Are you thinking about investing in Miami real estate and wondering if you should invest in long term rentals or short term rentals? Well, in order to find an answer, let us examine the Miami real estate market and its most lucrative real estate investment strategies.
Miami Real Estate Market
It is a no-brainer that Miami’s amazing weather, countless beaches, cultural diversity, and touristic spots have created a fixed place for Miami as one of the top touristic places in the world. Although it is hard to make predictions as the real estate market is subject to different external factors, the overall housing market in Miami real estate looks positive for this year, continuing a trend that started in 2010. Miami’s diverse characteristics and features are attracting more and more real estate investors to invest in rental properties and make money.
According to the Miamirealtor.org, the spring outlook is bolstered by a strong US economy, strong employment, and increasing tourism. The rebuild after Hurricane Irma is still underway, and the growth will continue, taking into consideration the strong economy of Miami’s real estate market and rising wages. Additionally, Florida’s no tax status gives buyers and investors more value in buying and investing in Florida’s real estate.
All indicators prove that the Miami real estate market can be a good investment for investors interested in rental properties. Both long term rentals and short term rentals have advantages and disadvantages taking into account location and financial resources available. Short term rentals are furnished properties that a real estate investor rents out for a short period of time, ranging from one night up to a week. These rentals include a shared or one single bedroom, a furnished apartment, or condo rentals. In all cases, the occupancy rate and demand play a major role in making investment in short term rentals a real success. On the other hand, long term rentals are properties rented out on a long term basis with a legal contract between the renter and the tenant.
There is no doubt that Miami makes a great spot for vacations, attracting travelers to use short term rentals. Let us take a look at major factors that make investing in short term rentals a better option for investors in Miami real estate compared to long term rentals.
Short Term Rentals in Miami Real Estate: The Blooming Industry of Airbnb
Airbnb’s popularity is increasing as travelers tend to use it more often, giving people a better chance to invest in the real estate market from the comfort of their own houses. According to Airbnb’s 2018 Travel Trends, Miami is one of the ten most-booked global cities for Airbnb travelers after Tokyo, Paris, Osaka, New York City, London, Rome, and Orlando. Based on bookings already made for the first half of the year, Airbnb predicts that Miami will also be among top destinations for Airbnb travelers for the year 2018. The blooming industry of Airbnb in Miami real estate makes investment in short term rentals a wise decision for investors in rental properties, compared to traditional long term rentals.
Moreover, Airbnb gave real estate investors who have vacation homes in Miami the chance to use them while also renting out some available rooms and generate positive cash flow, or use them for a certain period of time and rent them out when they do not need to use them. With long term rentals, real estate investors have to abide by legal contracts with tenants. This limits their ability to use the rental property and take advantage of it more often. Investors can also rent out a room or rooms in their primary residential real estate property and generate extra money. The flexibility of Airbnb short term rentals makes it a better rental strategy for investors in Miami real estate compared to long term rentals.
Short Term Rentals in Miami Real Estate: Higher Rental Income
The biggest challenge for investors in short term rentals compared to long term rentals is having tenants throughout the year. While long term rentals secure cash flow for a longer period of time, short term rentals depend on the demand by guests. In Miami real estate, finding tenants for short term rentals is not a big issue as its location attracts people from all over the globe all year long. This fact encourages investors to go with short term rental investment in Miami real estate as it generates a higher rental income comparing to long term rentals. The high nightly rate of short term rentals can prove to be a more profitable strategy to investors in rental properties.
Moreover, another way of making money with Airbnb rentals that does not exist in long term rentals is cleaning fees. Traditional renting for long periods of time does not usually require cleaning fees; however, this is not the case with Airbnb as most hosts require cleaning fees as part of charging guests to clean the rental, allowing investors to make extra money. For example, if you rent out your investment property 35 times per year, and you request $50 as cleaning fees every time, you can make up to $1,750 a year as cleaning fees. Moreover, Airbnb gives you the possibility to raise the rent in case guests have extra people with them, and you can change the rent costs based on the season.
Regulations on Short Term Rentals in Miami Real Estate
Miami is a great location for investing in short term rentals; however, it is important for real estate investors to be aware of regulations on such rental properties in order to be on the safe side and secure a good kick-off for their investment. Hosts for Airbnb and other short term rental companies face new regulations following the passage of a new ordinance indicated to preserve the integrity of county neighborhoods and preserve safety while allowing renters to operate legally in unincorporated Miami-Dade. It is worth mentioning that Miami-Dade is one of the top five Airbnb destinations in the country, with 6,800 hosts renting their home. It also has collected more than $2 million in taxes from Airbnb renters.
Under the ordinance, vacation rentals in unincorporated Miami-Dade will have occupancy limits capped at 180 days per year. The ordinance will be effective in the beginning of 2018 and would apply to 940 active Airbnb hosts, 60% of whom share an extra room in their homes, Airbnb said, as well as hosts on platforms like HomeAway and VRBO, according to Miami Herald.
Therefore, as a host, you will be required to sign up for a certificate of use, register for a business tax receipt, screen for sexual offenders, and enforce some rental standards on guests, such as following standard garbage procedures and noise restrictions, according to the Herald.
The major reason why Miami real estate makes a better place for short term rental investment in comparison to long term rentals is its touristic location and the high occupancy rate as well as the constant demand on vacation rentals by travelers. However, this by itself does not guarantee a successful investment as real estate investors have to put time and efforts in preparing their properties, communicating with Airbnb guests, and using innovative marketing strategies to market their rental properties.
Mashvisor provides real estate analytics to real estate investors for short term and long term rentals by using predictive and comparative data to analyze properties, providing investors with optimal rental strategies and allowing them to find properties that meet their criteria.
Head over to Mashvisor and master your real estate investment journey in Miami real estate and elsewhere.