Should You Invest in a Short-Term Rental Property? Considerations to Know
If you are looking to break into the real estate market, you may be wondering which options are best for you. You could purchase a home or apartment building to rent out to long term tenants, or you could purchase a property in a highly traveled location for short-term rental. The former option may be more familiar to you, but don’t count out a short-term rental property just yet.
Keep reading for a few facts about short-term rental properties that could help you decide if this is the right investment opportunity for you.
Compared to long-term rental properties, short-term rental properties make more money on average. Owners are able to raise the nightly rates of short-term properties at their discretion and consistently booked properties can earn far more than a traditional rental property would from monthly rental fees.
Unlike the more binding relationship between a traditional landlord and their long-term tenants, you would be able to control when your property is available to renters. In addition to being able to control nightly rates, you are able to unlist your property at any time. If you want to use your property for a personal vacation, reserve it for a friend, or simply put a pause on your rental, you have the freedom to do so.
In fact, you can still access your property even when it’s in use. Many Airbnb hosts will meet their guests at their rental to check them in and out or for daily upkeep of the property. You shouldn’t have to experience the landlord horror stories of discovering damage on move-out day with short-term rentals; you can pop in and out as you please to check on the wellness of your guests and your property.
Further, even the type of property used for short-term rentals is flexible. Some platforms—like Airbnb—allow you to rent out just a room or a portion of your own house. While renting out an entire vacation home would allow you to earn more money, this could be a good way to try out the platform and decide if it’s right for you.
With short-term rentals, you do have more control over your property. However, this comes with its own benefits and burdens. As guests and renters come in and out, you are responsible for ensuring that the property is properly cleaned and maintained between (and during) each stay.
Whether you choose to do all of these functions yourself or hire professional services, you could be looking at pouring more time and money into this investment than you might expect. If you are up to the task, it could still be a great way to get a lot of bang for your buck on a real estate purchase.
While you can enjoy a lot of flexibility with short-term rentals, there are some restrictions and limitations to keep in mind as well. For instance, be mindful of location when you’re selecting a rental property. Some vacation spots could have dead seasons during which you receive virtually no income from your rental. If this is the case, you might not get as great of a return on your investment.
In addition to considering seasonality, you will need to get familiar with the short-term rental laws in your desired area. Some states and cities have specific regulations that require Airbnb hosts and other short-term rental owners to get proper business licensure, pay special taxes, acquire permits, and abide by specific building codes and standards. In some cases, there may even be limitations placed on the number of listings and length of stays that a host can legally post or offer.
If either of these issues applies to your property’s location, consider purchasing a property in a different area or rework your rental plan to suit your city’s rules.
If owning a short-term rental property seems like something you could manage and enjoy, start researching locations and properties today!