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Are Short Term Rentals A Good Investment?

Are short term rentals a good investment?

Short term rentals are properties that are rented for a shorter period. Mainly, property owners or managers will rent their properties out on a nightly or weekly basis. Real estate is an easy way to invest in short term rentals. Among the many options for investments, rental properties are the best strategies as they allow investors to make money both in the short-run (through rental income) and in the long run. As a potential renter, there are pros and cons as well.

If you are ready for short term rental, then you must manage your own property to oversee the process, reduce fees, provide a personal touch, and directly impact keeping your rental booked throughout the year.

Hiring a property manager for bookings and remove the burden of dealing with clients can be a good first step for people new to the short-term rental game, and you can start self-management once you learn a bit more about the process.

Rules and taxes are becoming scrutinized in communities across the country. The guest pays the tax but it’s your responsibility to collect and pay it to the correct city, county, or state agencies, usually each month or quarter.

As an owner for short-term lease property, you are not bound by any lengthy contractual obligations. This is beneficial for rent increases and for higher rates in general. Getting rid of a problem tenant can be much easier when not under contract, with a 30-day written notice sufficing to end the tenancy, as opposed to the costly eviction process. The owner is also free to change the terms of the lease agreement on a monthly basis if the tenant is notified.

You can set a different rental rate for your property for each day of the week to accommodate for weekdays and weekends as well for holidays and other seasonal variations.

The main challenge associated with short-term lease property is that you can experience months with empty properties under short-term rental agreements. With tenants under contract, you don't have to expend the constant effort and advertising money to ensure your property is rented.

Another challenge of short-term rentals is that they experience a significantly higher turnover rate than traditional rentals. You may have guests who come for just one night, so you must welcome them and collect the key from them, clean after them, and restock on a daily basis. This requires a lot of effort and can be costly. You can deal with this issue by hiring a vacation rental management company, as mentioned above.

In some popular vacation destinations, it is possible to have your property booked out for 10 to 18 months in advance. However, most owners will struggle to fulfill the occupancy puzzle, with some tenants staying for days, others for weeks, and a few for months. Will you still be profitable if you only manage 40% occupancy for the year?

The best way to ensure a good return on short term rental investment is to choose your location and investment property wisely. If you find an investment property in a great location and the numbers make sense, you could get good returns. Also, make sure you implement some good marketing strategies to increase your occupancy rate.

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