Investing in Short Term Rental Properties (STRs) are to be considered as the smart approach especially when you are pursuing your short term goals in real estate. In the last few years, the internet has revolutionized the short term rental properties. Internet infuses short term rental properties with tourism industry by forming a community based online platform where anyone can rent out his property for short period of time, that increases the demand for short term rental rental properties, and moreover, it turned out to be more profitable model.
Many tech startups are based on this model, the most common & successful example for this is Airbnb. As internet has changed every industry including the tourism & hotel industry, the tourist accommodation service is also disrupted. Now in the age of shared or peer-to-peer economy, you can offer your property on community based online platforms for accommodation & can generate miscellaneousness revenue.
As the name suggests Short term rental properties are those that are rented out for a short period of time. But technically in real estate, we call those STRs that are rented out on a contract of fewer than six months. Typically, short term rentals are those properties that are rented out for a few days & weeks. They are now considered to be the alternatives to hotels & are also mostly used by tourists for accommodation. They are considered to be much cheaper than hotels for tourists & more profitable for property owners as compared to long term rentals. As they are beneficial for both ends that’s why we have seen an increasing trend in STRs. But there are many pros & cons in short term rentals, you have to keep in view many things that we will discuss further in detail.
The other that is usually used for short term rentals according to the location & purpose of the property is:
Transient rentals: Transient rental property is a general term used when the property is usually rented for a few weeks not often for vocational purposes.
Vacation rentals: This term is usually used for properties that are specifically sued for vocational purposes.
Short-term vacation rentals: These are the properties that are usually rented out for a few hours.
Resort dwelling units: This term is used when a property usually consists of a complete portion with a proper kitchen, bathrooms, living room & bedrooms for two or more people.
The most common question people ask is that should they invest in STRs, when they already created a steady cash flow in their real estate investment portfolio through long term & monthly rentals. Why they should rely on non-consistence short term rentals. Here I gonna tell you why should, you consider Short Term Rentals in your real estate investment portfolios. And what are the factors that make them so beneficial? If you are not following this strategy then you are losing huge potential.
Short Term Rental Properties are more profitable than long term rentals. Because this is how it functions, you can charge more for short stays. Let’s say, the average per night rent for a single bedroom apartment in New York is $200, if your room is occupied for 20 days out of 30 in a month you are eventually making $4000, for instance in a worse scenario the occupancy is 50% you are still ending up with $3000 & the average monthly rent for an apartment in a New York is $2000. Obviously, there are SRTs are more profitable if the occupancy rate is higher. Let us know in the comment section if you want to know how you can grab more rental yield from short term rentals, we bring separate articles on this topic.
There’s always a high demand for short term rentals in tourist attracted areas and in urban centers. We have witnessed within a few years how independent short-term rentals are taking place of hotels. Now people prefer private & independent rentals for accommodation rather than hotels, as they are cost-effective at the consumer’s end and more profitable for investors. Although there could be seasonal high demand for specific vacation rentals, with the extensive market analysis you can choose your ideal vacation rental property. But online platforms like Airbnb & Vrbo have contributed a lot in creating a high demand for these properties as they are now more accessible.
In long term, there’s a continuous occupancy of tenants in your property, you have less control over your property, and you highly depend on the tenant. Whether they are taking good care of your house or not. But in short term, for rentals, you have more control over your property. People stay for a short period of time, so there’s less wear & tear. You can also do regular inspections of your property & can maintain it to its highest rental potential.
When you come to investing in STRs, there are many types of short term rentals. Depending on the categories, nature, purpose & location of properties. You have to understand these types of SRTs in order to get the highest potential rental yield, as they all required a different kind of methods to manage. Find out the best type of short term rental property according to your investment capital & goals.
As the name suggests, these kinds of properties are those that are occupied by the owner. You can rent out a portion or a separate room of your own primary residence. If your primary residence in that area is attracted by tourists. This could be a great opportunity for you. You don’t have to invest separately to gain your short-term rental goals. After the success of community-based platforms like Airbnb, this trend actually increased. Many people are following this strategy. If you have any spare rooms or portion of your house, that is not in use & can be rented out, you should definitely consider this option. If you don’t have enough investment to buy a whole property, then you can just start out with this strategy.
Accessory dwellings are the single independent kind of apartments or residential units within the primary single family-duplex. If you have any portion of your house free, you can just start your short term rental journey from here by renting any portion. This is the most common kind of short term rental when any portion of the house with proper living consists of a kitchen, bathrooms, living room, and bedrooms. It could be above the garage, a basement apartment, or an independent residential unit in the backyard of a house.
If you have an accessory dwelling unit, that’s great, if not, then you should consider building one. Although there are many pros & cons of dwelling units, you should definitely consider them. Rules & regulations regarding accessory dwelling units may be different depending on your city & state. If you want to know more about these dwelling units, let us know in the comment section, we will bring a separate article on this & how you can grab more rental yields through these residential units.
Renting out separate rooms within your house is another common example of short term rentals. If your primary residence is in any tourist attracted area and has a couple of spare rooms, you can simply list them on online platforms like Airbnb for rent. With the basic facility of the attached bathroom with shower, air-conditioning, and basic housekeeping service & schedule renovations, you are good to go with this rental strategy. You can ultimately gain a high potential rental yield when your room is mostly occupied and you are following the above requirements.
These are the rental properties that are not the primary residence of the owner & are specifically used for this purpose. Obviously, more investment is required in these kinds of properties, as you have to own a separate property other than of your primary residence. These properties perform like commercial properties, you have to manage proper housekeeping services & many other things, or you can contact a property management company to handle all these things, definitely you have to manage your expenses with rental yield. If you own a property that isn’t your primary residence, then you should consider this short-term rental strategy. If you’re going to Invest in Real Estate, consider short-term rental properties in your real. Always buy these properties in tourist attracted areas and in midways, where travelers & tourists can stay for a while.
The trend in vacation rentals has increased in the last few years. This happens because of the expansion of the economy, and internet connectivity that enables many community based platforms where you can list your property. The concept of accommodation is also shifting, people are now independent kinds of accommodation rather than well-structured hotels. Although there’s a huge share of the hotel industry in accommodation service, single family duplex is also making their space. As it is cost-effective for families & gives a different kind of experience. You can buy a property in any tourist attracted place & where people usually go for vacations.
By providing basic accommodation services, you can easily rent out your property in a vacation spot. You can list your property on platforms like Airbnb & Vrbo or you can simply reach out to tourists through your own website and google my business. Obviously, there are many factors that are involved in this strategy, which we can’t discuss in this article Vairt will bring a separate article on this topic. So stay tuned, there’s much more to discuss this.
The most of the properties that are listed on platforms like Airbnb & Vrbo are urban properties. These properties are present in the urban centers like metropolitan cities New York, Chicago, Washington DC, Dallas, LA. These could be the studio apartments in skyscrapers or single-family duplex in urban centers with access to markets, commercial areas, and other attractions. These kinds of properties have more chances to be occupied most of the days in a month. Moreover, the rental yield is also high in urban centers. People visits these big cities whole year, there are no seasonal trends in these cities. People come here across the country & world to visit these cities for many reasons.
Some just come here for tourists attraction and some for business. As these cities have many tourists’ attractions, so people all across the globe visit these cities whole year. These are also entrepreneurial & business hubs, so many corporate delegation visit these cities. Some also visit for state affairs. You know what all of these needs? “Accommodation”, and you can provide this, yes you can. We all know if a property will be occupied for maximum number of days, it will generate more rental yield. And this could be only achieved when there are more visitors. What could be a better option than urban rental properties. The prices of properties in urban centers are usually higher, and the market is already very saturated. But if you have high investment capital than do consider investing in urban properties, it totally worth it.
Midway properties are those that are situated away from cities in remote areas. As the name suggests, they are situated on the way of national highways and expressways, where travelers can stay. As these properties are present in remote areas, so they are much cheaper. Travelers that usually travel on longer routes stay here for a few hours or a night for rest. These properties also potentially produce a low rental yields. However, it is a good option in short term rentals when you have a limited investment budget.
Luxury houses are the one of most expensive properties you could add to your investment portfolio. People who are looking for this kind of accommodation would seek a luxurious experience. But the best part is, they are always ready to pay higher rents if you are willing to give them a luxurious experience. With a smart strategy, marketing & convincing skills you can gain high rental yields from these properties. Usually, investors hire a property management company to give an exceptional experience to customers. Always consider luxury houses in your STRs strategy.
Over the years, STRs gained so much popularity, and are considered more profitable than long term rentals. You must have to consider it in your Investment Portfolio to generate more cash flow in your portfolio. Short Term Rental is the smart approach to achieving your short term goals. Although it’s not easy to pursue this approach, you have to develop a smart strategy with a strong market analysis. There are many pros and cons for STRs that you must have to follow. One that is interesting about STRs is that sometimes it gives us an opportunity not to invest separately on a property for this, but you can generate rental yield even from your primary residence. Most of the customers are now considering independent duplexes & apartments for short stays rather than traditional hotels, then why shouldn’t you consider STRs, as it is beneficial on both ends?
Vairt Strategies for Successful Short Term RentalsRead Now
Vairt Strategies for Successful Short Term RentalsRead Now