Life as we know it was disrupted by the global pandemic. With the pandemic under control, travel restrictions easing up, and remote model of working gaining traction, people are now ready to travel, explore new places for both work and pleasure.
Did you know that the global Airbnb revenue increased by 76.62% in 2021? Because of this popularity, short-term rentals are taking over rental property investment. Now travelers have better options for their stay, aside from the hotels.
Let’s say you’re traveling as a group for the holidays; staying in a short-term rental would be more cost-effective than conventional methods. Consequently, this proves to be a significant opportunity for real estate investors.
As long as the property is in a perfect location, modified with excellent aesthetics, and highly affordable, it can be a perfect fit for a short-term rental investment. Rest assured of significant returns on your investment.
Let’s get into why short-term rentals are a favored investment plan. Read to the end.
What Is Short-Term Rental Investment?
A short-term rental is leasing a house temporarily for a few days to a few months on end. Usually, most short-term houses are rented out weekly or monthly. Still, there are nightly offers for clients who want a brief stay. STR makes a perfect alternative to hotels; most people nowadays consider them for their vacation rentals.
Unlike hotel rooms, short-term housing is like condos, apartments, cabins, and townhomes. The owners furnish them entirely with everything you need in a house. This way, they offer maximum comfort to the renters as the space feels like a home away from home.
Short-term rental investment entails spending your money to buy or co-own and rent a house. This way, you get to earn from what the renters are paying. It’s an ideal and booming investment plan, but requires expertise in real estate.
Nonetheless, investing in vacation rental property should be undertaken under the able guidance of experts. Techvestor real estate experts exhort us that we can invest an amount as little as $25000 in short term rentals and earn a good quarterly return. A good STR investment company effortlessly handles everything for you after you invest.
So, you don’t have to think about where to buy a rental property, house design, maintenance, property management, and your investment finances. A significant advantage with the vacation property is the passive real estate income.
This means that after investing with the correct professional guidance, you sit back and watch your money work for more profits. So, you can go about your business as you receive quarterly income from your short-term rental investment company.
Factors Affecting the Profitability of STR Investment
There are buying rental property tips that you should consider. These tips are also factors that affect the success of short-term rental investments. For instance;
- Annual revenue
- Average daily revenue
- Cap rate
- Cash on cash return
- Net operating income
- Occupancy rate
- Operating expenses
- Supply and demand
When you want to invest in a vacation rental property, consider an attractive market. Such markets are a significant determinant between a profitable and a struggling investment. With adept experts, you can expect your cash to stream after 3-6 months.
Factors Favoring STR Investment
The above factors are what you should consider before spending your money. You want to be thorough to ensure you’re not throwing your hard-earned money away.
Nonetheless, there are factors that favor and ensure your short-term rental strategy is successful. These include:
Even big hotels are opting to join the bandwagon of short-term rental investments. People now prefer booking Airbnbs for their brief stay to hotel rooms. Consequently, there’s high demand in this industry, which guarantees major success for investors.
Short-term rentals continue to be the most significant disruption in the hospitality industry that has transformed the accommodation sector for the best.
How does this increased demand benefit a short-term rental investor? As a rule of thumb, this higher demand attracts more supply. In short, the short-term rental investment needs a constant supply to meet the high demand. So, entering the STR market is easy and assured of significant demand revenues.
The quick revenue allows the short-term rental investor to enjoy diversified agreements. This means that your rental income will be higher than the long-term rentals.
Plus, there’s more guarantee in short-term leases where the renters pay in full and on time. This works for units that are rented out severally in a month.
You can also integrate several packages in your short-term rental investment to increase occupancy charges and, eventually, monthly income. So if you are trying to lease many vacancies in a new or existing building, consider investing in short-term rentals. This way, you’re assured of property value and ROI.
When you invest in vacation rental property, you gain complete calendar control compared to when you want to rent a house long term. If you have renovations in the house, you’re free to not take on any visitors for as long as it takes to complete. Besides, you can’t rent an incomplete house, or one in a bad state.
Additionally, you can hike or drop the prices as you like. Based on the amenities you offer and the prime location your rental is in, your rental can vary. But to make a competitive offer, you can charge less for renters who want to stay for months. Undeniably, dealing with a homeowner is better than dealing with a hotel manager. A homeowner tends to be more attentive to your needs as this is their project.
Varied Taste and Budget
Is a mansion or beach house far above your budget? Worry not. Vacation rental properties come in different price points, sizes, and styles for studio apartments and mansions.
So, whatever house you want, the options to choose from are endless. If you cannot invest a huge sum to buy the property, you can co-own property. You can invest as low as $25000 and watch your investment offer good quarterly returns.
As of January 1, the federal tax law stated that owners of rental business properties would not pay mortgage interest. So when you invest in short-term rentals, you’re doing a profitable business, and liable to a 20% interest deduction on the mortgage.
This makes it easy for investors to buy more vacation rental properties without the pinch of high mortgage interest. Still, investing in a rental property for beginners is no longer a scary factor.
Are rental properties a good investment? One thing is true; short-term rental investment has changed how people travel. work and live. After the extended stay-at-home period during the pandemic, more people are going for long-awaited vacations. But now, they are booking short-term rentals instead of hotels.
Plus, with more remote work, people are opting to stay in vacation rental properties as accommodation for their nomadic lifestyle. Indeed, the future for short-term rental investments can only get better.