How much do you know about short-term rentals? Well, if you want to make money from rental properties, you may want to read on.
Reports show that the value of vacation short-term rentals was $99.38 billion as of 2021. Industry predictions placed the CAGR at 11.1%, covering until the end of 2030. The reasons for the upward trajectory in market share are numerous.
There is a high market demand for staycations. People are also spending more on tourism and travel. Yet, they are more conscious about looking for budget-friendly accommodation. And short-term rental provides the perfect solution.
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Our article explores short-term rentals and some of the benefits of investing in them.
Understanding Short-Term Rentals
A short-term rental is property leasing for short periods, typically not exceeding a year.
Short-term rentals are not only about vacations. Some people will relocate to other areas for work or medical purposes. They may need accommodation for a few months to about a year.
The flexibility in renting accommodation on a weekly or monthly basis is quite attractive. It also removes the formality of staying in a hotel.
Short-term rentals can be in condos, family homes, cabins, townhouses, and more. Tenants can rent a fully furnished place, further adding to the convenience of such accommodation.
So, what are some of the benefits of investing in short-term rentals?
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Short-Term Rentals Are a Good Investment Option
If you want a cash flow source, consider going into short-term rentals investing. With as little as 25,000 dollars, you can earn real estate passive income for the rest of your life. Depending on where you put your money, you can expect an annual ROI of upwards of 20%. You can also get an annual cash flow of 10% to 15%, or more. We also can’t forget to mention the numerous tax benefits you get from real estate investing.
But, some variables will impact the ROI of your short-term rental investment.
- The location of therental tops the list. You want the property to be in a desirable area to attract tenants.
- Pay attention to rental property demand in the area.
- The housing market conditions, including supply and demand, will also determine ROI. The same applies to applicable interest rates
- Maintenance can impact how much you get in terms of profit.
The best advice we can give is to work with reputable short-term rental investment companies. The professionals will walk you through how to buy your first rental property. They will also provide excellent tips for making money.
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Property Appreciation
Are rental properties a good investment? The answer is yes. But, you must consider the variables we mentioned above. There is also the additional benefit of appreciation.
The national average appreciation stands at 2% month on month. If you calculate it year-to-year, it is as high as 14.5%.
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Flexibility in Usage
Another significant benefit of short-term rentals is usage flexibility. As the property owner, you can decide when to rent or keep the property for personal use. That will not be the case if you take the option of long-term rentals.
The benefits double when you invest in vacation rental property at your favorite tourist destination. Since you know when you take your holidays, you can make advance plans to have the property empty at that time.
You enjoy the comforts of a second home while vacationing. There is also no stress of needing money for accommodation.
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Flexibility in Pricing
Flexibility also applies to how much you charge for the property. You can command higher prices when demand is high. Peak tourist seasons, for instance, are the best times to make handsome profits. When demand goes down, you have the flexibility to adjust your pricing accordingly.
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High Demand, Thus Steady Cash Flows
As we stated in the introduction, the demand for short-term rentals is high. People are willing to spend money on vacations or travel. But it doesn’t mean that they’re not budget-conscious. Hotels can be expensive, especially if traveling with the family.
But a short-term rental provides a fantastic solution, thus the demand. Reports show that as of April 2021, there was a 66.4% rise from the previous year. Indeed there is increasing demand for platforms like Vrbo and Airbnb to increase supply.
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Risk Diversification
If you sign a long-term rental lease, different factors can impact whether you receive any income. A tenant can, for whatever reason, stop paying rent. During that time, you will not be getting any income. Your only option is to evict them and perhaps seek restitution from the courts.
With short-term rentals, you have more stability in terms of earnings. The lease periods are quite short, so it is unlikely that you will go a long time without income. Insurance covers can also take care of any damages the tenants may do. You don’t have to dip into your pocket, which takes a chunk of your earnings.
If you think about it, short-term renters are not likely to make significant changes to the place. They will, for instance, not damage the walls by hanging paintings or pictures. That is unlike long-term tenants who may make changes to the property to suit their needs.
In essence, short-term rentals may end up requiring less maintenance. And if there is a need for any repairs, you do it immediately before the next tenant moves in.
Final Thoughts
Are short-term rentals suitable for real estate investments? We can say without hesitation that indeed they are. In fact, they are an excellent passive real estate income source.
The trick lies in meeting the variables we highlighted above. Location, for instance, is critical if you hope to get ROI from your short-term rental investment.
Also, do pay attention to the market. Is there a demand for the rentals in the area you are interested in? Also, note that a lack of proper maintenance can cause your property to depreciate.
If you want to get into short-term rental investments, work with professionals. They have a good understanding of the real estate industry. You will also get the best advice on where to put your money for maximum ROI.
Furthermore, you can rest easy knowing your money is in good hands. All you need to do is sit back and enjoy the income from your short-term rentals.