Listing a home on short-term and vacation rental sites (like Airbnb or Vrbo) can be an excellent way to make money with your real estate property. They generally produce a high amount of revenue in a short period of time, and some properties can even generate a month’s worth of traditional rental income in a single weekend. That’s not to say there are no downsides to the system, as you’ll have to invest time and money in the property to bring it to rental-ready condition and to keep it that way. It’s important to consider all these factors before making any business decisions, so let’s go over some of the things you’ll need to know about short-term rental properties.
Laying the groundwork
There are a few items you’ll want to take care of before you accept the first guest on your property. First, you’ll want to check local laws and ensure it’s legally viable to rent the property on a short-term basis. You may find that all you need to do is fill out some paperwork with your local town hall. Second, because accidents do happen, you’ll want to look into short-term rental insurance. While Airbnb and Vrbo do provide liability insurance, it doesn’t cover things like damage to your property or loss of income from major damage. For that, you should consider coverage with proper insurance.
Manage costs and expenses
As mentioned, there will be some costs associated with short-term rentals that you need to take into consideration. First off, there’s the matter of getting the property rental-ready. You’ll want to make sure every room in the home is furnished and pleasing to the eye, since you’ll be competing with other hosts for rentals. A fresh coat of paint goes a long way in making a room look new. You’ll also want to invest in things like Wi-Fi for the home, and a smart TV for entertainment. The more you spend on amenities, the more comfortable and acclimated guests will be while staying at your property.
Another thing to consider is that you won’t necessarily be pocketing all the profits from each stay. After every successful rental session, you’ll need to clean the property in preparation for the next one. You could always do it yourself, but it’s recommended to hire a proper cleaning service for regular use. Rental properties also tend to have higher utility bills, and if you purchase rental insurance you can add the premiums to your property’s monthly costs. You’re still better off this way, since you’ll be kicking yourself when you have to replace expensive items that get broken during a guest’s stay.
Demand and seasonality
One final thing to consider with short-term rental properties is that demand isn’t always consistent. In fact, you’ll find that it usually fluctuates in a seasonal pattern. This means that while you may have trouble finding renters during the off-season, it’ll be much easier to book the property and generate revenue when in season. However, you will have to spend some time marketing the property in order for demand to become consistent. If you’re just starting out, you’ll need to get some high-rated reviews before you can compete with other rentals. This means you may have to offer the property at a discounted rate until you reach your desired level of demand.
RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. RCN Capital also has flexible and competitive loan options available. Connect with us today to discuss your next real estate investment.