In a previous post, we wrote about the challenges of owning a short-term rental property. If you skim this post by itself, you might assume we are advocating against this form of investment. (A thorough reading will show you we are not.)
But short-term rental properties have their clear advantages as well. If you are investing in property, these are some of the reasons you may want to purchase a short-term rental property, such as a vacation beach house or condo in a vibrant city.
Why You Should Consider Owning a Short-Term Rental Property
Higher Potential for Profits
We certainly can’t say that all rental properties will bring greater profit margins than all long-term rentals. What we can say, within reason, is that with a short-term rental you have a strong chance to realize a significant income.
Getting a clear picture of how much you can earn is complex, but according to AirDNA, a vacation-rental data site, the average rate for a vacation property in San Diego is $207 per night. At a weekly rate, this means $1,449 for every full week the property is rented out. (This is an average, you may see higher or lower rates.) Annually, this would mean over $75,000 in income ($1,449 x 52 weeks = $75,348), but the site occupancy rates are 71%. So if your place is rented 71% of the time at a rate of $207 a day, you are looking at about $53,000 a year.
To get the same income from a long-term rental, you’d need to charge about $4,500 a month in rent.
Managing a Short-Term Rental is Easier Thanks to Websites and Technology
Previously, managing a short-term rental was like taking on another full-time job. This is rarely the case now thanks to advances in technology, both from a software and a hardware perspective. Websites have made booking and organizing tenants far easier, while smart locks and other connected devices allow you to grant access without even entering the home.
There Appears to Be a Growing Demand for Short-Term Rentals
Not only is the potential for profits higher, there also appears to be a major demand for these types of rentals. TechNavio, a market research firm, states that demand for vacation rentals will increase $56 billion between 2017 and 2021.
So you can expect a high demand for your properties, especially if the overall American economy continues to stay strong.
More Chances for Maintenance
If you own a typical rental house, it can be difficult to perform maintenance and repairs, largely because you don’t get to walk through your property on a regular basis. Unless the tenant reports an issue, you will be left unaware.
But with short-term rental property and vacation homes, you have the chance to inspect the property on a regular basis, usually weekly or once every other week. This allows you to keep an eye on potential issues, such as deteriorating gutters or failing furnaces. With renters coming and going frequently, you can keep up with small repairs before they become a costly issue.
Price Adjustments Can Be More Responsive and Immediate
If you own a long-term rental, you will have a contract between yourself and the tenant. This contract, usually called the lease agreement, will outline the details such as monthly cost, and it is usually locked in for at least a year. Basically, you have no way of making adjustments to the contract if you wish to do so.
With a short-term rental, you can make adjustments to pricing as you go. Are you finding that demand has risen? Then you can raise the price. Having trouble finding renters? Lower the price for next week. This almost-immediate responsiveness makes short-term rentals more attractive.
Tax Benefits for Owning a Short-Term Rental Property
Owning a short-term rental, when treated like a business, can bring significant tax benefits. You’ll want to talk with an accountant and tax professional, but you may find that advantages like pass-through laws and write-offs for improvements help increase your profitability.
Strong Chance of High Value Appreciation
While all properties can go up or down in value, including vacation properties, there is a strong chance that your house, or at least the land it’s built on, could go up in value. Beach front property, for example, has a strong track record of growing in value, as do home in vibrant towns where short-term rentals are often located.
Chance to Meet Lots of Interesting People from All over the Country
Of all the benefits to owning a short-term rental, one of the most popular is the chance to meet a wide variety of people from all over the country and across the globe. If you want to meet people from cultures far and wide, owning a short-term rental is one of the best ways to do so!
Provides Diversity to Your Investment-Property Portfolio
Diversity is one of the common bits of wisdom for investments. If you own short-term rentals, you are adding to the diversity of your portfolio and creating better long-term stability. Most would not recommend having all your investments in short-term rentals, but many would recommend it as a way to supplement and complement your portfolio.
You’ll Own a Vacation Property!
With a short-term rental, you’ll not only have an investment, you’ll have a vacation property that can be used as you see fit. If you wish, you can set aside your gorgeous lakeside cabin or fabulous beach house once a year for your own personal use. This might just make short-term rentals entirely worth the investment of money and time!
Get Reliable Financing for Your Short-Term Rental Investment
You can expand and diversify your portfolio with a top-quality investment loan. Contact our staff and we’ll show you the details of various loan options so you can make an informed decision for your financial future.
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