Padsplit 101 – what you need to know first

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In this video

• 00:00 Intro PadSplit overview and goals
• 00:25 What is PadSplit compared with Airbnb for long term rooms
• 01:20 Who rents on PadSplit typical member profile and no pets policy
• 02:10 Many members per home mindset shift for owners

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Caption transcript. This text is pulled from YouTube captions and may contain minor wording errors.

[00:03] hey guys I'm here today to talk about padsplit because I have a lot of conversations with investors about padsplit most who have never heard of it before and some are turned off and some really are are excited about it so let me tell you all about it um and everything that I can remember to talk

[00:18] about and and we'll get into it that is the calculator for later so the first question is what is padsplit and how does it differ from traditional rentals and and it's it's a long answer so the answer is like think of pad split as Airbnb but for long-term rentals so uh essentially you take airbnb's

[00:41] platform so Airbnb has a platform that any person can go on to um they can book up a stay anywhere in the world I I went through Thailand with my wife we traveled all across Thailand just stayed in airbnbs and it was great we had a great experience but when you're on pads split's website you are looking at rooms

[00:58] so you are renting out a room in a house um and uh and there's a lot of uh regulations that padsplit has put into place on on you know how they operate and what homes are are uh um I guess rentable like there's just some restrictions you have on like room sizes and some nuances like that but anyway

[01:17] essentially that's what pad blood is you're renting a room in a house for a long term a long period of time uh that's uh legally over 6 months at a time but most people tend to stay uh 9 to 12 months at a time there's there's obviously situations where people stay for years on end and some people kind of

[01:33] stay at that minimum time because they might just be stepping in um they might be uh just really in an intermediate time of their lives where they need to save a little bit of money or they got they're getting out of a bad situation and they need to save up for a uh a place for

[01:49] themselves which leads me to my next you know question that I always get is like who are the people rining these places out and the data that's provided from padsplit are uh 25 to 45y old old they're they're professional singles uh they're typically not you know in relationships or not married at least

[02:06] and padsplit I think in general does not allow pets in the homes because you can imagine how crazy that would get if know seven people in a house all have their own cat so this is usually where people I start losing people because you know why would you want to own a property with seven or eight or sometimes 14

[02:23] different tenants or you know with pad split I think we call them members because you're a member of pad split and you're signing a lease with them anyway I digress a little bit but uh the cool part about pads split and where people start to get excited is when you talk about the financial side of things so

[02:39] with pad split instead of having a house where you you know let's say in Tampa you have a three or four bedroom house that tends to rent for 1,00 to 2500 a month depending on finishes depending on location and a few other factors so you have let's say 2,300 a month for your three-bedroom two bath and Tampa uh you

[02:59] turn that into a seven-bedroom two bath and now you're getting about 56 roughly a month in rinse now we do have to talk a little bit later about I know with the calculator about your additional expenses with pad split because like Airbnb you're going to have to pay your host your property manager and uh it's a

[03:17] little bit more expensive than a long-term rental but the rents more than make up for it and the other thing about having that I think people don't really think about right off the bat is when you have a house you have one unit and when it's vacant it's vacant you're not getting anything for one to two months

[03:32] out of the year um and hopefully you have a renter for more than one year at a time because if you're getting one or two months of vacancy every single year that really adds up but with pad spit you have you know let's say seven or eight you know units and they're all producing income and if you're able to

[03:47] keep it 85 to 90% full at all times and you know hopefully 100% but even at 90% you're never experiencing complete vacancy and if you underwrite for that you know average vacancy then you're to be uh a little bit safer than than a long-term rental in many cases so we've talked about the

[04:06] difference between like a long-term rental and and how pad split separates itself from from Airbnb uh but some of the questions I also get are uh what properties are best suited for pad split and typically those are single family houses that are near public transit they are outside of HOAs

[04:23] definitely no HOAs um you could also do multif Family Properties they just typically don't make as much fun iial sense but they could work um and you are looking for you know layouts that are that are positive to build off of in separate rooms um and typically you want to maintain a bedt bath ratio of 1 to

[04:45] three now padsplit does allow 1 to four so that's one bathroom for every four rooms but you can imagine uh how you know and why people would prefer 1 to three so there's a few more nuances when you're looking for a pad split property but those are the main things you know you have you do have to consider parking

[05:03] um that's another big one and uh so some of other questions I get are how are tenants screened and who's actually staying here and you know the main I guess Airbnb I'm sorry padsplit is going to verify and vet your tenants because they're also going to take rents they're going to collect those for you and I

[05:24] guess the duties and the and the responsibilities for like an in-person property manager versus padsplit I should probably lay those out here so pads split is going to collect the online rents they're going to do the background checks for your for all your your tenants so you're not doing any of

[05:39] that you know more digital stuff they're going to make the payouts you have your analytics and track and uh tracking an account with pad split you can see you know who's there um like how many rooms are filled currently your occupancy rate that type of thing and they also handle

[05:57] evictions you know that's another question that H to M um but essentially your in-person property manager is going to be handling all the more uh physical stuff so when you have a tenant move out you're paying for a turn on one room not the whole house so you have a a very you know fairly low turn um expense when

[06:17] when when a tenant moves out and your property manager is going to be doing all that ENT you know a lot of people will pay a property manager to do monthly cleanings on the common areas as well um so that's that's really in in repairs when tenants put in tickets to get things you know replaced like a a

[06:35] leaky faucet your property manager is going to have a vendor who and they're going to send that person out so that's how and you can find out more information on how pad split V you know vets tenants and their background track and their and their requirements and and policies there on their website um and

[06:50] the leases that they use are are proprietary as well so they're not going to be your typical long-term rental you know Florida Realtors uh lease agreement uh let's go over to the uh calculator because I want to show you you know what the um what the uh numbers look like here so I put together just some sample

[07:10] numbers you know for kind of what we should Target in Tampa you know you're looking for about you know if you want to Target an eight-bedroom you're probably looking at about 400k price range would be a good starting point you could go you know fewer bedrooms lower price but um the 8500 here is not it's

[07:27] out of pocket not financed so so this is for your your uh Furnishing when you're leaving when you're you're uh closing the property after you close padsplit can even help you put together what you need so this does not have to be an overwhelming you know um very you know intense thing for you to do all by

[07:47] yourself we have people all throughout Tampa who uh can help you every step of the way and it will not break your bank so 8,500 to furnish the house which is much less than an Airbnb because you're not buying uh you're not buying uh Cosmetics you're really just buying functional things like bed frames

[08:05] mattresses tenants will bring their own uh I keep saying tenants but they're they are members they're going to bring their own Linens their toothpaste they you know that type of thing so you know here are some pretty basic Financial you can change them and edit it for your situation but uh if

[08:22] we're getting about $200 a week and I used $800 a month per room so 8 time 800 is 6400 a month right here uh you can see we target uh 10% vacancy um so we want to factor that in and your property management fee so this is the unique thing that I wanted to make sure everybody's aware about because this is

[08:44] this is kind of based on last year's projections on how the the leasing the um pad splits lease with the homeowner uh worked so I'll kind of go over all of this right now but basic basically padsplit used to have a much larger monthly percent fee um so I use it sometimes to reflect back on because

[09:09] it can be similar but basically now they didn't use to charge a tenant placement fee and now they do and that's kind of the difference so now they lowered their property management fee to 8% uh however um they also added in a tenant placement fee which is very hard

[09:28] to factor in cuz it's basic Bally you're paying 10 days worth of rent on each room each time you have a new tenant so it's a little it sounds complicated and that's why it's a little hard to like quantify in a calculator uh so I use the old projections which you know is about 20.75% um and that also includes your

[09:48] in-person like local property manager so this is kind of like a nice picture to look at on what you know we think now if I was to use um projections now I would put this at 8% and I would also do uh I'll put my calculator here because I'll show you how I came up with 700 so um actually it'll change it'll change so

[10:11] let's come up with a new number here this is going to be $300 a month is your flat fee roughly for your property manager I know a GU great guy here in Tampa who uh will do it um there is also $70 a month in Internet because you're paying for Utilities in internet as a pad split owner let's say 325 on average

[10:32] in power uh let's say 150 a month in water and then let's say you know $100 a month for mowing the lawn and keeping that that clean that could be a little bit higher so we'll just use that's 945 total let's let's use 1,000 so now your monthly net cash flow shows

[10:55] $997 but we know that that's not factoring in your tenant placement fee so that's kind of the uh it looks nice it looks like 12% cash on cash return but we know it's not going to be that unless you have tenants who are staying for you know a year plus uh two years plus then this is going to be excellent

[11:14] excellent cash flow because you'll get the tenant placement fee out of the way but if you are getting tenants who are staying 9 to 12 months at a time then uh you know the cash flow is still going to be there because we can go back let's remove the $300 for the property manager because everything is still going to

[11:30] apply and let's try to factor in the tenant placement fees a little bit um there's still going to be cash flowing about $461 a month we'll say five $400 to $500 a month uh on average now you can keep more of that if you create a better experience for tenants and that's what padsplit is all about is creating a

[11:50] great experience for members of their platform and retaining them for longer periods of time because as an owner here you can get rid and uh before people move in they will see that rating and that could affect your future rents all right so thanks for listening to all of that you know let's go back to

[12:10] evictions real quick because you can go to pad pad split's platform their website and learn about how they do things and uh they have mentioned that they have a very very low eviction rate and because tenants members because members pay weekly it is very easy to control and manage eviction because with

[12:30] with monthly uh monthly payments you know there's a longer period of time before you find out somebody's going to be a delinquent with pad split obviously that's x divided 4X so you can move about four times quicker with a padsplit property if you have to manage that and um there are great ways that padsplit

[12:50] does it in a very positive way for both and create a positive outcome for everybody so kudos to them on that you know what I realized is I forgot let me show you what that property on that calculator would have made with the uh rents that I told you about previously so let's say

[13:10] 23 oops messed up 2,300 a month and rents will take off utilities because your tenant's going to mowe the lawn they're going to be responsible for their own utilities as a as a long-term rental and we're going to move this to a 8% property management fee uh um and we're going to remove

[13:31] the rehab budget out of pocket doesn't really affect the numbers that much or at all excuse me but here we see excuse me man I'm coughing I'm going to move the vacancy back down from 10% to 5% and here you see I mean this is why it is so incredibly hard to find a

[13:53] rental property in Tampa that you can long-term rent now I I get it that you know nobody's really buying a $400,000 property to rent it 20 2,300 a month but I mean even if we bump this up to 3,000 cuz let's say this also had a pool and uh you know you were getting like you're still negative quite a bit and the

[14:13] reason of you know the reason for this is is a couple reasons it's because interest rates here have continued to stay pretty high while property taxes and insurance have skyrocketed and rinse while they did go up quite a bit um two years 3 years ago they they kind of puked and they didn't continue going up

[14:33] and prices went up so you have all these forces mostly either stagnating or moving upwards and uh and that's why um you know normally uh we would have been able to cash flow about $100 a month on something like this but um it just does not work unfortunately anymore so that's been a lot of

[14:53] information about padsplit I hope that if you're looking into a padsplit property in Tampa Bay reach out give me a call call schedule a showing with me and I'd love to talk to you about it and see if there's a way we can work together oh and don't forget to like share and subscribe thanks for watching