Over the years, the rise of short-term rentals has become more enticing among investors and landlords. While it’s widely believed this type of investment is the future of the rental market, there are various factors that owners should consider before deciding to jump on the bandwagon.
Difference Between Short-Term and Long-Term Rentals
There are some key differences between long-term and short-term rentals. For instance, while long-term rentals usually offer a more stable lifestyle to the renters, short-term rentals are usually furnished and move-in ready for people on vacations, honeymoons, or in town for work.
Short-term rentals are typically rented on a weekly or daily basis. They are usually furnished and have plenty of space to offer. Before investing in vacation rentals, it’s important to ask yourself some questions to see if this type of investment is right for you.
One of the first questions to ask is if the property is in a desirable or tourist area. Usually, you can charge more if you are in a desirable area. One of the most critical factors that owners need to consider is how much time they are prepared to commit to the rental. Doing so can help minimize the cost of running the property. Since vacation homes are more transient, they can’t always be guaranteed to rent. In most cases, the demand for rentals will increase during busy times.
Things to Know Before Listing Short-Term Rentals
Having the necessary knowledge is important when it comes to investing in short-term rentals. Even though it can be a good investment, many factors can cause it to fail.
1. Research Laws and Regulations
Local laws and regulations are important to consider when it comes to investing in short-term rentals. These are typically not the same for long-term rentals and should be checked before buying a property so you remain in compliance. Make sure that the rental property is in an area that allows short-term rentals.
2. Find a Good Realtor
Finding the right realtor can be challenging since buying an investment property requires a lot of effort and time. However, having the right professional can help you get the most out of the real estate transaction. Realtors can offer insight into local regulations, tourism potential, and supply and demand for your short-term rental.
3. Consider Appropriate Features
Ideally, a short-term rental has the features that a long-term rental does, such as having a pool and other desirable facilities. Understanding the local market can help investors make an educated decision when it comes to buying a short-term rental. For instance, a property in Miami might appeal to a beach-loving investor while a rental in New York could be swayed by someone who loves big cities.
4. Calculate Income Potential
One of the most important factors to consider when investing in short-term rentals is the potential of the investment. A mid-range property can be worth up to $200 a night. Before committing to a lease, it’s important to analyze the potential expenses and determine the ideal rental rate.
5. Prepare for Expenses and Occupancy Taxes
One of the most critical factors to consider when investing in short-term rentals is the expenses. Most investors will pay taxes on their rental properties. However, they can also take advantage of deductions and write-offs that can lower their tax liability.
