Since the emergence of Airbnb and other similar platforms, short-term rental properties have become a popular choice for real estate investors. But, are short-term rentals a good investment in 2020? If you are considering entering the short-term rental market in 2020, you may be wondering if it is right for you. The fact is that investing in short-term rentals has its own advantages and drawbacks. However, the impact will depend on you and the situation you are in.
Not sure whether a short-term rental is a good investment? Read on to find out.
Pros of Buying Short-Term Rentals
1. Higher Rental Income
The biggest advantage of buying short-term rentals is the potential rental income. More travelers now prefer staying in vacation rentals listed on platforms like Airbnb, HomeAway, and VRBO over staying in hotels. Apart from having access to a complete home, they are typically cheaper for travelers. If you manage to attract a steady stream of guests, the potential return on investment can be even higher than renting out a property on a long-term basis.
2. Flexibility in Pricing
Another reason to consider investing in short-term rentals in 2020 is the fact that you can set up your own price. As a host, you can increase the rental rate depending on the demand to maximize your returns.
3. Flexibility in Use
Real estate investors who own Airbnb rental properties have the option of blocking off dates when they don’t want to lease them. For instance, if you want to use the investment property, will be out of town, or want to do a major repair, you can do so easily.
4. More Control Over Your Investment Property
Unlike long-term rentals, you will be able to check on your short-term rental regularly, clean it, and do required maintenance.
5. Cultural Experiences
This type of rental property allows you to meet several people from all walks of life and from different places. If you love meeting new people and learning new things, this aspect of the business can be attractive.
Cons of Buying Short-Term Rentals
1. Managing One Is Time-Consuming
Managing short-term rental properties is a lot of work. Since you will have guests frequently, you have to always keep the investment property clean and in good condition for the next guest. However, you can hire a property management company if you don’t live nearby or don’t want to be involved in the daily management duties.
If you are considering buying short-term rentals, understand that the rental income can be irregular due to the changing of seasons. This makes cash flow planning harder.
3. There’s More Risk
The fact that you will be having regular guests in and out of your rental property means that you will be opening yourself up to some risks. You may sometimes encounter bad guests who damage the property or are a nuisance to neighbors.
Related: 5 Risks of Airbnb Real Estate Investing
4. Potent Legal Restrictions
In some areas, regulations may not be favorable for short-term rentals. For instance, Airbnb rentals are illegal or have some specific restrictions in some parts of the country.
Buying a Short-Term Rental Property
Because everyone’s situation is unique, it can be difficult to say whether short-term rentals are a good or bad investment. Nevertheless, after looking at some of the pros and cons of owning a short-term rental, you should have an idea of whether it would be a good real estate investment for you in 2020.
The next step will be to acquire a profitable investment property. So, how do you find good short-term rental investments? Well, before buying a short-term rental property, there are some basic rules that you need to take into consideration:
Find a Good Location
You’ve probably heard about the importance of location in finding good real estate investments. This is particularly true when it comes to buying vacation rentals. You should choose a place that is in high demand among tourists and business travelers. Such a location will attract more guests. You will not only have a high occupancy rate but also a high rental income. For instance, an area near urban centers and with technology amenities would be ideal for corporate rentals due to a high number of business travelers.
Related: 10 Best Places for Buying a Vacation Home in 2020
Understand the Local Laws and Regulations
Another useful tip on how to find short-term rentals is to study the local regulations. The laws and regulations usually vary depending on location. Therefore, make sure that the area where you’re looking to buy a short-term rental property has favorable laws. You may face severe penalties if you fail to follow the local laws. For instance, some cities have a limit on the number of days your property can be rented out. In some other cities, short-term rentals aren’t allowed.
Consider the Potential Return on Investment
It’s good to have realistic expectations when investing in Airbnb rentals to avoid being disappointed. To make money with short-term rentals, you have to be keen on the numbers. Take advantage of Mashvisor’s real estate investment tools to analyze potential markets and short-term rental properties for sale in the US housing market before making a purchase. With Mashvisor, you can easily access short-term rental data for different markets and investment properties. This includes cash flow, Airbnb occupancy rate, Airbnb cap rate, and Airbnb cash on cash return.
Related: The Airbnb Profitability Calculator: The Best Friend of the Short-Term Rentals Investor
The Bottom Line
Are you considering a vacation rental investment? The good news is there is a lot in store for vacation rental property investors in 2020. However, to know whether short-term rentals are a good investment for you, you need to look at both sides of the coin.
The best way to ensure a good return on 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. Apart from listing your rental on platforms like Airbnb, advertise through social media and other channels.
We have a lot more tips on hosting a short-term vacation rental. Read our guide on how to become an Airbnb host in 2020 to learn more.
To start your search for the best short-term investment properties in the city of your choice, click here!