“One of my favorite ways to invest in real estate is through short-term rentals (STR)” according to Ryan Pineda of Forbes. Websites such as Airbnb, HomeAway and VRBO are increasing their market share as people become accustomed to using them. If you start soon there is a big opportunity for a healthy return on investment.
While STRs are a great way to invest, there are some downsides. Counties and Cities in the U.S. are still determining how to regulate them. It is imperative to check if there are ordinances prohibiting hosting STRs. Locate a market that has an economy that depends on it. For example: where there are few hotels making Short Term Rentals a likely choice for tourists.
If you can locate a market that works for you, this type of investing has tremendous benefits:
In the right market, the returns on short-term rentals are much higher than long-term rentals. One of my properties grosses $4,000 a month on average. If it were available for long-term rental, it would earn $1,500 per month. With STRs there comes more management work and fees, but even taking that into consideration, the net is usually going to be higher than if you rented the unit long-term.
Again, every market is different. So it is possible that your market would have similar rental returns on both short- and long-term. But, you probably wouldn’t be investing in that market in this way. I suggest networking and talking to people in your market who have STRs to see how they’re doing to get a feel for the climate.
One big benefit of owing a STR is that you can use them as well. This is a great way to own a second home that provides you with income. You can schedule your vacations around your bookings.
Traditional long-term rentals pose an issue if the tenant stops paying rent and you have to evict them. You won’t have the monthly income coming in anymore until you can get them out and rent it again. With STRs you never have to worry about evicting a tenant. This lessens the risk of going months without your STR income. Also, if your tenant causes damage the rental sites have insurance to cover it.
If you would like to get started on a STR portfolio, these are the top traits to look for:
1. Location: Is it located where you can manage it? Would you go there on vacation? Could you build a team there?
2. ROI: How much are other properties in your market selling for? How much are they renting for?
3. Legislation: Is your target market Short Term Rental friendly? Are there any future law changes that may affect your ability to rent it out?
“Clearly, I’m a big believer in STRs. I think they will continue to gain even more market share as time goes on” says Pineda. There will undoubtedly be more regulations as the popularity increases but if you get in early there are great opportunities to be had.
Source: Forbes.com – Read Full Article Here
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