The demand for Airbnb rentals is expected to rise as the country reopens its tourism. Read the following guide to learn how to invest in short term rental.
Table of Contents
- What Is a Short Term Rental?
- How to Invest in Short Term Rental Properties
- How to Manage Your Short Term Rental
- Subscribe to Mashvisor and Invest in Short Term Rentals
Two years into the pandemic, we are finally seeing the relaxation of travel restrictions across the US. Several states are now reopening their tourism to both local and international visitors. Americans are ready to travel in the coming months. It means two things: one, the tourism industry across the country will flourish once again, and two, the demand for vacation rentals is expected to surge.
Both developments will result in a positive impact on the economy. More specifically, real estate investors will benefit from the reopening of the tourism industry, especially those who invest in vacation rentals. If you’re a beginner real estate investor looking for a profitable investment opportunity, consider investing in short term rentals.
What Is a Short Term Rental?
A short term rental, also known as STR, vacation rental, or Airbnb rental, is a living space that is offered for rent to visiting guests for a short period of time. Short term rental properties are usually furnished, and the dwelling can be a single room, multiple rooms, or an entire home. The rent period ranges from days to weeks, usually up to less than a month.
Some states impose specific rules on the maximum number of days a short term rental property should be rented. For example, short-term rentals in Florida are the ones with terms of 30 days or less. Usually, short-term rentals are listed on online home-sharing platforms such as Airbnb and Vrbo, where guests can book their stay.
In general, a short term rental can be a profitable investment property. However, to be successful in Airbnb investing, you need to choose the right location and possess a great deal of knowledge about the local real estate market. Vacation rentals also need appropriate property management, marketing, and overall maintenance.
How to Invest in Short Term Rental Properties
Before you decide to invest in vacation rentals, it’s important to set a budget and ensure that you have the financial capacity for such types of investment. After establishing that you have the funds or financing options available to invest in short-term rentals, you can proceed to the next steps stated below.
Step 1: Find the Right Investment Property
Finding the right vacation rental property is one of the most challenging steps in short term rental investing. Several factors can influence whether your investment will become profitable, including location, property type, Airbnb regulations, and the local real estate market analysis.
Related: How to Perform Real Estate Market Analysis
Location
Most guests who book a short-term stay are usually visiting a place as tourists or for business-related purposes. The best short term rental markets enjoy a booming tourism industry and busy business districts. It’s crucial to choose a neighborhood that is near most tourist attractions and business hubs where visitors often go. In addition, you need to consider the amenities and features offered in the area, including dining, public transport, safety, and walkability.
Property Type
You can rent an entire home, a single or multiple rooms, or a condo unit as vacation rentals. Before you choose the property type for your short term rental, you need to determine your target market first. For instance, if you plan to rent your home to individual travelers or couples, a condo unit is an excellent option. If you plan to rent to families, consider buying an entire home as a vacation rental. If you plan to stay in the house and only rent out a spare room, you can buy a property with multiple rooms.
Airbnb Regulations
When looking for a vacation rental investment, it’s critical to know if it’s legal to operate a short term rental in your chosen area. The rules and regulations on short term rental properties vary by state and city. It’s important to ensure that Airbnb is legal in your chosen location. Additionally, understand the Airbnb laws in a particular state and city to ensure that you won’t encounter any trouble while operating an Airbnb business.
Real Estate Market Data and Analysis
Before you buy investment properties, it’s important to check the local real estate market data in your chosen area. The information will help you determine whether the property is worth investing in. You need to consider important details such as cap rate, cash on cash return, and occupancy rate. However, finding an accurate real estate analysis and data can be challenging and time-consuming, especially for beginner investors. To avoid such a tedious task, you can utilize the help of a real estate data analytics company like Mashvsior.
How Can Mashvisor Help You Find the Right Short Term Rental Investment?
Mashvisor is an online real estate platform that offers one-stop-shop services to investors of all levels. The platform can help investors who want to find the right investment property according to their chosen location, budget, and property type. Mashvisor’s database contains thousands of listings from several sources. It uses unique AI-powered investment analytics, making searching for the best investment property easy for you.
You can use the property finder tool to search for a short term rental property. If you want to find off-market properties, Mashvisor makes it easy for you through its property marketplace. The heatmap tool provides information on specific neighborhoods.
You can also access the rental market analysis of a property in a particular area and get an overview of neighborhood comps to know if the property will be a profitable vacation rental investment. Finally, you can use the rental property calculator to compute your potential income based on your financing information and expected expenses.
Step 2: Register Your STR Property
After buying the investment property for short term rental, make sure that it’s physically ready to receive guests. After renovating and furnishing the property as needed, the next important step is to register your business and get a short term rental license if necessary. Keep in mind that different states and cities adhere to different Airbnb rules and regulations. Make sure to follow the rules because violating Airbnb city laws can result in unnecessary fines. Also, ensure that your property complies with the local zoning ordinances and tax laws.
Aside from the city’s Airbnb rules, you also need to abide by the other contracts and laws that bind you. For example, if you plan to do an Airbnb arbitrage, make sure to follow your lease contract. Other rules that may apply to your property include HOA rules, condo board or co-op rules, or rules established by tenant organizations.
Related: Managing an Airbnb in 2022: A Complete Guide
How to Get Around Short Term Rental Restrictions
Getting yourself familiar with the local short term rental laws is essential if you want to avoid unnecessary penalties. For instance, some cities require that you stay in the same house as your rental property. It means that you can only rent a spare room and not the entire home. You may also buy a multi-family, live in one of the units, and rent out the other units.
The required length of stay is another restriction that many Airbnb owners find challenging. It varies from one city to another. For example, Los Angeles limits the number of days you open your short term rental property to renters to 120 days per year. It means that you cannot rent out your property as a vacation rental after 120 days. Consider renting it out as a traditional rental (on a monthly basis) during the rest of the year.
Step 3: Set a Price and List Your Property
After you register your property and secure all the necessary approvals, you can now prepare your short term rental for listing. There are several short term rental sites and platforms where you can list your property. The more exposure your property gets, the more chances it will be booked. Make sure to understand the fees associated with listing your property on these platforms so you can price your rentals strategically.
When pricing your property, ensure that your rental rate will bring in a good rental income and positive cash flow. However, pricing your property too high may drive away prospective renters. On the other hand, if you set your price too low, you may not generate a good return on investment. To ensure that you’re pricing your short term rental accurately, you need to analyze the Airbnb rental comps.
Mashvisor can help you find comparable properties so you can set a competitive rental rate for your rental property. It also offers valuable insights so you can analyze the market’s short-term investment performance based on comparables. The platform will provide a list of short-term comparable listings, as well as their similarity, distance, daily rate, occupancy rate, rental income, and reviews. It can help you determine an ideal price range and calculate how much you can possibly earn from your short term rental.
Mashvisor’s Rental Comps feature helps investors find comparable properties so they can set a competitive rate for their rental property and attract lots of guests.
How to Manage Your Short Term Rental
A successful short-term rental investment does not end with finding the right property, obtaining a license, and getting it listed. Learning how to manage your Airbnb rentals is equally crucial to ensure that you keep an organized flow when it comes to marketing, bookings, and maintenance.
As beginner rental investors, it’s essential to understand the ropes of short-term rentals, including the day-to-day tasks that you need to do to make sure that your property is in its best state possible.
We list below a few things you can do to ensure that your property is managed properly:
1. Keep your property well-maintained.
Keep your property well-maintained if you want your investment value to appreciate. With guests constantly checking in and out of your property, you cannot avoid getting it worn and torn. Make sure to perform repairs and maintenance in check to improve customer satisfaction and earn positive reviews.
2. Improve your customer service.
Another important factor that can affect your customer satisfaction rating is how well you serve them. Develop a guest management strategy to respond to your guests and address their concerns in a timely manner. It can lead to positive customer reviews, which is important if you want your property to receive more exposure and get booked frequently.
3. Invest in property management tools.
Automate your bookings and pricing by investing in short term rental software. A computer program can help you manage your listings efficiently without paying huge fees to professional property managers. Some vacation rental tools help you manage bookings and synchronize your calendars, which is useful when you list your property on more than one platform.
Related: How to Become an Airbnb Property Manager: The Complete Guide
Subscribe to Mashvisor and Invest in Short Term Rentals
After a couple of years of unforeseen lockdowns, many states are now ready to accept visitors. We can expect an increased demand for vacation rentals across the US. With the higher demand comes opportunities for investors. Beginner real estate investors can take advantage of the opportunity and start investing in short-term rentals.
If you are ready to venture into short term rental investment, subscribe to Mashvisor to help you find the most profitable investment property in your chosen area. The platform offers three different plans to help you get started. Access the database by just typing the city or neighborhood of your preference, and you’ll get a list of all available properties for sale in your preferred location.
Mashvisor will also help you identify whether a property is suitable for short-term investing by providing comprehensive real estate insights and analytics. You’ll get an overview of essential details, including the cash on cash return, cap rate, occupancy rate, Airbnb comps, and potential income analysis. Additionally, its Airbnb calculator will help you determine how much income you can possibly earn, considering several factors such as your financing option and expenses.
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