Short-term rentals have emerged as a popular and lucrative trend in real estate markets all over the world. Landlords and property owners are rapidly realizing the advantages of short-term rentals, which outweigh the security of finding a long-term tenant.
This article will walk you through the benefits and drawbacks of this business opportunity, with some practical tips to create a solid game plan that will increase your rental income successfully.
Benefits of Short-Term Rentals
Increase your income
You can effectively increase your monthly rental income by listing your apartment or property on a short-term rental platform, such as Airbnb. Rental rates charged on a nightly or weekly basis end up creating a much more substantial monthly income than renting your property to a long-term tenant.
If you live in a city that attracts throngs of tourists, such as Miami or Los Angeles, you can attract scores of tenants and make an average monthly income of $1000. Properties that are centrally-located in high-income neighborhoods and posh localities can easy earn over $200 per night.
You can earn much more in five nights than the monthly income you will generate with a long-term rental agreement. However, the rental amount should reflect the furniture, interior, amenities, location and seasonal market rates, amongst other factors. If your property is located near tourist attractions and leading entertainment centers, you can make a much more significant income with short-term renting.
Reducing Maintenance Costs
Long-term rentals come with a plethora of expenses for the landlord, from leaking faucets and plumbing issues to broken fixtures and water damage. With a short-term rental, you can bid goodbye to the monthly maintenance expenses and the hassle of hefty upkeep responsibilities.
Repairs and maintenance issues that are neglected blow up into bigger and costlier problems. But with a short-term rental, you can maintain and clean the property immediately after check-out, much like housekeeping services in a hotel.
Enjoy Tax Deductions
Did you know that a short-term rental comes with a variety of tax deductions? That’s right, converting your property into a vacation rental allows you to enjoy more tax deductions. You can deduct several costs, such as travel expenses, and upgrades for security systems, HVAC systems, roofs and fire systems.
You can also enjoy deductions on marketplace fees, insurance and commuting costs related to your rental property. What’s more, you can also deduct the expenses of hiring cleaning and maintenance services, furniture and even appliances.
Less Depreciation and Damages
Long-term tenants are more likely to damage your property and cause excessive wear and tear. However, travelers and vacationers will spend less time inside your property, thereby inflicting minimal damages.
Drawbacks of Short-Term Rentals
More Time & Effort
Short-term rentals will require continuous effort and services, and you will find yourself spending more time working at the property. While the payout is higher, so if the work and effort involved in maintenance and housekeeping. You will have to attend to the cleaning chores before, after and while the tenants are staying because the guests will expect you to provide housekeeping services.
More importantly, you will have to continue marketing your rental property through all seasons to attract tenants. This will also require routinely improvements, monthly upgrades and attention to seasonal trends. Your rental income will also be subjected to seasonal market trends and rates.
Minimal Tenant Screening Options
Long-term rental agreements come with extensive scrutiny, legal processes and background screening. Landlords can rely on the assistance of law enforcement officials and resources to examine credit history, employment status and criminal histories. Landlords have a right to obtain references and identification documents.
However, short-term rentals do not come with such screening options. Landlords can protect themselves by taking security deposits but they cannot undertake lengthy processes to verify the identity and background of potential tenants.
Long-term tenants provide landlords a sense of security with a predictable monthly income. However, short-term rentals are not the most reliable option to enjoy the same amount of money each month throughout a year. The availability of tenants and rental rates vary, depending on the season and crowd of tourists visiting your area for business or pleasure.
The local governments of numerous cities and towns are taking measures to increase taxation for vacation rentals and restrict short-term renting agreements. It’s wise to examine the local legislation, state laws and taxation clauses with regards to such a business. If you’re investing in a new property to start a short-term rental, be sure to examine the public discourse and local legislation to avoid legal conundrums.
A Solid Game Plan for a Successful Short-Term Rental Income
Choosing the Right Location
Location is a powerful element that will define the appeal and rental income of your property. It’s wise to choose an area that is located in close proximity to business ecosystems, tourist attractions and entertainment hotspots. Be sure to conduct rigorous research into the areas that attract high-paying tourists and vacationers.
An Aesthetically Pleasing Decor
How can you attract tenants and guests and maintain a traffic of guests throughout the year with high rankings on the listing platform? All vacationers and business travelers are attracted towards accommodations with aesthetically pleasing and attractive decor. Adding modern amenities and smart appliances will further boost the comfort appeal of your property.
You don’t have to go overboard with furniture, decorations and antiques. Just avoid cluttering up the place, and try to make it as elegant and comfortable as possible.
An Attractive Listing
Pay close attention to the content and image quality of your listing. It’s wise to hire a professional photographer to take splendid photos and capture immersive videos of the apartment, room or property. Interactive and aesthetically impressive listings work wonders at boosting ratings and attracting potential tenants.
A short-term rental is an opportunity that comes with pros and cons. If you’re keen on exploring this option, we urge you to do so with a solid game plan and a pragmatic strategy!