3 Things to Consider Before Buying Your Next Short Term Rental
Investing in short-term rentals can be a great way to get a foot in the door in real estate and generate additional income. However, choosing a property for your short-term rental business shouldn’t be an impulsive decision.
There’s a lot to consider, including property location and profit potential. You also want to make sure the location complies with local regulations. If you want to invest in short-term rentals but aren’t sure where to start, this article covers the basics of how to choose the right property to help your business thrive.
Location
The first thing to consider when choosing a location is whether the property will be your partial vacation home or merely an investment to earn extra income.
With that in mind, who do you see as your target guest? This can include factors, such as age and rental purpose. If your goal is to market vacation rentals to families, that property will likely look different than one marketed to young couples seeking an urban adventure.
You should also consider whether you’ll rent seasonally or year-round. For example, a beach house may thrive in the summer, but not so much in the winter. It may be tempting to invest in areas already attracting a lot of visitors, but you shouldn’t shut out up-and-coming niche regional markets. Being one of the only options to choose from can work in your favor.
There are several tools available, including AirDNA, STRInsights, and Rabbu, that can pinpoint the best areas for your needs.
Return on Investment
If you’re investing in rental properties, you want them to be profitable. Using the tools mentioned above, you can research areas with the best returns on investment (ROI) for your intentions. AirBNB can also be useful in determining the available property types and competition in your area.
If you’re purchasing an existing rental, it wouldn’t hurt to ask the seller for a Pro Forma or an AirBNB or VRBO report to review prior rental history. This can provide insight into the type of guests the property attracts and when rentals get busy.
Lastly, consider how much you’re able and willing to invest in the property. Some factors to consider include:
Furniture
Repairs
Cleaners
Complimentary items
Taxes
Creating an expense sheet can determine your monthly budget, expenses, and expected income.
Short-Term Rental Regulations
Before making any hard decisions, conduct research into whether rentals are allowed in your location and what regulations are in place. In Nashville, short-term rental permits are required and determined by zoning.
Each area will have its own unique requirements and regulations. Check with local government agencies to determine the required guidelines before purchasing the property. This can prevent you from wasting time and money on a big investment.
If you’re still learning how to navigate the short-term rental business, Mariposa has you covered. Check out our blog for tips and tricks on how to succeed.
