The vacation rental industry has been growing like crazy, and people are talking about seeing higher returns on their investment properties by renting them out through sites like Airbnb, VRBO, and Homeaway. Whether you have a spare room in your home or you're wondering how to maximize income potential for your investment property, chances are you've looked into the option of short-term rentals.
We've put together a few things you may want to think about before making your decision:
Vacation rentals offer more income potential because you can charge more per night. However, you should consider that while the potential is there, it's not a sure thing. Depending on where you live, the demand may be seasonal or generally insignificant-- check out this list of the best and worst cities for making money as an Airbnb host. You should prepare yourself for the income instability that vacation rentals can bring.
Your in hospitality now
When you're a new host, there's also the process of getting bookings, collecting enough reviews to look legitimate, and creating a reputation for a clean and safe place to stay.
Here are some other logistics and expenses to consider:
- Cleaning fees / time spent coordinating to get the place made up between guests' stays. Sometimes there are quick turnaround times on this and you need to make sure that things are cleaned and reset between when a guest checks out and when the next guest checks in on the same day. The busier you become, the more time and/or money you will spend on this task.
- Marketing is an ongoing job if you're looking to maximize your bookings. Particularly if there are a lot of vacation rental options in your area, you may fall low on the search results on the vacation rental platform you're using. Marketing can be a great tool to help you gain exposure and increase bookings, however it does require a lot of time, and some marketing platforms are costly.
- Host fees may be deducted from your profits through your vacation rental platform. You should look into the policies of your chosen platform and consider the impact on your take-home revenue, or factor them into your pricing.
- Rental property supply is increasing. This may or may not impact you, however it's important to pay attention to the new properties becoming available around you, and what they are charging. You may need to lower your prices if supply spikes in your area.
- The up front investment of getting your property ready for vacation rental can be very expensive. Unlike a long-term rental, you will be responsible for preparing the property for travelers. You'll need to furnish the place, provide dish ware, glassware, silverware, bedding, linens, towels, and decor. In order to be competitive with other vacation property options, you should consider additional amenities such as wifi, television, and Netflix. The most popular vacation rentals are thoughtfully designed with trendy, artistic, unique, or modern furnishings and decor, so it might be worth the investment to hire an interior decorator if that isn't in your skillset.
- Keeping the place stocked on everything your guests need is an important responsibility. Your guests will need things like soaps, paper towels, and dish sponges. Additionally, towels, linens and rugs are bound to get stained and will require replacing over time. Dishes will break and small things will go missing, so it's important to be prepared to replace things on short notice so that no guest is left without a basic item.
Bottom line: you are in hospitality like a hotel, not just property management.
By contrast, long-term rentals may not offer the flexibility or the same income potential as vacation rentals, but they do have many perks. Leasing your property to a tenant on a long term basis provides much more income stability and far fewer timely logistics for keeping the place in order.
You don't need to furnish the place or invest in household items such as kitchenware, decor, or bedding. Your responsibility is to provide a clean space with functioning appliances, and they will bring the rest.
You'll still need to clean the place between tenants, however, most tenants stick around for around 2-3 years. Compared to turnaround time of an average of 4 days for a vacation rental, cleaning is a pretty simple task for a long term rental-- and it doesn't include any laundry or bed-making!
While you still need to market your vacancies, marketing your long term rental property is not an ongoing job. Once the tenant gives notice that they will not be renewing their lease, you can list your vacancy on a variety of different platforms, and once it is filled, you can take the listing down and not worry about marketing.
To make things even simpler, you can sign up for Showdigs to fill your vacancies faster. They will connect your prospective tenants to a licensed real estate agent who can show them your property on-demand, with no hassle for you.
Contact the Showdigs team to learn more!