what is coming this year.
One of the reasons I wanted to do this episode is for you to realize that not everything in hosting is a bed of roses, but also not everything is horrible. Even as a host for over 10 years I’m still learning every day.
I hope when you go back and look at your numbers they’ll be a lot better than mine.