Short-term rental investments have grown in prominence side-by-side with the increasing popularity of Airbnb and Vrbo properties. Investing in short-term rentals could be much more lucrative than traditional long-term rentals. But, just like with any other severe financial venture, adequate preparation is critical to achieving your financial objectives.
We’ve prepared this guide on winning big on short-term rental investments to enable you to make informed decisions when buying one. We’ll address what a short-term rental property is and if they’re profitable investments. Let’s dig in!
What Is a Short-Term Rental Property?
A property that has a lease term of fewer than 12 months is typically called a short-term rental. Short-term properties come in a single or multi-family apartment, a condominium, or a townhouse. The property owner usually purchases these types of rental properties to lease them to tenants on a short-term basis.
Short-term rentals are famous for being vacation apartments and Airbnb in tourist destinations. However, short-term rentals aren’t only about vacation homes. They also apply to renters who need a place to stay for less than 12 months, tagged the conventional lease time.
Recently, the industry has grown from a source of extra income for real estate investors into a booming industry with many markets across the United States. Moreover, though regarded as great investments, short-term facilities owners need to utilize proper management and adequate local market knowledge.
Are Short-Term Rental Investments Profitable?
With good management, the short-term property could be more profitable than longer-term investments. But don’t think that it will generate passive income without much effort.
Before you invest your money, you have to take a look at several components that determine whether your property will create a profit or not. Based on information from property managers, investors, and owners, potential short-term rentals investors will do great to note the following tips:
Have a Good Marketing/Advertising Strategy
The proper marketing and advertising strategy can transform your short-term rentals investment into a goldmine. On the other hand, a poorly planned system can sink it. If you purchase a short-term rental property on a popular tourist site, it’s pretty easy to undermine planning a proper advertising strategy.
However, it’s never advisable to start a real estate investment without clearly pre-defining how you want to advertise your short-term rental property to the public. Take note of the general rules of good marketing and advertising plans.
Detailed and Compelling Ads
Ensure to add crisp images and possibly some videos, detailed descriptions, and good customer relations with your guests.
You can also inform your potential clients of all the amenities in the vicinity, such as restaurants, plus cultural and historical landmarks that might interest them.
Social Media Marketing
Another type of advertisement to leverage is social media. Some successful short-term rental property owners have a dedicated Instagram account, sometimes inviting influencers to create a buzz around them.
Some people would notice your hard work and recommend your properties to their friends and family members.
Vacation Rentals Websites
What about outsourcing advertising to vacation rentals websites? Theshorttermshop.com, for instance, lists the best real estate homes, condos, land, and foreclosure apartments in the most profitable vacation rental markets.
By outsourcing to such websites, you compete for high-end users and increase generated revenue by extension. Over the long haul, your marketing and advertising strategies could create a remarkable chain of word-of-mouth advertising for your brand.
Pay Attention to Market Diversity
Different short-term rental markets showed a wide range of varying demand rates during the pandemic. For instance, large cities and other markets in urban areas had much lower demand over the period. This decline, of course, occurred from the risks connected with crowded places and the absence of single-family properties.
On the other hand, coastal and drive-to markets saw an all-time high demand for single-family properties near famous feeder markets.
In some areas, single-unit short-term rental investments might deliver more returns compared to more significant luxury rentals. Meanwhile, it could be better over the long haul to invest in larger luxury units over smaller rentals in other places.
Don’t forget to estimate your ROI based on different property types in your investment portfolio to maximize returns. You’ll want to maximize your investment returns by accurately reviewing the market’s current performance based on different property types, including vacation rentals in Florida
Research Properly on Applicable Regulations
Any experienced real estate property investor will tell you for free that local and state regulations could have a powerful effect on your investment.
Having a good grasp of historical policy changes can inform you of potential future changes.
You want to avoid marketing properties like oceanfront vacation rentals, only to discover later that you have requisite uncompleted permits to receive. However, one crucial advantage of conventional vacation rentals is their long-standing history and regulations.
Tourism industry experts would prefer vacation short-term rental investments, knowing that their rules are unlikely to change. Additionally, you should also find out the rules for a platform such as HomeAway or Airbnb.
One more thing to be aware of is the amount of tax you’d have to pay. A well-known advantage of short-term properties is that you could reduce your tax liability by deducting your expenses from your total returns.
Leverage Technology
Property management involves lots of work. Therefore, you’ll need to understand how to automate your tasks using technology. The need to leverage technology is relevant when you’re outsourcing to a property manager; and when operating by yourself.
It’s very vital to be familiar with the technology that’s commonly used in the industry. Doing so will help you define what would be most appropriate for your portfolio.
It’s advisable to choose an easy-to-use pricing tool with various data sources to price your investments accurately over the last five years.
Conclusion
Short-term term rental investments are an excellent opportunity to diversify your portfolio and gain financial security. Though not without some initial planning and working, once you’ve set up a system, it could become a very significant source of a passive income!
If you think this might mean a great way to invest in real estate, talk to experienced persons around, conduct some research and get at it.
