When choosing your next investment property, should you consider something that would work best as a short-term rental? Short-term rental investments, such as those operated through vacation rental sites like Airbnb, can be profitable ventures.
Owning an Airbnb-type rental is a popular trend for investors, but make sure you're prepared for the risks and everything involved to make these properties a success for your portfolio! Vacation rentals require different strategies than a long-term rental property. Here are a few things you need to know before getting started with these real estate investing strategies.
It Takes Time
Having an Airbnb rental home that stays booked most days throughout the year doesn't happen overnight. It can take time for your rental to become popular and profitable. However, some investors prefer this type of investment compared to long-term rentals because they can charge more money for nightly stays and generate more cash flow.
Be prepared to be patient as guests begin to discover your property, enjoy their stays, and leave positive reviews that encourage more frequent bookings. If you provide a quality vacation rental that people enjoy, your property will develop a reputation as a go-to place to stay in your market.
Operating Expenses Can Be Higher
While you might be able to charge higher rates for short-term stays, you'll also experience higher operating expenses than with a long-term rental unit. You'll need to invest in furniture and other amenities to make your listing more attractive. You'll also likely have higher ongoing expenses than with a traditional long-term rental, including internet service, utilities, and more.
Setting the rental rates high enough to offset those costs can help, but investors must also keep rates competitive to stay booked compared to other nearby rentals.
They Can Be a Lot of Work
Many Airbnb hosts find investing in real estate with this strategy a rewarding experience. However, the rewards require a lot of work!
With a traditional rental home, tenants usually stay for several months to a year or longer, depending on the lease term. This means that most rental property owners don't have to conduct rental-ready tasks more often than once a year.
However, with short-term guests, investors must clean and inspect a property as often as every few days or once a week as visitors come and go between bookings. To get a rental ready for new guests, the unit needs a thorough cleaning. Property owners must also check for any damage or broken items left behind by the previous guests and make sure those items are repaired before the next guests arrive.
Most investors that find success with short-term rentals hire a property manager to take care of these tasks. With a property management company on your real estate investing team, you don't have to worry about bookings, dealing with guest concerns or requests during their stay, or cleaning and repairing a property between bookings.
They Can Be Worth It
In the right markets and with the right strategies, short-term rentals can be worth it! The key is to start with properties that make the most sense as short-term rentals in markets with an excellent tourism industry or lack enough traditional hotels to help vacation homes thrive.
If done correctly, short-term rentals can be a lucrative way to invest in real estate. Here are a few tips for how to get started:
1. Do Your Research Beforehand
Just like any other investment, it's crucial for a real estate investor to do plenty of homework before investing in short-term rentals. Study the market to see how much competition you'll have, the current rental rates, and how often properties are booked. Does your research indicate that a short-term property makes sense in a specific market based on the rates you could charge? If so, don't let a good property get away!
2. Choose the Right Property
Not every property is suited for a short-term rental real estate investment. Properties near popular tourist destinations or areas with many vacation homes are ideal. Consider how much work will be needed to get the property rental-ready and how often it needs to be cleaned and inspected between guests.
3. Make Great Deals On Short-term Rentals
Since it can take a while for your property to gain traction on sites like Airbnb or VRBO, make sure you get a great deal on the investment to help reduce start-up costs. As a rental becomes popular, b generate enough cash flow to see positive returns!
Find Real Estate Investments Through Privy for Successful Short-Term Rentals!
If short-term rentals sound like a good fit for your real estate portfolio, Privy can help! This type of investment can also be a great way to learn how to get into real estate investing! No matter the markets where you prefer to set up properties through vacation rental websites, our platform can help you find properties that work best for this real estate investing strategy.
The Privy Advantage means you get experienced investor insights into different markets to target the best properties at the best prices. No matter how you plan to invest (whether you choose fix-and-flip opportunities or rental properties), reach out soon to learn more about how Privy can help build your portfolio!
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