Anatomy of Building an e-Commerce Property

The Four Hour Workweek by Tim Ferris revisted an idea made popular years ago by Robert Kiyosaki in Rich Dad-Poor Dad. That idea is that passive income represents the holy grail of business-savvy entrepreneurs. If we could only find products or services that require very little effort to generate repeat income, then we can literally “make money while we sleep”! 

In Rich Dad-Poor Dad, Kiyosaki takes a close look at the role real estate could plan in creating passive income streams.  The Four Hour Workweek talks about creating a “Muse” built using today’s eCommerce engines to generate online traffic.  Examples used in the Four Hour Workweek include selling specialized exercise DVDs through a shopping cart site or a stylish series of French sailor shirts through an eBay store.

In November of 2007, my wife and I took a plunge into the world of "passive income" by buying our first rental property.  This has long been a dream of mine, but it took years before we finally overcame the numerous hurdles needed to make it happen. The property is a lakefront home in the Pocono Mountains of Pennsylvania.  However, to make this work financially, we needed the property to produce revenue!

This post examines the Internet Marketing techniques we used to generate revenue for our new “passive income” property.  After the initial burst of energy getting our new property ready for rent, we began wringing our hands about finding renters.

Our first thought was that we'd be able to rent the property through our friends and family.  It turns out that only 11.5% of our renters were friends and family. 

Our second thought was to use a highly visible Realtor in the Poconos to find renters for us.  For a $150 annual fee - and a hefty 25% of the rent - they'd find us renters.  Surely, they'd be able to lure in some good rentals for us!  Again, only 11.5% of our renters came from the Realtor.

Yet as we close in on the first year of operation, we are just about break-even on our operating costs.  We'll basically be out the cost of our first year repairs and maintenance... which actually exceeded our expectations.   So a full 77% of our rental income was discovered online!

Here is how we did it: 

Step 1.  Find a good domain name.  We had fun with the naming and my 11 year old daughter became our branding official.  After a series of voting runoffs, we settled on www.poconoperfect.com. I like names like this because you don't have spell anything - and its easy to remember.  Our extended family can then automatically promote the property to their networks as a result.

Step 2.  Build the landing page. I used my hosting providers free web-site builder to create a simple landing page.  The 1and1 Website Build application allows you to embed a photo album. As you'll see below, we can upload a limited number of photos to the HomeAway rental web-site. The HomeAway site is our main eCommerce engine, but PoconoPerfect gives us a place where we can provide more information, pictures, relevant links, etc. to our potential renters - and we have had a few inquiries come in through the simple fill-out form that is part of this site. In turn, all of the rental details, the availability calendar, etc. are linked from this site to the HomeAway site.  

Step 3.  Complete your competitive analysis and set your price competitively.  Although our property has many amenities that other lakefront homes don't (pool table, game room, screened-in porch overlooking the lake), we decided that we wanted to go for capacity.  Sites like HomeAway.com and VRBO (Vacation Rentals by Owner) were great for finding out what our competition was charging.  We found the range and targeted the low-end.  My wife, who does the sales, is sure to point out that ours is the most affordable lakefront home in the community.

Step 4.  Create a listing on a well-trafficked rental community.  We put a lot of time into creating a great listing on the HomeAway network.  This network actually links up Cyberrentals.com, A1Vacations.com, GreatRentals.com and HomeAway.com.  It manages your listing from a single database.  You have the ability to manage your listing details, the description, the rates and availability from a single site.

Step 5.  Create a great customer experience.  Pretty early on, my wife decided that she should be in charge of sales.  I was amazed that she would spend 30 minutes or more talking to potential renters, answering their questions, asking about their families, cajoling them, etc.   I guess I was  a "just the facts" kind of sales-guy.   We built some template contracts and waivers and got our little pitch down about the deposit.  We always send the deposit out as soon as our housekeeper gives the thumbs up.

Step 6.  Keep the listing fresh. Renting a place in the Poconos is a seasonal business. Use snow pictures for the upcoming ski season.  Use people fishing and swimming for the upcoming summer season.   You need to position your site for 30-60 days ahead of schedule.  If there is a big event (like a NASCAR race at Pocono Raceway), we'll make sure the site is reflecting it.

Step 7.  Run promotions for the slower seasons.  Dropping your off-season rates only goes so far.  The HomeAway network allows you to create special offers and have prime placement for $10-$15/week.  Every time we've had a slow period and paid for 2-3 weeks of promotion, it has paid off. 

Step 8.  Follow-up, close, follow-up, close.  My wife is a natural at contacting people who made inquiries.  If we have a slow period, she reaches out to former renters or other interested parties. Running our little eCommerce operation has become a hobby (obsession?) for her - and it has paid off.

So after all of this... what have our results been?

150-500 visits to PoconoPerfect.com each month.

As of today, we've had 9670 visits to our HomeAway site. (together, our landing page and HomeAway site generate about 1100 visitors each month).

In the past 10 months, we received 196 email inquiries and probably another 30 phone calls without emails (226 inquiries).  That represents about a 2% conversion to action rate. In June, The HomeAway network notified us that we had one of the most popular properties listed for inquiries in the Pocono Area.

We received a total (all sources) of 26 rentals that covered operating expenses (mortgage, association fees, taxes, electric/utilities). We have about a 10% close rate from inquiry to sales. Of course, unlike an e-book or DVD, our inventory is limited - and we've had to turn many potential renters away once a week was booked.  

I think it is safe to say that the eCommerce approach to our property has allowed us to keep it in the family for another year.  We expect to cover our operating expenses in the first year of operation.   This coming year we'll be expanding our Internet Marketing efforts and introducing some social media work as well.  Who knows... maybe we'll start approaching our neighbors at Arrowhead Lake in the Poconos to see if they'd like some Internet Marketing help.

Let us know - were these stats and steps useful to you?  Would you like to see more practical eCommerce how-tos in the future? 

Comments

[Skip Shuda, Chief Cheap Revolutionary]

Jim -

Glad you found it helpful. I think that the economic conditions are good for owning rental props in the Poconos... lots of people from Philly/New York/Delaware/NJ seeking less expensive vacation options.

We just signed up with VRBO since so many friends tell us they rent through VRBO. The owner signup process was a nightmare initially - but its smooth sailing now.

Skip

[Jim Hopkinson]

Hi there

I found this article very interesting and extremely helpful. I am also a 4-Hour Workweek convert and am working on some side businesses here in NY. I also have a goal of owning a place in the Poconos or Hunter Mountain area, and trying to at least break even with rentals. The 'how-to' was very helpful.

I do a podcast/blog covering online marketing trends for Wired.com. Check it out at TheHopkinsonReport.com

Thanks again

- Jim