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Things to consider before investing in short term rentals

By Jamie Richardson | January 5, 2022

As of the latest reports by AirDNA, the demand for short-term rentals is up by 66.4% in April 2021. This concludes that investing in short-term rental projects is increasingly becoming an attractive target for investors.

Investing in short-term rental properties has many advantages. Some of them include getting instant cash at the time of reservation, no hassle of dealing with long-term tenants, and passive income that has the potential to offset mortgage loans.

Hand writing the text Rental Income

But, before all of that, it’s necessary to research properly as investing in any property requires. With a minimum of 20% down payment, if the mortgage bills are delayed, that will pile up to a lot of debt.

So, it’s very important to consider a few things before investing in short-term rentals.

Let’s understand them one by one.

1. Buy a turnkey property

Buying a property that has a solid turnkey would be an ideal choice if you have just started investing in this sector. These kinds of property have solid rental history and may also have reservations already lined in place, beforehand.

These kinds of properties don’t see a slump in terms of investment attractions and there’s a possibility of good income from the first week.

Importantly, buying a turnkey property ensures that you at least get the records of the past 3 years of rental and income.

That would be enough for decision-making because sometimes these properties are listed over the current market values. But don’t worry, the premium is worth the revenue it will provide.

2. Understand the location

Locations near the metro are usually more occupied than places with no metro connection. The simple reason is that most office locations and small businesses are connected through metro lines, so it becomes easier to stay near them. Therefore, it concludes that location impacts a lot when it comes to occupancy and businesses.

So, whenever you are searching for these kinds of property, ensure that the site is on the list of the best short-term rental markets. That will help you gain rental income within a very short span of time, especially compared to a more secluded property.

3. Look out for saturated zones

There are many areas that are prone to saturation, like the ones mentioned before. The occupancy area in these zones decreases, but their prices remain increased or sometimes higher than what they should be. So, if any investment is made without ensuring the saturated levels of the area, the ROI will automatically decrease or will take a long time to match the investment made.

So, don’t buy the first available property you find. Research properly, look at the occupancy area, and then make a decision.

4. Research about the taxes

Every area, city, and state has different rules and regulations when it comes to filing taxes by investors who own these rental properties. To pay your taxes on time, you depend on the income that you generate from your short-term guests.

Thus, it is important to set up a payment system that assures that you always get your payments on time. In this way, you will have the cash flow needed to pay your local taxes and other fees when the time comes.

5. Market it properly

If carefully researched, there are many properties that are present in a single location, but only a few of them actually make good revenue. The only reason for this is marketing. Marketing makes all the difference if you really want this investment to turn into a good passive income.

For starters, consider advertising your property on the Airbnb platform. Or you can also consider creating your own rental website. Just ensure that the photographs of the property should not be of cheap quality, because more than 90% of people who select a place to stay choose on the basis of the photographs they see online.

There’s no point in saving a few bucks if it’s costing you a renter. So instead, hire a professional, upload HD pictures of your place, and attract premium guests.

Over to you…

An investment in short-term rental property expands your income stream and allows you to be more financially secure. But for that, proper planning and market research is required.

These tips are providing you with a head start.

So, go ahead. All the best.

Jamie is a 5-year freelance writer who enjoys real estate. He is currently a Realty Biz News Contributor.
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