Short Term Rentals
When we travel, we have become accustomed to finding the best hotel, in the best area, with the best reviews-especially when it comes to cleanliness. Platforms like AirBnb, HomeAway and VRBO have revolutionized travel accommodations. Travelers have the option to rent for a few nights to a few months. These types of properties can be very lucrative, even more so than long term rentals.
Investing in rental properties is typically about maximizing your income. Short-term or vacation rentals allow you to charge more per night that you would get from a long-term rental. For example, you could charge $150 per night for a short-term rental. If you typically rented the home for $1,200 you would earn that in 8 nights of having your short-term rental occupied.
Vacation rentals also have the option of charging more per night on days with higher demand like, weekends, holidays, and special events.
Lately, many people have begun using short term renting to pay for a second, vacation home. They rent the home out during times they will not be there. You simply block off the days in the booking calendar for your use. This works really well in buy and hold situations by allowing you to continue to profit.
Short term rentals may also offer tax deductions. As we are not tax professionals, please consult with a licensed tax professional.
Finally, short-term rentals do not come with some of the risks that long-term rentals have. Travelers only occupy the property for a short amount of time, typically paying in advance using the platform of your choice. With long-term rentals you are likely stuck with your tenants until the end of their lease.
Overall, short-term rentals can be riskier investments than long-term rentals. Renters are not thoroughly vetted for short-term rentals like they are for long-term rentals. Long-term renters typically go through an extensive background check that includes checking credit, references from previous landlords, employment history, etc. There is no way to guarantee that a tenant will be a good one, but the chances of having a good tenant are high with background checks.
With short-term rentals, landlords have little to no control over who they can rent to. Recently, short-term rental platforms have come out with a new system to review guests. However, there are still unknowns when it comes to short-term rentals.
Short-term rentals also have less predictability concerning income. Short-term rentals have higher vacancy rates than long-term rentals. Tenants only stay for a few days, often with a few days gap before the next tenant checks in. There are also frequent last minutes cancelations. The travel market can also be unpredictable, think COVID-19 travel restrictions.
Short-term rentals also require more time commitments. Cleaning, restocking, booking, and other questions can quickly be turned into full time work. Maintenance costs also tend to be higher due to the property being furnished. More things to break=more things broken.
Investing in short-term rentals can prove to be very lucrative. However, you need to do your due diligence in researching your market, local laws and rules regarding vacation rentals, and local zoning to ensure your short-term rental is compliant.
Budget properly to include furnishing, decorating, and for vacancies. Consult with someone well versed in short-term rentals, as well as professionals to ensure your short-term rental is legal and your taxes are taken care of.