Pros and Cons of Running a Homestay

September 24, 2017 Posted by Tyler Cruz

A few posts back, I shared how I am now a homestay host. I had so much to share in the post that I had to end up breaking it up into two separate blog posts.

In this post, I will outline the pros and cons of running a homestay in case any of you have even the slightest interest in running a homestay as well. Or, perhaps you know somebody that does (it’s really perfect for empty nesters!). Or maybe you’re just interested in learning more.

As a quick reminder, I’ve been running a homestay for 1.5 years now and have had both boys and girls of varying ages from China, Japan, Vietnam, Saudi Arabia, and Qatar.

Cons

The Money is Not Very Good

As mentioned in my original post, I am not making very much from being a homestay host. For the upper rooms, I am charging $800/month which works out to just under $27 a day. I am budgeting $12/day for food, which works out to a profit of just $15 a day. The downstairs room would yield a profit of only $18 a day. It doesn’t feel good to write and reflect on this – considering that you could make the same amount in 1 hour working at McDonalds!

So as you can see, the money is definitely about as low as you could imagine. This is not a get rich quick scheme. However, I actually list money as being one of the pros as well, so don’t give up all hope yet.

It Can be Hard to Get Homestay Students

I have spent a significant amount of time working on obtaining homestay students.

The university here has a homestay program, but won’t accept us due to our house not being very close. We are also part of a homestay agency, but don’t work with them anymore as those students are always short term at 3-4 weeks, which is not worth the effort. As a result, I have had to obtain homestay students independantly instead of just having them sent to me automatically (although there are benefits to this as well though such as being able to set my own rate and being able to choose who I accept).

By far, the best method I’ve used to obtain students is simply by putting up free ads on Craigslist, Kijiji, and another local classifieds site. However, I’m also a member on various online homestay services such as Homestay.com, although I haven’t had much luck with them so far. I even made up posters and put them up around town, such as at the university itself (in the ESL building), in Chinese restaurants, malls, etc.

More recently though, I created a website. It doesn’t rank too well for the keywords I need so I created some AdWords ads which have been doing well (thank god I have some past skills I can fall back on!).

Fortunately, we are now completely filled up with 4 students, and have 3 more on a waiting list! I even had to remove all of my ads everywhere! But this is the busy season – 2 months ago, we had gone 5 months without even a single inquiry for a student!

You Have to Give Up a Portion of Your House

This is a downside to running a homestay that may not be immediate obvious at first. Sure, you know that you’re giving up a room, but you’re also giving up other areas of your house, too. For example, you’re giving up a bathroom, part of the kitchen, the living room, etc. There will be more shoes in the shoe rack. There will be more coats in the closet. There will be less space at the dinner table.

The smaller your house, the more noticeable this will be.

Upfront Costs

This is not a huge con as it’s a one-time expense, but you will need to make your homestay room(s) ready for a student. This means making sure it is clean with decent furniture and everything a student will need such as a desk and chair, bed, lamp, etc.

These things add up, especially if you’re planning on having multiple students.

You Have to Cook and Clean

For me, this is by far the hardest part of being a homestay host. I’m not a great cook, and I have to make sure the student(s) get a proper lunch and dinner (breakfast is self serve, thank God!). I also can’t just make macaroni and cheese or instant noodles as I have to make it at least moderately nutritious and tasty.

It also means washing dishes for one more person (or in my case, 4 more people!).

I even prepare bagged lunches for the students for when they go to school. Although, to be honest, I don’t mind this too much as it’s a lot easier than preparing a hot lunch at home for them.

Students Can Break Things

Accidents happen of course, but it is something to consider. We had a 16-year-old student who did a fair bit of damage to his room which we didn’t discover until he left, as well as damage to various other things in the house. In general, though, this is not a huge deal and I’ve learned my lesson and now charge a damage deposit which I highly recommend doing!

It Can Be Belittling

Most of the time, if you’re doing a homestay, you could use the extra cash it bring in. And most of the time, the students will have a fair bit of money – namely if they are from China or the middle East. Everything they have will be better than yours. They will have the latest iPhone, expensive clothes, expensive laptops, etc.

The worst part for me was when I was a chauffeur for them. It just felt so demeaning, especially when one of our students would sit in the back seat. I would drive him to and from school, making only $1.50 per direction after gas fees. I’ve since increased that fee very slightly, but it’s still next to nothing. I hate the driving, but as mentioned before, I do have to compensate for our distance from the university and the fact that the transit system here sucks.

But hey, desperate times call for desperate measures.

Pros

Live Mortgage-Free

I mentioned the low profits of being a homestay host as being a con above, but at the same time it’s also a pro.

Yes, I only make about $15-$18 a day profit, but once you get into the groove of things, time flies by and having a homestay student is pretty easy. The most effort goes in when you first get a new student, as there is an adjustment period in learning about him/her and getting them adjusted to their new life. This is why we don’t accept short term students anymore – the longer you have a student, the easier they are to look after.

My point is that after a while, it barely feels like work at all once you’re accustomed to your student, which usually takes about a month to become really comfortable with each other. Then, the money is almost (but not quite), like passive income, and it adds up fast. This is not making money online, so it’s not “maybe” making $15 tomorrow – it’s a guaranteed $15 tomorrow. So that’s $450 a month for 1 student. Get 2 students and you’re living mortgage-free. Get 4 students and you’re living mortgage-free, utilities-free, Internet-free, Cellphone-free, etc.

I will have 4 students by the end of the month, so that’s $60 a day, or $1,800 a month.

Basically, it’s a great way to make extra cash on the side. If you had no mortgage, you could effectively retire immediately.

Enjoy the Culture Exchange

As a homestay host, you get to experience other cultures. In most cases, students will be “fresh off the boat”, and so a lot of things will be new to them (not everything though; you’d be surprised how westernized other countries are these days).

I actually really enjoy this aspect of things and enjoy showing and teaching students our culture as much as I do learning about theirs.

Two of our students and their friends (16-22, Korean, Chinese, Chinese, Japanese) trying Trick-or-Treating for the first time!

Relive your youth! My first time carving a pumpkin in 20 years!

Eat Delicious and Exotic Food

I love to eat, and my bulging stomach will attest to that.

I have eaten so much authentic exotic food over the past year and a half, it’s not even funny. As mentioned in my other post, I offer discounts if students want to cook dinner for everyone once or twice a week, and clean up afterwards. In fact, our Vietnamese student is cooking us dinner tonight.

Most Asian students know how to cook, and can cook very well. This is in stark contrast to the 20-something in the west, that can usually only make Kraft dinner or instant noodles.

All of the food I’ve eaten from the students so far has been restaurant quality (or above).

I also learned that I absolutely love pork belly, and am learning how to make it now.

Pork belly dishmade by our Vietnamese student and Chinese vegetables (I made!)

Most dishes prepared for us are very healthy.

Enjoying a Chinese “hot pot”. The chinese students sure love having hot pot with their friends… probably the equivalent of young people here having a pizza night.

Vietnamese spring rolls.

Squid, bun cha (if I remember correctly), and a vegetable dish.

Vietnamese BBQ (so good).

This was part of a soup; noodles were served, then broth, then we added the other ingredients.

Part of a dinner prepared by our 16-year-old Chinese student who could really cook!

A ramen lunch.

One of the best meals I’ve had in my life, made by our 16-year-old Chinese student.

More People to Socialize With

If you’re lonely, or just generally enjoy having people around, then being a homestay host is a great option. Dinners will have actual interesting and stimulating conversation, you might find yourself doing activities that you haven’t in years (such as taking the students out bowling or mini-golfing), you might have a blast playing board games, etc.

Conclusion

Being a homestay host can be extremely rewarding if you are interested in other cultures and helping people. You will be compensated for your time and effort, but it is not a get rich quick scheme.

You could always try it for a month or two and see how you like it, or even find a local homestay agency and perhaps try it with very short term students (1-3 weeks) first.

Posted: September 24th, 2017 under Miscellaneous 2 Comments

I’m Making $86,000 a Year From TRUE Passive Income

September 21, 2017 Posted by Tyler Cruz

First off, a warning that this title is somewhat of a clickbait, although not entirely. In fact, it’s mostly accurate. Keep reading.

In a recent blog post, I gave an update on everything that happened to my first income property during its first two years. I also shared my numbers in regards to rental income.

In this blog post, I will be focusing purely on numbers from my real estate investments in regards to appreciation.

The plan for my income property, a house with an upper and lower unit, was always to act in the capacity of a holding property to gain value through appreciation. I balanced the cashflow so that it would just cover its own costs and taxes, as well as a bit more to keep as a contingency fund. Where I live, it does not make sense to own property from a cashflow standpoint; house prices are simply far too high. Where we do benefit, however, is through appreciation – that is, the value of a property rising over time. My strategy was therefore a longterm one – to hold onto the property (hence it being a “holding property”) until it appreciates enough to where it makes sense to sell, and then to rinse and repeat.

Now, I will be the first to admit that some of what follows is from pure luck; I bought at a good time right before the market completely blew up. Actually though, the market had already been starting to explode for about a year or two before purchasing, but it really went crazy afterwards and is still climbing. This is due to hordes of rich Chinese coming in and buying up real estate here left and right, causing a housing shortage and raising property values. The problem city near me, Vancouver, has since added a 15% foreign buyer tax, but this has only slowed down the Chinese by a small bit – they still have money to burn.

Hot Market

According to the July 2017 VIREB (Vancouver Island Real Estate Board) market statistics report: “Nanaimo’s benchmark price [of a single-family home] rose 19 per cent to $490,500“.

That means to purchase an average house here, you will need to fork out half a million dollars.

What shocks and excites me more though, is the fact that it rose a staggering 19% over the last year! Take a look at the table below to see how significant this is:

A-mei-zing!

1 year ago, the average house was worth $433,500. 12 months later, that value is now $490,500, a $57,000 increase in just one year. If the market continues at this pace (it shows no signs of slowing down), then the average house will be worth $625,000 in just 2 years from now.

The graph below shows the appreciation from just the past month, with my city sitting at 2.33%.

That means that the average house value rose $11,000 in just the past 30 days! I must be missing something or calculating something wrong though, as that doesn’t seem like it can be right… can it?

The thing is, this increase is not just from this year… it has been like this steady the past 2 years. I can’t remember the exact average appreciation from the previous year, but believe it was around 20% as well:

My Properties’ Appreciation

Okay, so the reason I wrote about my market’s numbers above is so that you can believe me what I tell you how much my properties have appreciated and that I wasn’t just throwing out some pie in the sky numbers. In fact, I have been in close contact with my realtor, constantly asking him the value of my house and income property, so the numbers I will present here are actually the estimates he think we can sell the properties for.

Income Property

I purchased my income property almost exactly 2 years ago for $274,000. It is now worth at least $360,000.

It therefore appreciated $86,000 in 2 years, making me $43,000 a year (not counting taxes, realtor fees, closing costs, etc.) passively, or $117/day if you like.

I put $140,000 down, which leaves me with a whopping 61% ROI – certainly a hell of a lot better than the 1-3% I might get by keeping it in the bank or putting it in a GIC.

If the market stays the same and it appreciates another 20%, it will “make” another $72,000 in the next 12 months. It’s a crazy snowball effect. Again, I am not factoring in closing costs and taxes though.

Residential Property

My girlfriend and I purchased our residence around 4 years ago for $405,000. It is now worth around $580,000 (a similar house sold just down the street a month ago for this price). This is an increase of $175,000. Over 4 years, this works out to an average of $43,000 a year. Does that number sound familiar? It should, as that is what my income property has averaged above – this is purely a coincidence though, although a funny one since it’s literally the exact same number.

As a result, you could say that I have been passively making $86,000 a year via property appreciation. This is really more for the clickbait title though, as I didn’t factor in closing costs and taxes on either property, plus I only own half of the residential property so only half of that appreciated value would effectively be mine, or $65,000 a year.

$65,000 a Year Passive Income

So my properties, and I’m only counting half of the residential property since that is my legal owned part, that’s $65,000 a year from true passive income. Sure, you could argue that it’s not technically income until I sell the properties, and that the market could crash and the homes lose value. But I don’t live in the US – while the market here is headed towards what looks like the edge of a bubble, it will never completely tank like the US did in 2008 – the lending regulations here are far too strict (it’s very difficult to get a mortgage here and the rules are very firm). Honestly, I believe the worst that is likely to happen is that appreciation slows to a crawl.

$65,000 a year works out to $178 a day. That’s $178 a day I’m gaining in equity, and at a 20% appreciation rate this has a huge snowball effect. If things grow at another 20%, that is $130,000 I will gain in equity in one year from now (only my share, not including my girlfriend’s). Suddenly, that’s $356 a day. A year after that it would be $156,000 (just my half of residential) or $427 a day.

It’s impossible for the market to keep this rate up as nobody would be able to afford a house in a few years time, but even if rates were “only” 5%, you can see the tremendous value of property appreciation.

Wish I Could Buy More

As I have mentioned many times before, I only wish I had more money to throw into real estate. Not only are the returns fantastic, but I absolutely love real estate. I love calculating the numbers, I love watching the market, and I love looking at property to purchase.

If I thought people would invest, I would actually consider offering shares in my holding company so that I could go purchase more property. But I know that my track record has not been very good (my last investment opportunity I gave out was for Votesy, which completely tanked). The properties I’ve purchased have appreciated $261,000 so far though, so at least I have a good track record with real estate so far 🙂

Posted: September 21st, 2017 under Income Properties 13 Comments

My RODE PSA1 Microphone Stand Review

September 18, 2017 Posted by Tyler Cruz

Despite having bought a brand new microphone, and that microphone coming with a very nice stand of its own, I found myself needing a studio arm stand instead.

This is because I found that in order to get the best quality recording, that I needed to set the gain very low and speak close to the microphone. As a result, I had to either hold the microphone very close to me, or else lean forward into the mic. This wouldn’t do, and so I researched what the best mic stand for the Blue Yeti USB microphone was.

There was one clear winner – the RODE PSA1 microphone stand. It works perfectly with the Blue Yeti and will support its heavy weight. It costs about $100 USD on Amazon and is well worth the price, as you will see in my video review and demonstration below:

(Note: You may need to visit the post directly at TylerCruz.com if you’re reading this via e-mail or RSS in order to see the video.)

Posted: September 18th, 2017 under Videos 3 Comments

So What the Hell Happened? Part 4 of 5: Airbnb

September 15, 2017 Posted by Tyler Cruz

In part 3 of my “So what the hell happened?” series, I wrote about how I started running a homestay. After our first homestay student, we decided to become Airbnb hosts as well.

So why Airbnb when we were already homestay hosts? Simple – to fill in the voids for when we had no homestay students.

We’ve now been Airbnb hosts for one year, although so far we’ve only ever hosted during the prime tourist season, which here is in July.

What is Airbnb?

 Unlike being homestay hosts, I doubt I have to explain to you what Airbnb is, but for those of you living under a rock, Airbnb is an online service that lets people rent out part or all of their home, just like a hotel. People will book a room (or entire house) just like a hotel, pay Airbnb, and Airbnb will pay the host.

Both guests and hosts leave reviews for each other, meaning that it is very safe for both parties, as you will likely be very satisfied with somebody who has an average of 5 stars.

The Fee

One thing that surprises me about Airbnb is just how small the fee is for hosts. According to the Airbnb website: “it’s generally 3%, but may range between 3-5% depending on the cancellation policy selected by the Host.” — this is a miniscule amount, especially when Airbnb is doing all the hard work of getting you a paying guest.

So if you were to list your downtown apartment for $75 a night, you would receive $72.75.

To be honest, I would be fine if Airbnb charged 15%-20%, as my main concern is getting guests period.

How Much Can You Make?

This will of course depend on a number of factors including: your location, the size of your listing, the quality and features of your listing, and the season. A listing in downtown San Francisco will obviously be a hell of a lot more expensive than a place in rural Nebraska, for example.

For me, I live on an island in British Columbia, Canada, and in a house which is about a 10-minute drive to downtown. The listing is for the large downstairs unit, then they have access to our shared spaces such as the living room and kitchen upstairs as well.

Again, we have only ever hosted during the prime season so far, but after expenses (little shampoos and soaps, for example), that 1 room brings in about $1,000 a month profit.

When you compare this to what you can make running a homestay, it’s not even close. However, running an Airbnb listing has its pros and cons as well, which I will be blogging about in an upcoming scheduled post.

Since we were booked solid (something like a 90% booking rate) this month, I raised our unit’s price by $5, but that room won’t be available for likely at least a year due to homestay students arriving in a couple of days.

$1,000 a month is most definitely nothing to sneeze at. While I’m not factoring in taxes for simplicity’s sake, that’s $12,000 in one year you can add on top of your normal income. So two years of Airbnb you could earn enough to put a down payment on a small apartment or even house depending on where you live, then rent that out (either to standard tenants, or again on Airbnb!). Then rinse and repeat.

How Has Running an Airbnb Gone so Far?

First off, I’ve only run an Airbnb by listing the downstairs “room” in the house that I live in, so I have no experience in running an apartment-based listing or a listing in a property that I don’t live in, which are a fair bit different from running one out of your home.

So far, things have gone very well. We’ve had no negative reviews (our lowest rating so far has been a 4/5 (which is very low by Airbnb standards), and actually became a superhost after our first month!

This was actually from a guest that had just checked out this morning!

Due to the review system, we have never had horrible guests. I require positive reviews as a guest requirement, and it’s simply difficult to get bad guests this way. I do not accept unreviewed guests (I only did for my first guests since our listing was also unrated at that time). I did have one guest that I didn’t care for, but he made a lot of bookings and wasn’t terrible so I could live with it.

The two hardest things about running an Airbnb has been:

  1. The cleaning between guests. This is when you turn into a hotel maid. Fortunately, most guests leave the place extremely clean (this differs from how a guest might leave a hotel room, as guests are rated on cleanliness!), and a lot of the cleaning is redundant. For example, a guest may have just arrived at 11pm and then checks out at 7am, and despite having only been in the room for 8 hours, you still have to clean everything in the room – all the sheets, pillow cases, bathroom, etc.
  2. We share our kitchen, so it’s a bit of a pain to try to co-ordinate when we can cook dinner. We have a mini-fridge downstairs though, and may in the future add a microwave and kettle to try to limit the use of our upstairs kitchen.

Other than those 2 points above, running an Airbnb is really easy and a fantastic way to bring in additional income.

I would highly recommend Airbnb as both a host and a guest!

Stay tuned for two upcoming Airbnb posts: one on the pros and cons of running one, and another on various tips on being a host.

Posted: September 15th, 2017 under Miscellaneous 20 Comments