7 Things You Should Know About Short Term Rental Properties

7 Things You Should Know About Short Term Rental Properties

Senior Loan Officer
Brian Decker
Published on February 18, 2022

7 Things You Should Know About Short Term Rental Properties

7 Things You Should Know About Short Term Rental Properties

Short term rental properties require a special set of techniques for management and investment purposes. Here are some important things to consider.

Keyword(s): short term rental properties

 

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Did you know that over 600,000 Americans use platforms like Airbnb to rent out units and make passive income?

These online platforms have become incredibly popular during the past decade, proving that short-term rental properties can be a fantastic investment. However, investing in short-term rental properties is more than just buying a property and waiting for the money to start coming in.

Luckily, if you’ve been thinking about investing in this type of property, you’ve found yourself in the right place. In this guide, I will be providing you with the best tips and tricks I know to succeed as a short-term property rental owner.

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Read on, and let’s get started!

1. Reasons To Invest

Overall, short-term rental properties tend to be a very lucrative investment.

Think about it- let’s say you invest in a condo and charge permanent tenants $2,000 per month. Now, let’s imagine that the same condo is a short-term rental, and you can charge around $300 per night.

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As you can see, you could make a lot more money from it if you have it occupied consistently throughout the year. Depending on the market, it could be occupied 60% to 90% of the year.

Furthermore, when you own a short-term property rental, you have a lot of flexibility in setting rates and can take advantage of price appreciations during seasons of high demand.

The key to getting the most out of your investment is to fully understand the market where you plan to purchase and find a suitable property in a popular destination within it, which is what we’ll talk about next in this guide.

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2. Understanding the Market

Now you might be thinking, “how do I know that my short-term rental property will have tenants year-round?” Although you can’t know for sure, you can significantly increase your chances if you make your investment within a sought-after destination.

Keep in mind that the most popular tourist places in the US come with serious competition. So, you might have more challenges finding a good deal in cities like New York, Miami, Los Angeles, Las Vegas, etc. However, you could still find properties worth your time if you remain patient throughout this process.

Regardless, I recommend that you do these things to try and determine if the market you are thinking about is worth your time:

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  1. Research tourism stats in the area
  2. Research the local economy
  3. Research if there are projects in the pipeline that might increase tourism in the future
  4. Look up the area on platforms like Airbnb to see what the rates are like for different properties

3. Finding a Good Property

Once you’ve decided on the right market for you to invest in, you should start looking up properties. For this, I highly recommend working with a trusted real estate agent.

Not only will a professional help you find the best deals, but they will also help you determine if the property you are interested in allows for short-term rentals (because some projects might not allow for you to rent out your units short-term- we’ll talk more about this in the next section).

After you’ve found options of properties that do allow short-term rentals, make sure to do some research and calculate the revenue to see if those options would make good investments. To do this, you’ll need to figure out the average price and occupancy rate. Then, multiply the occupancy rate x nightly price x 30 to get your monthly revenue.

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If you like the number you see, you might’ve found yourself a winner. If you don’t, keep looking for properties and repeat the process.

4. Researching Regulations

As I previously mentioned, some buildings and neighborhoods do not allow property owners to lease their properties short-term. Similarly, some cities have rigorous short-term rental policies and regulations.

Therefore, you should always do your research and ensure that the market you chose and the properties you are looking at allow this renting model. Otherwise, you might not be able to lease your property short-term or will run into serious issues if caught doing it despite the regulations.

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This is another reason why working with a realtor is a good idea- they will be able to guide you in the right direction and help you avoid investing in a property that won’t allow short-term rentals.

5. Estimating the Expenses

Another thing you have to consider before you invest in short-term rental properties is the expenses, you’ll have to cover regardless of whether the unit is occupied or not. This type of investment will have similar costs as traditional real estate investing.

Therefore, you should expect to pay for taxes, insurance, interest, mortgage, etc. However, you should also consider possible expenses such as additional insurance and taxes for short-term rental properties, property management fees, other permits, utilities, repair and maintenance, and marketing.

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Make sure to do your research on what your specific expenses would be before you sign any contracts!

6. Marketing the Property

As a short-term property rental owner, you’ll want to make sure that the unit is always (or almost always) occupied so that you can make more profits. Therefore, you’ll have to spend some time (and often, money) to properly market the property and list it on the appropriate platforms.

Make sure you take professional photos of the unit and use them for the listing. If you want the property to have even more visibility, consider sharing on social media or running a Google Ads campaign.

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7. Managing the Property

Once you purchase the property, you need to get it ready for your short-term tenants. This entails furnishing it and fixing any issues it might have. Remember that you’ll be the point of contact for all of your tenants, so be prepared with answers to all their questions and concerns.

Suppose you don’t have time to manage the property yourself (or have several properties in different cities). In that case, you should consider hiring a short-term rental property management company to handle everything for you.

Most companies charge 15% to 30% of the gross rents. However, it is completely hands-off on your part, which is nice.

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Looking for a Loan to Invest in Short-Term Rental Properties?

There’s a lot to know about short-term rental properties. I hope this guide was helpful and that you feel prepared to take on this investment.

Any client pre-approved by Modern Lending will get a comprehensive review for the city in which they are interested in purchasing.  This is a complete 15 to 25-page report that is completely free.  Most companies charge up to $1000 for this- we do it for free!

Contact us today to see how the Modern Lending Team can help you finance your short-term rental investment.

For more expert tips, follow me on Instagram and Facebook @thebriandecker!

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Senior Loan Officer
Brian Decker Senior Loan Officer
Click to Call or Text:
844-4-Modern

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