Are Short-term Rentals the Real Estate Investor’s Future?
The past several years have seen an uptick in short-term real estate rentals. With the popularity of websites like Airbnb, VERO, and Homeaway, short-term investment properties are becoming more and more commonplace. While these short-term rentals do offer many benefits for investors, there are disadvantages to this investment strategy as well. In today’s article, we’ll be covering the advantages and disadvantages of short-term rentals.
The Advantages of Short-term Rentals.
Earn a Higher ROI Per Month
Aside from the tax deductions, short-term rentals when set up correctly can generate higher returns every month as compared to long-term rentals.
As an example,
You can list your property of AirBnB for $149 per night, times 25 days is $3,725 gross income.
A long-term rental renting for $2,000 a month.
As you can see, short-term rentals do generate higher returns on your investment. However, you must factor in your expenses.
You don’t always have to rent your property through Airbnb or other websites. One of the most significant benefits of owning a short-term rental is that you can use it as a vacation home when it’s not in use. You will have the opportunity to become more familiar with the neighborhood.
Owning a short-term rental property allows you to meet new and interesting people. People who travel, whether it’s for business or pleasure, are intriguing. They might have a boring job, such as a vacuum cleaner inspector, or someone who bags groceries at the store, but each of these individuals has a unique story. You never know who or what they know, and this can lead to new opportunities and friendships.
We’ve all heard the expression, Don’t put all your eggs in one basket. Owning a short-term rental property should be just one aspect of your investment strategy. One of the reasons why you might not want to invest solely in short-term rentals is because one day, you might wake up and realize the city has enacted new regulations pertaining to short-term rentals.
The Disadvantages of Short-term Rentals.
Tight Regulations in Certain Municipalities.
There are roughly 3,142 counties and county-equivalents within the United States and the District of Colombia. Some of these counties have extremely tight regulations regarding short-term rentals. Las Vegas is one area that has strict regulations on this type of investment properties. You should conduct your due diligence before committing to any major investment.
Higher Fees and Costs
With long-term rentals, your maintenance fees and costs are much lower, yet with short-term rentals, they are higher. If you list your property on Airbnb for example, every time a tenant leaves, you’ll have to clean and possibly make some small repairs.
Some municipalities require you to register your property with the county for a small fee: managerial fees, fees for listing your property on vacation websites, property taxes, and so on.
Long-term rentals may offer lower fees and costs, but the monthly revenue you generate is lower too.
Short-term rentals offer a higher return on your investment, but the fees and costs are usually higher.
While the popularity of short-term investment properties continues to rise, investors can position themselves for higher returns and numerous other benefits as mentioned above. These rental properties can cause a lot of enthusiasm among investors, yet caution is advised as there are disadvantages associated with this investment strategy. For the astute real estate investor, short-term rental properties can be a gold mine in disguise.