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The concept of a short term rental property is not an entirely new one. Even before Airbnb began to emerge in 2007, property owners have been offering up rooms or other spaces to travelers on a short-term basis. However, nowadays, the practice is much more widespread, and platforms such as Airbnb cater to 150 million users worldwide.
As we are dealing with such a big market, it is important to clarify precisely whom we are reaching out to with this guide. We seek to provide advice and guidance to anyone that is considering entering the short-term rental property market, and this includes the following;
A wealth of opportunities is open to all of these user groups, provided that the short-term rental market is approached in the right way.
So, how can property owners and investors make sure that they approach the market correctly? Let's examine five critical factors you need to consider.
Think about why people would want to rent your property, or what people are looking for in your area. There are myriad different marketing angles that you could pursue. These might include:
Put yourself in the mind of someone who might wish to stay at your property, and then build your marketing initiatives around this.
Carry out some research into the local short-term rental market, as well as the local accommodation scene. In most cases, short-term rentals offer a more cost-effective option than traditional forms of short-term accommodation such as hotels. However, if you plan to target a more luxurious or experiential angle, your pricing should reflect this.
If you are a recent entrant into the market, it is advisable to pitch your property's pricing slightly below that of your local competitors. Doing so will help you get established and build up good reviews, which will become instrumental in your investment's long-term success.
For those targeting seasonal customers, consider altering your pricing based on relative levels of demand. Hotels commonly adjust their pricing for the on- and off-season, and short-term rental property owners should do the same.
Renting out a property or a space in the short term is not a passive income stream. Even after the initial investment is recouped, there will still be ongoing expenses associated with the rental.
Consider the following;
While the income from the property should make the investment worthwhile, it is still critical to consider these factors.
There are likely to be periods in which the short-term rental property is vacant. During these periods, of course, you will not be receiving any income from rentals. This is particularly the case for properties rented out on a seasonal basis.
So, what can you do? You may decide to use this time to carry out any needed repairs and renovations to maximize the rental income during those boom times. Alternatively, you may decide to drop the price to encourage more bookings during downtime (as noted above, you should already plan to do this if your property has seasonable appeal, but you may decide to reduce the price further if the lull continues). You may also consider re-marketing the property with a different angle, so that seasonal disparities in visitor numbers are not quite so severe.
Entering this market is going to result in significant lifestyle changes. These will be particularly acute if you will continue to occupy the property you are renting out, although all investors will experience lifestyle changes relating to increased income, additional responsibility, and the avenues of opportunity that open up for you.
Think about how your lifestyle will be affected, and consider how you can make the negative changes more bearable while taking full advantage of the positives.
There are certain risks involved in entering the short-term rental market. Plan for these risks ahead of time, and think about how you can mitigate them.
It's important not to lose sight of the rewards when you rent out a property on a short-term basis. As long as the property is managed correctly and the right decisions are made during the investment, this could be the path to a solid rate of return.
These are just a few of the rewards you can look forward to:
If you would like to learn more about getting an investment property loan in Texas, reach out to our team.
Ask about investment property loan options before buying an investment property. Considerations such a 15% down payment options, DSCR, increased loan amounts for multi-unit rental properties, or ARV appraisals can help you leverage your rental property financing.