I was once in Paris and engaged a street artist to sketch my then fiancée, now bride. In perhaps 10 strokes of charcoal he captured her essence. I was indeed more amazed with the process than the image, it struck me as quintessentially, yet, unconsciously competent artistry.
Our business is tasked with overseeing roughly $100M of vacation rentals in Charleston and Palmetto Bluff. Over the years our team have settled in to the easy ways of unconscious competence. We see what an owner may not, we suggest improvements where others may see problems or indeed, nothing at all. It’s our version of that Parisian encounter so many years ago. It’s this trait that helps us stand apart from the crowd.
Our role in this is to aid them in exploring every avenue that might exist for increasing their revenue, whether it be simple updates to the interior decor, a renovation that modernizes the kitchen or baths, adding a pool, or increasing the size of the property to add additional bedrooms. Understanding the market data and the expected returns that come with the different enhancement scenarios allows us to develop a cost/benefit analysis and help to determine what is a valuable use of their money to maximize ROI.
Now words are easily crafted and certainly not costly to do so but how about a real-world example of what we can do and how it worked out? This exact scenario played out recently when we worked with owners interested in adding a bedroom to what had been a single-bedroom carriage house rental.
A 1-Bedroom/1-Bath Becomes a 2-Bedroom/1-Bath:
We have a one bedroom carriage house in our Palmetto Bluff portfolio. It rents well but based on feedback that we had received over time from guests, there would be high value to adding a second bedroom to this property to act as additional office space and somewhere for children to stay over, as previously there were only pull-outs in the living room. This being a 1-bedroom, 1-bath carriage house configured over a 5-bay garage, with no ability to add an additional bathroom, the expectation was a modest increase in rental return for a modest outlay and minimal disruption along the way. We sent our construction team over to look at the building and make suggestions. Now we can all do the math on this, i.e. cost of construction, potential increased rental rates, potential increased occupancy … but in this case, that’s not the whole story, please read on.
The Carriage House Interiors “BEFORE”
Bedroom was added where interior glass window overlooked the vintage car collection that was on display in the garage below.
This was to be a quick project for the owners as the loft space already existed. It could be easily enclosed and the new garage ceiling made suitably fire-resistant. A total of $15,500 was spent on the work, saving a few dollars by using building materials leftover from another recent project, plus the added benefit of an owner in the building industry. Seeing the opportunity that exists here is easy, and in this case, a seemingly straightforward update to be made, but important nevertheless to note that in any scenario, a market analysis is vital to understanding whether the addition will garner the expected returns.
The Carriage House interior “AFTER” new bedroom addition:
How we calculated potential ROI with increased rental rates for a 2-Bedroom/1-bath Carriage House:
$ 2,800 Project design and prep work
$15,500 Materials and labor (some work was done by the owner and reused building materials from previous project)
$21,600 Additional rental income @ $120 per night/projected 180 night occupancy per year. The project should be cash flow positive year one. Note: The carriage house was previously renting well with a nearly full calendar and a steady stream of return guests.
Potential ROI gained in overall property value:
As with any home renovation that increases the overall square footage of the house additionally, outside of the extra rental revenue, the owners will realize:
$156,000 Additional value to the house at 260 sq. ft. added @ $600/ft
That is a 700% return the minute the paint is dry, and before the next guests check-in!
Our Luxury Simplified Retreats team is a top 3 company in South Carolina for Average Daily Rate and Occupancy (AirDNA November 2020). With some of the top Revenue Managers in the coastal areas in and around Charleston, we aim to maximize our owner return and our renter experience, and our team is skilled at achieving both. Why not ask how we could help your own property achieve the same results? Contact our team and find out what we can do for you.