Deciding to invest in commercial real estate is a major financial decision. There are many ways you can invest in real estate. A popular investment opportunity is a short-term rental property. Creating value within your short-term rental property is key to enhancing your income. Let’s explore some ways.
What is a Short-Term Rental Property?
A short-term rental property is a furnished unit that is rented for short periods. They usually are seen as alternatives to hotels. And maybe a less expensive option for an extended stay. Sometimes, short-term rentals are rented on short-term rental property websites, such as Airbnb or Vrbo.
Can I Rent My House Short-Term?
Rules and regulations for short-term rental property can change by location. In many areas, short-term rental hosts must register; and obtain a license or permit before renting their property. To register your home, the host has to pay various fees and occupancy taxes; and must comply with insurance and other requirements. If you are interested in renting your house short-term, you should contact your local municipality, typically found on your local government’s website. You can also call your location’s zoning board or local housing authorities.
Renting Vacation Homes
Many people who own a vacation home choose to rent it out when they are not occupying it themselves to earn extra income. This allows you to be flexible and determine the dates your property is available to rent.
Pros and Cons of a Short-Term Rental Property:
It is always important to weigh out the pros and cons of using your property as a short-term rental property. Before getting to ways you can increase your profit, we’ll dive into some pros and cons below.
Are short-term rentals a good investment?
- Flexible Scheduling: You can decide when the property is available to the public to rent. You can choose to have it available for renters during the more popular times of the year.
- Flexible Charges: A short-term rental property can allow you to raise the nightly fee on the days when the demand is higher such as a weekend or a holiday. For example, you can charge $100 a night during the week and $150 on the weekends. Looking at the charges from a monthly standpoint, you can charge $1500 for a week-long stay vs. $1500 for a month-long stay in a long-term rental. Even though the vacancy rate for a short-term rental property is generally higher than for long-term rentals, the additional income usually makes up for it.
Concerns about Short-Term Rentals:
- Decrease in Demand Can Happen Anytime: The demand for a short-term rental property can change at any moment. These changes can occur due to travel restrictions, fluctuating trends, weather conditions, etc.
- Upkeep: Having renters checking in and out of your short-term rental property means you must turn over the property between visitors. You are responsible for cleaning and maintaining it. Washing linens, restocking toiletries, and cleaning the rental unit thoroughly, can become time-consuming. Rentals in demand may not allow for a lot of time between check-out and check-in.
This challenge may be one you can overcome with the right property management company. To learn more about managing buildings, read our blog post: 5 Major Challenges of Managing Apartments as a Property Investor.
- Unvetted Tenants: The people booking your short-term rental property are usually not vetted like long-term tenants are. This reduced vetting can open up the opportunity for tenant issues because you have no idea who is renting out space.
How to Run a Short-Term Rental Property:
When it comes to managing your short-term rental property, staying organized is very important. It most likely is not your full-time job, but you need to make sure you can dedicate enough time to managing your short-term rental property business. It is easy to get bogged down with bookings, screenings, and maintenance. Here are a few tips on how to effectively run a short-term rental property according to The Short-Term Shop:
- Screen Your Tenants: Check the reviews that previous landlords have left for your potential new renters. Establish a good relationship with people interested in your short-term rental property to ensure a smooth stay and clear communication. Make sure you review the guidelines and rules of your property with the renters.
- Keep Maintenance up to Date: Make sure that your property meets all of the requirements for the location. Some states and towns have different laws and regulations for short-term rental property. To legally operate, your property must meet maintenance requirements.
- Provide Excellent Customer Service: Being a happy host is a great way to ensure your tenants leave good reviews. Provide the best contact information for your tenants to reach you and make sure you are easily accessible. Be clear, straightforward, and provide an easy way to communicate with your renter.
- Read Your Reviews: When looking for a short-term rental property to book, many people read the reviews left by previous tenants. To receive great reviews, make sure your tenants are happy with their stay.
To maximize your profit, aim to have your short-term rental property be the best in class. There are many ways to increase your profit. First, you must understand which properties your short-term rental property will be competing with for tenants. There will always be competition around your short-term rental property. You want to make sure your property is the best! Do your research; what do the surrounding properties or hotels have that yours does not? How can you change it?
Here are five ways to increase your profit
- Choose Your Market Carefully: Location is the most important part of a short-term rental property. The more desirable area your property is in, the more you can charge per night and the greater chance you’ll fill your short-term rental property with bookings. Set your rental property criteria and find a property that meets as many criteria as possible. Some hot spots for short-term rental properties are college towns, metropolitan cities, and popular vacation spots. Here are some items people look for when booking a short-term rental property:
a. Proximity to Transportation: If someone is renting your property from out of town, they may be traveling from an airport or a train station. Rentals close to mass transportation or rental car facilities allow potential renters an easy way to get to and from the property.
b. Cuisine Options: When people book a stay at your property, they may not want to cook, and they will likely not be familiar with the area, so providing plenty of dining options or delivery services is a big step toward making your property comfortable and convenient for renters. Make sure you understand the local food scene the location provides.
c. Entertainment: Your guests may be traveling to a new area to explore a new location. Sometimes they will be coming for work or school. Whatever the reason, having entertainment options close to your short-term rental property makes your rental more desirable. It gives your guests something to do while they are in town.
To make your rental more attractive to renters and grow the number of days your short-term rental property is booked throughout the year, select a location that meets all of these criteria.
- Make Your Property Appealing: There are many ways you can make your short-term rental property the best in the market; here are some ideas:
a. A Picture is Worth a Thousand Words: When marketing your short-term rental property, be sure the pictures are high-quality. You may want to hire a photographer for the best results. Make sure your property looks clean and tidy and in tip-top shape. The pictures should be clear and help the viewer understand the property’s layout. Many people consider a property based on the photographs; having the best possible photos in your marketing will help fill available days.
b. Update Your Property: Property improvements, even cosmetic ones, will go a long way to maximizing your short-term rental property income. Update your unit’s curb appeal. That is the first thing renters see when they arrive. Are the appliances in your short-term rental property updated? Can you add smart- technology to your property, such as a keyless entry option?
c. Make it Feel Like Home – Add Some Fun and Simple Additions: There are a few ways you can add some nice touches to your short-term rental property:
i. Provide shower items such as shampoo, conditioner, body wash, and lotion
ii. Have an extra phone charger
iii. Leave a few snacks/drinks
iv. Have a smart TV with streaming services
v. Have some board games to play
Appealing and updated properties have more bookings and therefore increased profit.
- Allow Pets and Charge a Fee: If you are a pet owner, you already know that one of the most challenging parts of traveling is to find accommodations that will allow pets. If you’re looking to secure those extended rentals and increase profit for your short-term rental property, it could be beneficial to allow your guests to bring their pets. You can charge your guests an additional fee when bringing their furry friends along. This strategy alone will generate more interest in your rental units, and they will rent for more money, ultimately increasing profits.
- Advertise Space for an Office: With the rise of remote work, short-term property rentals with a designated space for an office are in high demand. Especially if you are traveling with a family, it is nice to have a separate room or designated workspace. To increase your chances of booking your rental, carve out a workspace if possible.
- Incentivize Longer Stays: One of the quickest ways to increase your short-term rental property profit is to increase the number of days the property is rented.
One way to do this is to incentivize your guests with longer (but still short-term stays). Consider setting minimum night requirements. Set a minimum of three (3) days, or offer a discount to guests that rent for the whole month or at less desirable times of the year.
There are many ways to increase your short-term rental property income. Even small changes can result in increased booking and growing potential profits.
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