- Reasons To Invest In Short Term Rentals
- Types Of Short Term Rental Properties
- How To Choose The Right Short Term Rentals For Your Portfolio
- Interested In Short Term Rental Investing?
In today’s world, it can be hard to commit to investment opportunities that may take a long time to pay dividends after investing money up front. This is where investments like short term rentals, corporate housing, weekly room rentals, and other similar opportunities can come into play.
Traditionally, when many people think about real estate they think about long term investments, such as purchasing a family home that they plan to sell later to fund their retirement. Long term investments can be fantastic and can be a great way to generate long term income.
But if you’re looking for more income upfront, or want to earn larger and faster rental fees for similar property types as long term rentals, or have a property you only want to rent occasionally, you may want to consider options that fall under the short term rental property category.
Below, we’ll dive into short term rentals and details about options like weekly room rentals, monthly house rentals, short term lets, Airbnb short term rentals, and everything in between.
Reasons To Invest In Short Term Rentals
There are many reasons to consider investing in short term rentals. First, you can often start making money quickly with these properties, and short term rental services like Airbnb and Vrbo make it simple to find your first guests without too much effort or up front marketing costs.
Secondly, investors can also often leverage properties that otherwise wouldn’t generate any income on their own as short term rentals. For example, if you have a pool house on your property, and don’t really use it, you could easily turn that property into a short term rental, assuming your local laws are friendly to this. Even a spare room in your home may be an acceptable weekly room rental opportunity.
And lastly, short term rentals are often more profitable than longer term rentals, but they can also come with risks, especially if it takes a long time to find new tenants between renters.
Let’s talk about the different kinds of rental properties, profit potential, and how to choose the right rental property for your needs.
Types Of Short Term Rental Properties
There are a lot of different types of short term rentals. Below, we’ll discuss some of the most common forms of this property investment and the differences between each of them.
Corporate Housing Or Short Term Apartment Rentals
Corporate housing is one of the more popular types of short term housing, but it doesn’t necessarily have to be corporate or even work-related.
Instead, this type of short term housing is designed to meet the needs of people who need to travel for work, who may be on an extended vacation, or for any reason that renters might need housing for longer than average hotel stays.
This type of housing is also often referred to as short term apartment leases, though corporate housing tends to indicate a nicer location with better amenities and short term apartment leases might indicate fewer benefits or amenities offered to tenants.
For investors, this kind of housing can be attractive because you can charge a comparatively higher rent with often less overhead. Investors who have more than one corporate housing short term rental, or who offer their rental year-round, can also hire management companies to take care of accompanying tasks and issues that may arise.
The downside to corporate housing or short term apartment rentals is that it can often require a costlier up front investment than other property types, and may require more upfront investment in amenities than other short term rentals.
Vacation rentals are one of the most common types of short term rentals, and also what most people think of first when they think of a short term rental property.
Vacation rentals can range from vacation homes that are independently marketed and rented by owners, to weekly room rentals or short-term listings on sites like Airbnb or Vrbo.
There are generally two types of vacation rentals: the rentals that cater to people seeking luxurious accommodations and amenities during their stay and vacation rentals designed to give people a more budget-friendly residence in which to stay in popular destination cities or near desirable attractions.
These two types of rentals often take a slightly different management approach, with luxury vacation rentals often being associated with higher maintenance costs for things like professional cleaning between renters or maid services for tenants that stay more than a couple of days.
The good news is that this kind of rental almost always makes more in rent than the same property would as a long-term housing rental. The bad news is amenity costs can often be high and many of these types of rentals are located in more seasonably desired locations, making renters hard to find during certain portions of the year.
There are a lot of pros and cons to owning this kind of short term rental, so it’s important to weigh everything carefully before you invest in a vacation rental property.
Monthly House Rentals
Monthly house rentals are an increasingly popular housing option for people who need the flexibility of short or medium term leases. This type of rental property offers an attractive alternative to making a long term commitment, especially to those who may not be able to commit to a year or longer lease, and it can be a great opportunity for short term rental investors.
Generally speaking, monthly house rentals fall under month-to-month housing lease agreements, and while they’re not different than long term rentals landlords can usually charge higher fees due to the convenience of the renter not being tied to a longer lease requirement.
Most monthly houses will come fully furnished with electronics, furniture and kitchenware, and some even come with access to pools and tennis courts, making homes often eye catching for potential renters. However, investors should also keep in mind that monthly house rentals usually require significant up-front costs; these costs typically cover finding potential tenants, advertising rental properties, processing paperwork associated with new leases, furnishing costs, and more.
Pet Friendly Short Term Rentals
Pet friendly short term rentals are a growing trend in the real estate market and offer investors a unique means to generate additional income. By allowing pet owners to rent their units for shorter stays, investors can attract pet owners who are looking for pet friendly accommodations or pet sitting services when they are away.
Short term pet friendly rentals is an attractive option as these tenants may return time after time depending on their pet-sitting needs. Additionally, pet friendly short terms rentals may attract higher rents than standard units due to being pet friendly. Investors who take advantage of this popular trend can see a considerable return provided they understand relevant regulations and pet policies, such as requiring pet deposits or pet fees, that may be needed for upkeep and repairs.
How To Choose The Right Short Term Rentals For Your Portfolio
Choosing the right kind of short term rental can be complicated if you aren’t sure what kind of investor you want to be. If you live close to your rental, remember that you might be able to save money by doing cleaning and providing other services yourself, but if you own rentals further from where you live you might need to hire a management company or other professional services on a regular basis – this is generally what those who offer monthly Vrbo rentals and Airbnb rentals do.
Before you invest in a property and plan to turn it into a short term rental, think about how much time you’re willing to spend on that rental, how much you would need to make from the rental to provide the expected services and amenities, and what kind of profits you’re looking to get in return. Once you have this information figured out, it should be much easier to choose the right kind of short term rentals for your investment strategy and time commitments.
Are Short Term Rentals More Profitable Than Long Term Rentals?
Yes and no. The profits you earn from any rental depends (at least a little) on your management style and your ability to leverage that property effectively.
Short term rentals do tend to charge more for the same amenities compared to long term rentals, but there’s no guarantee that they will have tenants as often as the long term rentals. If you have a gap between renters for too long, you might be losing money by covering a mortgage with no renters as compared with leasing the same property on a long term basis.
The other downside that can sometimes make short term rentals less profitable overall is that they can take more management and may need additional marketing and advertisement services, additional cleaning and maintenance, and other costs that a long-term rental generally wouldn’t.
Take an Airbnb short term rental for an example. Most guests will expect clean linens, a clean and fresh living space, and any damage or problems caused by the previous guests to have been cleaned up and repaired before they arrive. This can require not only quick decision making, but can mean up front costs that you weren’t necessarily planning on.
While, most of the time, those kinds of maintenance tasks aren’t a huge undertaking, short term rentals do always come with the risk that you will need to fix problems on a priority basis between renters, which can add to the management cost and the service cost associated with fixing the problem.
Ultimately, while short term rentals have the potential to be more profitable, which is why an increasing amount of landlords are converting long term rental properties into short term rental properties, they also take more management, and may not be the best option if you aren’t looking to spend a lot of time thinking about or marketing your property.
It’s also important to consider things like whether you want to have pet friendly short term rentals offered, which can add to cleaning and maintenance costs, and whether you’re interested in the Airbnb short term rental model, or are looking for something slightly longer term, like a monthly house rental, or with a service like a monthly rental Vrbo.
All of these different styles of short term rentals can have different profit potentials and are dependent on your ability to judge the market and position your rental favorably compared with other similar rental options in your area.
Like all investments, short term rentals aren’t ideal for all investors, regardless of their high-profit potential.
Interested In Short Term Rental Investing?
If you’re thinking about investing in short term rentals, are looking to make an existing rental property more profitable, or want to break into a different kind of rental property, we can help. At Teifke Real Estate we have a wide range of experience from finding the perfect properties, to helping people find the investment strategies that work best for them.
Don’t wait, schedule a consultation with Teifke Real Estate, today.
- Blackburn, J. (2021, August 12). Corporate Housing Real Estate Investing: See the pros and cons. Corporate Housing by Owner – CHBO Blog. Retrieved February 14, 2023, from https://www.corporatehousingbyowner.com/blog/2020/03/corporate-housing-real-estate-investing-see-the-pros-and-cons/
- Carl, A., Avery Carl, Investing in short term rental properties: The Complete Guide. The Short-Term Shop. Retrieved February 14, 2023, from https://theshorttermshop.com/beginners-guide-investing-vacation-rental/
- Vacasa. (2020, December 14). Pros and cons of owning a vacation rental property. Vacasa. Retrieved February 14, 2023, from https://www.vacasa.com/homeowner-guides/pros-cons-of-owning-vacation-rental-property