For those taking their first dip in the deep waters of real estate investing, the choice between short-term and long-term rental properties can feel daunting. This decision is often compounded by concerns about effectively managing a property with a high turnover of short-term stays.

We had the privilege of sitting down with Avery Carl, the CEO of The Short Term Shop and a vanguard in the realm of short-term rentals. Carl shed light on these investor quandaries and made a compelling case for why short-term rentals can yield a high return on investment. 

The Profile of a Short-Term Rental Investor

According to Carl, before you get started on your investment journey, you need to determine what type of investor you are — an investor looking to maximize profits or simply offset part of the cost of owning a vacation home.

As Carl elaborated, the first group of short-term rental investors is made up of those in search of income-generating properties. “Short-term rentals are arguably the most profitable type of real estate investment because they allow investors to maximize income on a single-family property,” said Carl. “They can gross anywhere from two to ten times more than traditional long-term rentals, depending on the market and management strategy.”  

The other broad category of short-term rental investors are high-net-worth individuals looking to purchase a vacation home, but who are less concerned about cash flow. “These are people looking to buy properties that enhance their quality of life, like beach homes, and maybe break even on expenses or just cover some of the maintenance costs or taxes,” Carl explained.

Managing a Short-Term Rental is Easier Than Most People Think

Per Carl, too many investors avoid short-term rentals due to misconceptions about insufficient capital or a lack of experience in managing such properties, particularly when they are located in a different state.

“A lot of false assumptions are made with regards to short-term rentals,” said Carl. “For example, people think you need a lot of money to cover a 20% down payment. But Fannie Mae only requires a 15% down payment for conventional investment loans. It also depends on the market where you want to buy. In some of the markets we have offices in, like Santa Rosa Beach, Florida, higher occupancy properties can cost upwards of $2,000,000.00. On the other hand, in other markets where we have offices, Myrtle Beach, South Carolina, or Branson, Missouri, there are investment properties selling for as little as $150,000.

According to Carl, the other trap that new investors often fall into is wrongfully assuming that they are not capable of managing a short-term rental property themselves and must instead hire a management company. “A property manager will cost between 20 and 25% of your gross income. That’s a lot of money that you could be saving to buy your next property instead,” said Carl.

After Carl bought her first property in 2015, a cabin in the Smoky Mountains, she set out to learn how to manage it herself. Eventually, that would set her on a path to teach others how to do the same. “I started The Short Term Shop out of my own necessity,” said Carl. “Because I was talking to a lot of real estate agents, but none of them could answer my questions about how to manage a property. They were questions like ‘How do I find a cleaner?’ and ‘How much do you think this repair will cost?’ Through my own experience, I gained a good understanding of the answers to most of these questions, and now I provide these resources to other investors through  The Short Term Shop’s comprehensive management training program.”

Thanks to the advent of apps like AirBnB and Hospitable, it’s never been easier for investors to manage their own properties, even if they live out-of-state, or even out of the country. “With the help of technology, short-term rental investors can circumvent the old system of needing a middleman,” said Carl. “This way, they can keep 100% of their revenue rather than just a fraction.”

Key Considerations Before Investing in Short Term Rentals

Carl emphasized that investors should consult with a lender to determine their budget and the markets that match their financial capacity. “It’s at this point that they should consider working with an agency like The Short Term Shop, to best identify their target market and property type,” said Carl. “Because picking the region and neighborhood where you want to invest is the most important factor. Second only to the property itself.”   

According to Carl, regional, drivable vacation markets generally have the highest tourist traffic, the friendliest short-term rental regulations, and while nothing is recession proof, are the most recession resistant. “That’s where you want to look first,” said Carl. “Vacation areas that are dependent on tourism but do not have a heavy hotel presence, places like the Smoky Mountains, or Destin, Florida, where most vacationers stay in cabins and beach houses rather than hotels.”

To evaluate the potential of a short-term property, Carl recommends using a combination of the short-term rental specific data subscriptions (like AirDNA) and the ENEMY method. “The ENEMY method, coined by Carl, involves analyzing the softer aspects of what drives income that hard data numbers can’t tell you. Things like amenities, quality of photos, quality of listing, is the manager using dynamic pricing, the list goes on,” said Carl. “What you’re looking for is how your potential property can be superior to your neighbors. Can your design be better? Is it easy to out-amenity them? You’re looking for anything that you can add to your property to make a potential guest choose your property over your neighbor’s property.”

To learn more about short-term rentals, consider a consultation with The Short Term Shop, which helps investors purchase the best short-term rental options for vacation rentals and second home properties in the highest quality short term rental investment markets across the country — and teaches investors how to manage their new investment for free.

About Avery CarlAvery Carl, Founder of The Short Term Shop brokered by EXP, was named one of Newsweek’s Top 500 agents in 2020, Wall Street Journal’s Top 100 in 2021, Top 50 in 2022, and Top 10 in 2023, as well as the New York Times Top 100 in 2023. She and her team focus exclusively on vacation rental and short-term rental clients, having closed well over $2.5B in sales. To join over 5,000 happy Short Term Shop investors, please visit https://theshorttermshop.com/