Rental property investment is among the most brilliant routes to a secure future. You’ll not only own an asset that appreciates, but you’ll also have a steady monthly cash flow. That is — if you do it right.
Short-term rentals, to be specific, are the best type of rental investment. They are the brightest spot in the hospitality industry providing guests with larger and more cost-effective spaces. Still, remote workers are enjoying the newly-found freedom of new destinations while maintaining the 9 to 5 routine on Zoom.
As a beginner, your first walk through with a real estate expert may make you want to close the deal instantly. But, if you don’t prepare and research, you’re likely to find yourself in a money pit that you’ll remain stuck in for a long time.
Nonetheless, there are crucial basics you must learn before signing on the dotted lines. In this guide, a beginner will learn all the steps to master, which are crucial to short-term rental investment.
The financial benefits of owning real estate are significant.
Let’s delve in!
Not Necessarily a Vacation Home
Short-term rental investing can be more than just for people on vacations. You can make use of your property to suit different short-stay purposes. However, you’ll need a perfect and reliable short-term rental strategy to ensure you target the right market for a high ROI. For instance, you can rent your short-term rental to people who;
- Need a place to stay as they renovate their house.
- Need a place to stay while waiting for a medical procedure
- Want a place for a “staycation”
Targeting people who want a place to stay and be close to an ailing loved one who may feel inhospitable can be incredibly marketable. Some people seek medical attention from a distant location, and booking a hotel would be costly for the accompanying loved ones. Marketing your STR strategy directly to hospitals would be an excellent move to increase your occupancy.
Choose The Market Carefully
When assessing the perfect market where you want to buy a rental property, it’s good to consider a local market and a distant location.
The first stop should be at the state and HOA offices to check the restrictive house covenants. You don’t want to buy a rental property that goes against the regulations. Online tools like Airdna can provide you with the necessary information.
When purchasing properties using online tools, you must check the occupancy rates in different locations. This way, you’ll know the ideal places to invest your money.
Additionally, your target market allows you to invest in short-term rentals with a high chance of finding regular clients. Some features of profitable short-term rental investment include;
- Professional sports teams
- Large urban areas
- College towns
- Vacation areas
The likelihood of having back-to-back guests in an area with the above features is exceptionally high. If you’re lucky, you can find a location with all the above.
Buy the Right Property
Investing in a rental property for beginners can be quite a challenge. Learning how to buy a first rental property takes experience and expertise. The right property doesn’t just fall on your lap.
So, what should you do?
A lot of research and adequate patience will help you find an excellent deal. Please don’t rush to buy a house only because it’s cheap. The low price might be why you need more time to accept. It may require a lot of renovations that cost you way above your budget.
It would be best if your first property is from your local area. Most times, pictures are deceiving. Buying from your local area would make it convenient to visit the property physically.
Sometimes finding an off market property is your best bet.
This will also help you assess if features of interest are close to the house. You want to avoid throwing your guests in the middle of nowhere.
Pictures Will Work Great
Usually, a client would trust images more than words- it’s the basic rule of the game. Thus, you must invest in a vacation rental property worth amazing photos.
Even though a photographer’s skills can make bad looks amazing, the reality shouldn’t be the opposite of what you show in the pictures. So, the house photos need to be fantastic.
An excellent STR strategy involves spending money on things that matter to get a high ROI. So, hiring a professional photographer would give you high-quality photos and videos which you can use for a long time. Besides, about 83% of real estate clientele say pictures are an influential decision-maker when choosing a place to visit. So, get the perfect ones!
Go For High-Quality Tenants
You have a perfect location and unique photos; what next? It would help if you had the ideal and high-quality tenants for your short-term rentals.
The best way to attract your ideal guests is by setting a higher minimum age for mature clients- approximately 30 years and above. Also, consider having a three-night minimum stay as this will earn you a more significant amount from serious clients. Ensure your rules are clear about not hosting parties in the house. Such will increase the likelihood of damages.
Install cameras outside your property to see how many people come in and leave. This will ensure the tenants adhere to the rules of no parties and that they consider the maximum number of people allowed.
More so, ensure you have a rental agreement. This will cover you from unnecessary liabilities in case someone gets injured in your house. Even better, you should get insurance to protect you from any damages.
Know How Much to Expect
Time for some math! Investing in vacation rental property is a highly lucrative business. The best part? It’s a passive income real estate investing strategy where you don’t have to be actively involved.
Various properties have different incomes. For instance, a basic house has a monthly return of $1,000-$2,000.On the other hand, the luxury property can make about $3,000-$5,000 monthly. So, a perfect short-term rental strategy would require buying around 4 properties to get financial freedom.
Furthermore, you need to check for things likely to bring down your expected earnings. Hiring the wrong property management company can cost you more than you earn. Also, buying rental property in an area with high taxes would consume your profit.
It would be best to prepare a budget. Depending on your expected expenses, identify the monthly occupancy rate that will help you reach the desired profit. No guesswork; do some calculations.
The short-term rental investment provides beginners and experts a fantastic chance to diversify income streams for financial independence and security. Nonetheless, it takes profound, upfront research and planning. But, with an excellent short-term strategy, you can quickly build a solid system that makes your investment more passive!
Daniel Martin wrote the above article on buying short term rentals. Dan has had hands-on experience in digital marketing since 2007. He has built teams and coached others to foster innovation and solve real-time problems. Dan also enjoys photography and traveling.