6 Benefits of Owning a Short-Term Rental Property Business
The travel industry has evolved drastically. One of the most significant improvements has been in how travelers book their accommodations with sites like Airbnb and VRBO leading the way. The traditional hotel industry is still alive and well, but the number of travelers venturing outside of hotels to find a safe and more affordable vacation place to stay has grown substantially as another market is quickly gaining traction–short-term rentals.
Investing in short-term rentals is a viable alternative to traditional investments such as stocks, bonds, etc. It has skyrocketed to new heights with the help of technology. Nowadays, anyone with extra space can turn it into a business with the help of online listing platforms like Airbnb or VRBO. These platforms have made it possible for any homeowners to make some extra cash by renting out their property while they’re away on vacation or just not using it at all.
If you are reading this, then you are most likely considering becoming a short-term rental property owner. Like any real estate investment, owning a a vacation rental home is not without its fair share of risks. But for those who can put in the work and have the resources to get started, the benefits are well worth it.
Low Startup Cost and Easy To Start
The best thing about running a short-term rental property business is that it has low startup costs and is easy to start. While there are some upfront costs (like purchasing the property), once you set up your business, it can practically run on autopilot with online platforms and technology.
All you need is a house or apartment that you can turn into an Airbnb listing, which will be your main source of revenue. You can also list your home on other platforms such as Booking.com and Expedia if you want to increase your chances of having it booked for the long term.
However, you do have to keep in mind some pros and cons of short-term rentals. Here are some handy tips on how you can start small and avoid big risks.
1. Convert your own home into a rental goldmine. If you already own a home, there’s no need to buy additional property. You can simply convert your existing space into a vacation property.
2. Find a property within your budget. Your best bet is to find a property within your budget and then worry about renovating it. It is possible to get a great deal on a house that needs work, which will let you make the renovations yourself and save thousands of dollars.
Any property you buy should have the essentials for any short-term rental. Plus, you’ll want to find a house that can be used for years to come — so keep in mind future trends in travel.
3. Calculate the potential cost and earnings. Plan ahead and ensure that by renting your mortgaged home, you can earn cash to cover the cost of paying off your mortgage if you already own it. The amount you can earn renting your home on Airbnb depends on many factors including:
- Location (obviously)
- Property size and amenities
- How often you rent it out
- How many guests you host at once
4. Start small and gradually expand. If you’re just getting started, though, it’s a good idea to think and start small. Don’t go all out and buy a five-bedroom house your first time out, especially if you don’t have experience managing real estate property or running a business. You can always buy larger properties down the road when you gain experience and become more comfortable with short-term rentals as a business model.
As with every new business venture, there are benefits and risks to owning a short-term rental property business—it’s just a matter of looking at both sides and weighing your options before you make your final decision. Plan ahead by consulting a real estate expert. The Short Term Shop Brokered by EXP is one of the most dependable go-to resources if you want to learn how to be successful at owning a short-term rental.
Flexibility in Running Your Own Business
Being a short-term rental entrepreneur allows you to have a lot of flexibility in your life, enabling you to enjoy more freedom and autonomy.
Time flexibility. Your daily and weekly routine can be whatever you want it to be. The time you spend on managing your rental business is up to you. The most important part is your can enjoy more quality time with your family.
Be your own boss. If you want to enjoy the flexibility of running your own business, working from home, and being your own boss, short-term vacation hosting can be a great option—especially if you live in a popular travel destination. You can work from wherever you want and do more of what you love.
Imagine a steady income-generating investment where you don’t even have to leave your home to get a visit from a tenant or repair person. Plus, you can choose which guests stay in your home and how long they stay there. But with that flexibility comes some challenges:
1. You are always on call or checking your inbox to answer inquiries.
2. It may take time to find good guests.
3. You will deal with different personalities.
Steady, Passive Income
Owning short-term rental properties is one of the fastest ways for new investors to start earning passive income from real estate. One of the pros about this kind of business is that it is profitable all year-round and you can make money while you’re sleeping (literally). You don’t have to be available 24/7 to monitor its operation because you can manage your property virtually and with the use of technology.
But getting started requires some work up front. Here are some tips to help you maximize your income from each short-term rental property you own:
- Keep the place clean, well-kept, attractive, and relaxing.
- Provide amenities, toiletries, and essential appliances.
- Know the market rates and set the right price.
- Stay on top of maintenance.
- Be mindful of the seasonality.
- Promote your property with a stellar listing
Marketable and Competitive Business Model
Short-term rentals are more than just a home away from home. They’re quickly becoming the preferred choice for travelers, and for good reason. They offer a wide range of benefits to both parties that contribute to their marketability and competitiveness, including:
More space. Short-term rentals provide wider space. It is like having your own apartment, but better. Guests can stretch out in a spacious living room, cook in a full kitchen and enjoy the entire property (and not just one room) during their stay.
Accessibility. Short-term rentals are often located near popular attractions, which means guests can get around easily. Instead of spending time looking for parking and dealing with traffic, they can easily walk or bike to popular destinations.
Cost savings. While renting an apartment may be cheaper than a hotel, it’s not as affordable as renting a short-term rental. In fact, many families find that they can save up to 30 percent on accommodation costs by renting an entire home vs. paying for individual rooms at a hotel.
Privacy. While hotels may have privacy curtains and semi-private rooms, many don’t have doors that close completely between rooms (i.e., adjoining rooms). This means those staying at hotels can hear everything going on next door, including late-night calls and parties in the room next to your unit.
For rental property owners, the AMT or Alternative Minimum Tax is an important consideration, since many of the tax rules about real estate that apply to real estate are different from the AMT. Does owning a short-term rental help with AMT?
The answer is, ‘Yes.’ When you own a short-term rental property, you’ll likely enjoy fairly substantial tax deductions—such as operating expenses, depreciation, and interest on property loans. Your expenses are more than just mortgage payments and maintenance fees. Furniture and appliances are also tax-deductible because they’re part of your investment expenses for the house. You can deduct repairs that you make to the house as well as improvements that increase its value (e.g., new roofing).
Many of these costs can be deducted from your taxes, which helps reduce your tax burden at the end of the year. That’s a huge incentive to keep your property booked as much as possible.
Fun Learning Experience
In addition to financial benefits, owning a vacation rental business is also a fun learning experience! The social benefits are often overlooked by potential hosts, but they are crucial if you want to achieve maximum happiness and success as a host.
Opportunity to provide community livelihood. You can make a positive impact on your local community by being a short-term rental property owner. The money spent by guests in your area benefits the local economy, and you’ll have the opportunity to be a part of your community’s livelihood.
Guests to lifelong friends. If you enjoy meeting new people and learning about other cultures, this could be a great way to do it. You can meet people from all over the world who are traveling to your city. You can also make new friends as guests often enjoy having conversations with their hosts and learning more about their city from them. As they return to your property, you may develop a relationship that lasts beyond the trip.
Clearly, the benefits of owning a short-term rental property business can outweigh the downsides of the business and can go far beyond the financial gains. 6 Benefits of Owning a Short-Term Rental Property Business.
This is not a get-rich-quick scheme. Instead, it is a solid business plan that could potentially turn into a lucrative investment as well. Whether it is supplementing your cash flow, making extra money, or generating a passive income, there are guaranteed wins to owning a short-term rental property. But remember, there is also a lot of work and costs associated with it. Many of the benefits come with caveats and risks involved, but if you take the right steps to mitigate these variables, then you will be well on your way to starting generating income from renting your vacation home.
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