The Need-To-Knows Of A Short-Term Rental Investment

Short-term rentals have quickly become a popular investment that could net you a bigger return than if you jump into the more traditional long-term rental market.

A big reason this segment of the rental market is taking off is Airbnb and other short-term rental sites, which vacationers and other travelers are using as a cheaper alternative to hotels.

In general, a short-term rental is a furnished apartment that is rented for short periods of time, usually by the month or even shorter, as opposed to an unfurnished apartment that usually has a year-long lease. Short-term rentals have become great alternatives to hotels and are an offshoot of the corporate housing market.

Short-term rentals haven’t caught on yet with a lot of investors, even though they can be lucrative. They are a great investment even for first-timers.

Here’s a look at the short-term rental market:


There are some obvious advantages to the short-term rental market compared to the traditional rental markets.

The biggest is that you usually get your money upfront at the time of the reservation in the form of a cash transaction. That’s so much better than having to wait for tenants to pay on a monthly basis, and it eliminates having to deal with renters who are habitually late with their payments or become delinquent by several months.

As you begin your foray into the short-term investment market, realize that there are far more potential uses than a bunch of college kids looking to have a weekend party or a couple from out of town coming in for a vacation.

You can also market your property as temporary housing. Some examples are a family that needs a place to live while remodeling their house, someone from out of town who is looking for a job, someone who needs housing while getting an outpatient medical procedure, or people visiting a family member who is in the hospital. A short-term rental is often more preferable and cheaper than staying in a hotel. They are usually located in residential neighborhoods and can offer peace and quiet as opposed to the hustle and bustle of a hotel.

Do Your Research

If you are a beginner in the short-term rental market, it’s probably best to start close to home. Pick a neighborhood close to where you live but also close to attractions such as the beach, a college campus, a technology hub, a sports stadium, or any other place where people will be coming regularly for business or entertainment.

You can get a sense of what’s available by checking online real estate sites, but you’ll also want to hire a real estate agent. An agent will know of more properties than the online sites and will be notified of them the minute they hit the multiple listing service. Be sure to hire an agent with a proven track record of transactions in the short-stay rental market.

Find an Ideal Property

As you look at single-family homes and even condos to use as short-term rentals, remember that you will be competing with hotels and short-stay units for business. You’ll want to pick a property that is in good shape and is located in a nice, safe neighborhood. Visit the property in person and find out about the surrounding area. The property should have easy access to restaurants, grocery stores, pharmacies, and other retail outlets. Many people who use short-term rentals will want to prepare their own meals in order to save money.

If you buy a property that is already used as a short-stay rental, you’ll be able to hit the ground running. The previous owner should be able to provide you with rental records from the previous few years, including the amount of income. There might even be some reservations already on the books when you take over.

Learn the Laws

Before purchasing a property, you must learn the local ordinances that govern short-term rentals. There has been a backlash against short-term rentals in many localities, in some cases due to irresponsible tenants and because they cut into the available supply of residential housing. Short-term rentals could be flat-out banned in an area or heavily regulated.

For instance, some cities have passed laws that short-term rental agreements must be at least one month long, which would eliminate them for use as quick getaways or staycations. Other municipalities allow rentals only on weekdays while forbidding them on weekends. Such regulations eliminate a certain segment of renters, so you’ll have to make sure you can attract enough business to make your investment profitable. Finally, find out from City Hall whether you need to purchase a business license to operate a short-term rental.

Other Factors

Just like with other rental properties, there are other costs besides the down payment. Your projected rental income will also have to cover your monthly mortgage payments, property taxes, homeowners insurance, and, if applicable, homeowners association fees. You also should have money in reserve for maintenance, repairs, and any emergencies that come up.

Unlike long-term rentals, you will need to be much more active in running your short-term rental. You’ll have to market the property, check guests in and out and clean the place in between stays. Just like with a long-term rental, if an appliance fails or the roof springs from a leak, you’ll need to fix the problem immediately.  

Getting into the short-term rental market can be exciting and profitable as long as you cover all your bases ahead of time.

Ready to take the next step in buying a rental investment? If you plan to buy real estate in 2021, reach out to the experts at the Coldwell Banker Riveras for knowledgeable advice and guidance. 


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