Aussie Fire Ant

Guide to Earning Income on Airbnb

A while ago we booked an Airbnb studio on a trip. It ended up being a granny flat in someone’s backyard. That particular host had built a 3 bedroom unit above the 1 bedroom studio we were staying in. It was peak snow season and we were paying almost $300 a night. The 3 bedder next to us was listed for $665 a night. I remember this distinctly because I thought WOW this family is on their way to FIRE if they can get almost $1k a night in Airbnb income.

So I set out brainstorming ways in which we could do the same.

Idea 1: convert the Garage into a studio. This was inspired by a show I’d seen on tiny homes in the US, and the example of a 25 sqm home they used to have (and maybe still have?) in Ikea. I quickly realised it wouldn’t work because the floor of our garage had no foundation, it’d be miserably cold at night, and suspected it was against council rules.

Idea 2 build a granny flat out the back. This was quickly scrapped because we have a tiny backyard and the cost of a granny flat or studio is $100K or thereabouts.

The easiest way turned out to be simply renting out a spare room. It also required the biggest compromise in terms of privacy.

The layout of our home had a few things going for it. Firstly, a second bathroom near the back of the home, close to the room we had earmarked for renting out. Second, there was potential for side access.

So we spent the next few weekends preparing our ‘AIRBNB PLAN’. It was hard work. There was a lot of decluttering that would have made Marie Kondo proud. Plus reshuffling furniture to clear out what was effectively a study and turn it into a host-worthy room.

We purchased a double bed and mattress, some modern looking furniture on the cheap. Plus a doona, blankets, linen. It was quite an investment even though we tried to buy budget versions of everything.

It has worked out pretty well so far. We’ve managed to get a few 2 week / 1 week and even month long stays.

Some tips for renting out rooms and earning income through Airbnb

Make your photos amazing: Photos sell, think about how you yourself search for hotels and shop online. I am usually guilty of flicking through photos and making my mind up quickly. I’ve seen so many crappy photos on Airbnb. Poor lighting, too cluttered. Bathrooms too zoomed in, or angled down at the toilet bowl. Most phones nowadays have photo editing tools, or you can use an app called Lightroom. You’d be amazed what turning up Brightness, Contract and Highlights can do.

Test your own listing by switching to travel mode in the Airbnb App and searching for your listing. I have mine as a saved search so I can review the text from the perspective of a traveller. You can also test a few different dates to get an idea of what sort of pay out you will get, remembering that Airbnb takes a clip.

Make several sets of keys so you have spare copies and backups if your guests lose theirs. We have two sets of keys for our guests but only provide 1 (the other is upon request), then a set each for ourselves.

Be well stocked with the things you’ll provide like toilet paper, toiletries etc. There’s nothing worse than having to rush out for supplies because your guests have run out.

Be responsive. Airbnb recommends responding to questions and reservation requests within 24 hours. I try to reply within the hour and have all notifications pushing to my phone. The most common question we get is how close is your home to the airport or nearest station. Takes 30 seconds to send a response. If you took 24 hours your guest might have booked with someone else.

Maximise privacy: You can create screens or hang an extra door between your living area and theirs. Clearly state in your listing or house rules which areas are theirs and which are for your private use so it’s abundantly clear to guests.

Make check in easy: Rather than waiting around during your check in window, why not write a really clear set of check in instructions then set up a lock box system so guests can check in by themselves? It saves you the hassle of waiting, and saves them the stress of attempting to make contact upon arrival.

Be clever with your pricing: Do your research on surrounding homes. You don’t want to be the cheapest because it might seem like your place is dodgy. But you don’t want to overcharge either. Airbnb has smart pricing too which auto sets pricing. We use a mix of both – auto pricing for general periods with a minimum floor. Then on long weekends we set our own pricing. If you would rather long term stays, Airbnb has a discount feature for week long and month long stays. That way you’ll be changing the sheets less / doing less cleaning with longer term guests.

Hope you found this helpful!

August 2019 Net Worth Update

A bit of a late post. We had a really busy month with a heap of work related travel.

I remember just out of university the prospect of travel for work was so exciting. Free flights, nice hotels, a daily food allowance. The chance to explore new places.

Then the reality set in. Flights were exhausting and a day out of the office inevitably meant a barrage of emails to catch up on upon return.

The hotels were nice yes, but usually any free time was spent hunkered over the laptop on a tiny work table and feeling frustrated at a slow Wifi connection. Sometimes I rarely left the confines of the hotel let alone explore a new city.

But August wasn’t that bad. We got to explore two warm locations and escape the Sydney winter which was nice. It also meant a lot of spending – eating out and a portion of R&R that wasn’t reimbursed by work.

Net worth Summary – I’ve changed the table to include the past month. The main change this month was a rejigging of our share portfolio, where we sold out of $50K of managed funds to lower fees. The proceeds went into a mix of offset and eventually the plan is to move these back into ETF’s. I still think maybe we hold too much cash but always worried about a redundancy or rainy day event that will mean we need the savings to pay the mortgage and bills.

Summary	August 2019	July 2019
Shares	$ 176,749	$221,264
Cash	$ 143,251	$128,764
Real Estate (Equity, includes PPOR)	$ 626,092	$555,659
Net Worth	$ 946,092	$905,687

Whopping Fees on Managed Funds

We recently switched out $50k of managed fund investments with a Financial planner. It was not because were didn’t like our planner or thought the investment was underperforming. It was the whopping fees which finally made us bite the bullet and switch out. We’ve still left some in there, however will be gradually moving it out over time.

How it all started…

So I went to see a Financial planner back in 2012. With the promise of a financial expert managing our money and the allure of higher returns, we agreed to put $1,000 direct debit every month into their choice of 3 – 4 actively managed funds.

I didn’t hear from them for the rest of the year, but could see that we were earning dividends and the investment growing steadily through a mix of capital gains and our disciplined input each month.

Each March on the anniversary of our first meeting, we would sit down for an ‘annual review’ which lasted one hour with the planner. They would show us how the portfolio was doing, recommend some switches to new funds, switch out of the existing funds, give a short update of how the market did for the year and for that charge a tidy 1% on funds under management (i.e. how much we had with them).

Fast forward to 2019

We now have $120K invested across Magellan, Fidelities, Antipodes funds. What shocks me though is the fees.

Fees to the financial planner: so for the one hour of contact we have each year, they charge 1% on funds managed. 120K x 1% is $1,200. To me, that seems like a lot of money for not a lot of value. I am not saying all planners would be like this – perhaps yours is very active in managing your investment. But this was our experience.

Fees on the managed funds: our managed funds were invested in underlying ‘active equity’ funds with an investment manager. This means there’s a team of guys in swish tailored navy suits and brown leather shoes looking over Sydney Harbour from plush offices doing research full time on what stocks to invest on the managed investment portfolio. The fees charged were around 1.2% ‘management fee’ on the funds invested. Plus if they outperformed the benchmark, another 15% on the outperformance above that benchmark.

A simple example is say you had 100K invested with them.

100K x 1.2% management fee = $1,200.

If the 100K grew to 150K, but the benchmark stayed flat, their ‘outperformance’ is $50K and so they earn 15% of that 50% ($7500)

Again, that seems like a lot of money, but then again these are star stock pickers and experts in the market, so you’re paying for that expertise.

Fees for the platform: Our funds were invested through some fancy investment accumulator platform which had its own app and website. Which isn’t too different from a Commsec or IG brokerage account however having that platform means you have access to these managed funds. The fees for the platform were $600 for the financial year.

The combination of the above is $1200 + $1200 + 600 so a whopping $3K in fees.

Now, compare to this to if we put our money into an ETF. The fees would be the $10 to $20 ONE OFF brokerage fee to get into VAS ot VGS.

That’s it.

The $3,000 can fund my soy flat white habit. It could be reinvested into more ETFs. It could fund a few mini road trips a year.

July 2019 Net Worth Update

Early July was a heavier than usual spending period for us as we embarked on a mini trip involving 5 nights in Canberra’s city centre and 3 nights in Jindabyne (Baby’s first snow trip!)

Canberra was our first stop via the Big Merino in Goulburn.

The purpose of the trip was part work – a health conference. That meant for me – child minding and exploring Canberra’s parks, cafes and driving around a lot of big roundabouts all day.

Image result for canberra big roundabout — Why Though? A Big Roundabout – Source Buzzfeed

We visited the Monet exhibition at the National Art Gallery and contemplated our FIRE goals while gazing at the Water Lillies. Well, it was more like I held a squirming 1 year old who was making a lot of noise while cashed up retirees looked at us disapprovingly

Where was I, oh right the net worth update.

Shares were up, both our managed funds portion and ETFs as markets continue to rally. By the way, every month we have a direct debit of $1k going straight into a mix of funds. It means that I am not tempted to go out and splurge on something random with money sitting in my account, ready to PayWave.

Real Estate – valuations continue to slide *sad face*. We use Domain as a guide for simplicity and yeah…just depressing to see your valuations go down month to month and equity shrink despite working hard and saving. But we continue to pay down the debt, rental income coming in from tenants and smooth sailing generally – despite a big toilet leak requiring a plumber on one of the IPs.

Cash – we’ve probably been a bit risk averse and kept an emergency fund of 100K. With the interest rate cut and rather dismal high interest savings rates, it was time to move some of this to the mortgage. So a small reduction in cash but really just shuffling money from one account to another.

Summary

Summary	Jul-19
Shares	$ 221,264
Cash	$ 128,764
Real Estate (Equity, includes PPOR)	$ 555,659
Net Worth	$ 905,687

One of the questions I have been grappling with is whether to include the PPOR into the Net Worth? I do because while it is not an income generating asset, any equity could be realised upon a sale (market conditions dependent). If we were to sell and redeploy that capital into ETFs then it could generate income. We would then need to rent to have a roof over our heads, however I have factored rent costs into the FIRE figure. What do you think?

How Marie Kondo helped our FIRE goals

For various reasons, we have moved house a few times in recent years. With each move, we gained an extra bedroom and more storage space, and hoarded more and more stuff.

After finishing Marie Kond’s book The Life Changing Magic of Tidying Up, we were very inspired and immediately embarked on our once in a lifetime tidy.

How did we end up with so much crap in the first place? The centre aisle of Aldi seems to have been the main culprit for this. Also a number of once off camping / snow / cycling trips which meant we bought more gear than we would need in our every day lives.

Long story short it took us a week to declutter our wardrobe and fold everything ‘Marie Kondo’ style. Selling things on Ebay and Gumtree has been an ongoing process.

But how does this relate to FIRE at all?

We made a few hundred bucks selling unwanted stuff, yes. But that’s a once off and hardly makes a dent on long term FIRE goals. It was more that, when confronted with a mountain of our past purchases, my mindset towards shopping shifted.

I’ve never been a big shopper. I don’t covet designer things. But I do have a habit of buying things for one off events. A big work trip? I’ll buy work clothes. A snow holiday? I’ll go and buy thermals, socks and new gear. It has made us think long and hard before making any bulky purchase that might sit at home after its initial use.

With a 1 + year old toddler we are now faced with a whole bunch of outgrown baby things. Initially the thought was to keep it (in case we have number 2) but that will mean EVEN MORE hoarding. Finally we made the decision to start selling that too.

It’s an ongoing process, a lot of trips to the post office (for larger items), a lot of bulk buying of 500g satchels, a lot of flaky Gumtree pick ups that never eventuate. But I would say it has been rewarding. To know that things are going to a new home instead of straight to landfill.

And I am proud to say it has helped keep our discretionary spend within our $500 a month limit (this includes eating out by the way).

Uber Side hustle

So I went to Perth this week and ubered all four trips to and from the airport. Work pays and at early hours of the morning it beats catching an overpriced AirportLink train.

On one trip, my friendly driver told me at 6am I was his third trip to the airport and he had made 70 bucks. At that point I was actually juust starting to doze off so I was initially struggling to make sense of what he was on about in my dream like state.

Guess how much I made last year, driving Ubers part time? Guess!

Um..I mumbled sleepily

$40,000! He announced triumphantly.

That kind of woke me up. He wasn’t a full time Uber driver. He had a second, albeit casual job at a hospital. He would drive 5am to 8am then head to work.

Seemed pretty lucrative as a side hustle. I remember seeing articles a while back of drivers making $1k a week driving.

Was there a catch?

With any side hustle there is an opportunity cost involved, what else could I be doing in that time. Well, sleeping for one.

There is the depreciation on your car too, given you are running down your own asset. Another driver (remember I had 4 trips to casually probe lol) told me he would easily clock up 200 to 300km a day driving around. Thats a lot of kms over the norm. But on the flip side, all of a sudden all your car expenses can be tax deductible! Which helps given the ATO recently reduced the extent to which the work car can be deducted. So all of a sudden, petrol, car servicing, rego, could perhaps all be, at least on a pro rata basis, tax deductible.

Another driver told me it is getting more and more competitive. Unless it’s peak hour or a Friday night there isnt as much Uber business durimg the day. He switches between Uber and another new ride share service, Ola, in order to get enough business.

As a test, I flicked open my app at random times to see the competition and sure enough, even in my sleepy inner west suburb, there were always 4 or 5 ubers lurking in the vicinity.

What do you think? Is it worth driving Ubers nowadays as a side gig on top of a full or near full time job?

FIRE with a Baby

Hello, today is my day off and I am on the couch writing this on my phone while my 1 year old is tearing up tissues on the floor.

We started our FIRE journey prior to starting a family. I guess we had a vague notion of the costs involved but it only really hit us once we started to shop for baby stuff.

We didn’t want to blow the budget or splurge on things which would only last a few months or years, so we made it our objective to always be frugal where we could.

This post is a review of the top 10 baby items we bought over the year and how much we saved hypothetically compared to if we had bought new.

Pram: The pram market is pretty ridiculous these days. There are prams that are the cost of a small car. Pram shopping is overwhelming. And as with all baby things, it’s a constant mental battle of wanting to get the best for your baby versus not breaking the bank. Despite being on a budget we wanted to get a quality pram and didn’t want to compromise on this, so settled for the Bugaboo Cameleon. We found a second hand one on Gumtree – the only compromise was that it was bright RED which isn’t really my colour. Oh well.
Cost: $300
Retail: $1,600 new.
Saving: $1,300.
Cot: a hand me down. We did however buy a good mattress for it for hygiene reasons.
Cost: Free.
Saving: c.$200
Car seat: We found a Britax Safe and Sound carseat on Gumtree for $300. The only risk of getting second hand was if it had been in an accident. We did ask the seller, so I guess in this instance we were relying on the honesty of fellow gumtreeians.
Cost: $300
Retail: $500
Saving: $200
Change table: Freebie on Gumtree. The seller even threw in a change mat and covers too! It was a dark wooden one which didn’t quite fit with the decor of our home, but it was sturdy, much more so than brand new plastic versions.
Cost: Free
Retail: $250 (for a similar wooden one)
Saving: $250
Bassinet: It was initially news to me that babies needed both cots AND bassinets. But eventually we found it to be very convenient, to be able to wheel the bassinet around the house. We found ours by the side of the road. At first I was a bit paranoid, I must admit. What if it wasn’t clean? What if it wasn’t compliant with xxx safety standards? However we pulled it apart and cleaned all the parts. I also googled and found it was a legit model sold at Baby Bunting. We used our bassinet for about 4 months before changing to a cot.
Cost: Free
Retail: $100
Saving: $100
High chair: There’s so many high chairs the choice is overwhelming but babies are so messy when they start solids, so the simpler and easier to clean the better. We opted for a basic Ikea model. Found a second hand one for $5 on Gumtree.
Cost: $5
Retails $25.
Saving $20.
Baby carrier: I did start off with a cloth wrap carrier but after wearing baby in it for a day, my back was sore. So we eventually caved and bought an Ergobaby Omni 360. There is a liquid Ebay market for these things! I ended up in a bidding war unfortunately and probably paid $20-30 more than I should have. The carrier also arrived covered in cat fur! I’d forgotten to ask if it had come from a pet free household. Dang.
Cost: $168 (incl postage)
Retails: $300 (approx)
Saving: $130
Breast pump: a Medela Swing, brand new but purchased off Gumtree for $100. It was in its packaging and obviously new. About a year in the pump broke down and unfortunately since we hadn’t bought it from a store, we pretty much dusted $100 bucks.
Cost: $100
Retail: $180
Saving: $80.
Second pram: we are outdoorsy and go running every week and it soon became apparent that the Bugaboo wasn’t going to cut it. The tiny front wheels seem to catch if you go faster than a jog. We found a free Mountain Buggy Urban Jungle on Gumtree. It was faded and the sun shade at times slipped back when going fast. It got really annoying, so we eventually got ANOTHER running pram, which was a Mountain Buggy Terrain, second hand off Gumtree. Love this pram and it has actually at times replaced the Bugaboo.
Cost: $150
Retail: $899
Saving: $750
Last but not least, Nappies. We bought Pea Pod cloth nappies and used them for a few months. Yes it was a bitch to wash at times, and sometimes it was pretty gross I admit, trying to peel off the poopy liners and chuck them into the wash. But our baby pooped about 10+ times a day at the start (that’s within the range of normal….apparently), so we really did save a lot in those early months going reusable cloth. Mind you, we still used disposables such as 1) when we were on holidays 2) when we were really busy and couldn’t get the pea pods washed in time.
Cost: $200 (for about 22 nappies)
Retail: $200 (we bought these new)
Saving: probably 1K? compared to if we had used disposables.

Hope you found this post helpful!