Short term rental properties are increasing in popularity in the real estate market. However, do not assume that this is an easy way to make money in real estate investing.
The short term rentals market is competitive and not every real estate investor can reach the top following this investment strategy. In addition, just like with long term investment properties, there are a number of things to consider before owning short term rental properties.
At Mashvisor, we work to empower property investors to make smart investment decisions for a successful real estate investing career. Because we understand the real estate market and what it takes to succeed, here are our 4 tips for property investors wishing to succeed with short term rental properties.
Location of Short Term Rental Properties
As you should know, location is KEY for a successful real estate investing career (whether with traditional long term or short term rental properties). How come? Simply because, where the investment property is located determines its profitability.
While some locations are favorable for long term investment properties, others yield a higher return on investment for short term rental properties. It’s up to you, the real estate investor, to study and analyze the real estate market to determine which rental strategy is optimal.
Related: Real Estate Investing: Should You Go for Long Term or Short Term?
Generally, the best real estate markets to invest in short term rental properties are those with high demand for this type of investment properties. Demand will determine the occupancy rate, turnover, and rental income. Obviously, you don’t want to own a rental where occupancy rate is low – your property will sit empty and you’ll start to lose money! You also want the rental income to be high enough to guarantee a decent profit.
Our first tip here is to invest in short term rental properties in cities that are considered tourist destinations. These are the best locations as they have high demand and many tourists prefer staying in rentals over expensive hotel suites.
Another tip is to check the local laws and regulations governing short term rental properties because some cities across the US have strict regulations regarding this real estate investment strategy. So, to succeed with short term rentals, find locations with landlord-friendly real estate laws, specific to owning an Airbnb.
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Marketing Short Term Rental Properties
Marketing is something that could make or break your investment. Think about it this way: you are a real estate investor with a short term rental in a certain neighborhood. You notice that other short term rental properties in the same neighborhood are getting more guests. The reason behind this might rely on how you’re marketing your investment property.
Related: Marketing Your Real Estate Property to the Millennial Generation
Marketing is a factor of success that way too many owners of short term rental properties tend to overlook. The first tip in this regards is to list your investment property on multiple short-term listing sites such as Airbnb, HomeAway, Trip Advisor, Booking.com, etc. This way, when people are searching for short term rental properties online, you can guarantee that they’ll come across yours.
Social media can also create more visibility by giving visitors the ability to easily share your business and investment property with their friends. Other tips for marketing short term rental properties include taking good quality pictures, writing a great description that attracts people to the investment property, and asking your visitors to leave positive comments and reviews.
Managing Short Term Rental Properties
Just like with long term investment properties, property management is an important factor for successful short term rental properties as well. Managing short term rentals can be even trickier. Management requires more time and effort from property investors because renters are constantly checking in and out.
Therefore, property investors have to repeat the process of marketing the rental, screening tenants and cleaning the rental to prepare it for the next tenant over and over again.
Our first tip here is to be very organized. However, if you believe you can’t handle these responsibilities, then you can opt to hire professional property management. These are companies that take care of investment properties on behalf of property investors. You can find professional property management companies – such as Pillow for example – that specialize in managing short term rental properties!
Nonetheless, as a real estate investor, you need to realize that these are not cheap and come with a fee. Thus, we recommend analyzing your financial standing to see whether or not you can afford professional property management for your short term rental properties. Otherwise, it’ll affect your profits and rate of return on investment.
Related: When Should Real Estate Investors Hire Professional Property Management?
Tenants of Short Term Rental Properties
Some think that short term rental properties are passive income generating assets – meaning property investors don’t have to do much work to make money from real estate investing. This is definitely not the case!
We already mentioned that short term rentals require management for success. Besides, tenants are frequently checking in and out of short term rental properties, meaning property investors need to know how to handle and communicate with them.
As a real estate investor, you need to carefully screen potential renters and ensure they understand what is expected from them. It’s best to have a good landlord-tenant relationship by providing them with the best experience possible.
Make sure short term rentals are clean when tenants arrive, respond quickly to their needs, give them space and privacy, and do not mislead them! Happy tenants = positive reviews which are essential for successful short term rental properties.
The Bottom Line
Owning short term rental properties is a popular way to make money from real estate investing. Still, that does not mean that it’s a laid-back investment strategy. A lot of work and planning need to be put in short term rentals for them to succeed. For more tips on how to succeed as a real estate investor, keep reading our blog.
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