If you are curious about short term rental management, this guide offers all relevant information about the topic. For example, should you be hunting for long-term tenants, or should you instead rent your place out on a portal as a vacation rental?
Although you can expect high rent rates with short-term rentals, they are usually seasonal. Plus, the management of these rentals requires more involvement from the landlord.
What Is A Short Term Rental?
People usually utilize these rentals either on business trips or on vacation. The stays can be from several nights to some weeks. A short term rental is typically a residential property, accessory dwelling, or a unit rented out to guests for a maximum of 30 continuous nights.
But the maximum duration can differ based on the jurisdiction and state in which the rental is situated. Monthly leases aren’t usually called short term if there’s no specific end date. These rentals can refer to multi-family properties, single-family homes, standalone rooms or contemporary short term villas for rent.
Should You Go For Short Term Rental Management?
Considering the various risks linked to short term rentals, it’s wise to be prepared from the beginning. Before you post your properties on different platforms, ask yourself the below questions:
- Are you capable of providing excellent services?
- Is your property suitable for the job? It should be hygienic, maintained, and furnished.
- Do you reside near your rental property?
- Are you contactable?
- Can you afford high vacancy rates?
- Is your property located at a tempting holiday address?
After you have decided that your investment style and property are appropriate, you need to weigh the pros and cons of operating an Airbnb.
Short Term Rental Versus Long Term Rental
The Perks Of Short Term Rental
- Generate more money
In the USA, the average rate of a private room on Airbnb in 2021 was $66 per night. This amounts to $462 per week or $1980 per month. So the entire home will make more money.
Therefore, while people are okay with paying a premium for vacation rental, their expectations are also sky-high. In addition, high-quality service is a must. These factors result in excellent running and set-up costs, so you should charge more.
Usually, people engage with short term rental management when they want to rent out one home. In this case, you should maintain a few weeks in the home calendar to visit during your vacation.
As for the rest of the year, the property shouldn’t be left empty. The reason is that vacant properties decay with time, and thieves will try to break through.
But if you rent it out, you can use your home whenever you want, and it won’t become a financial burden as tenants will be paying generously.
- Tax benefits
The last advantage is that you will enjoy tax benefits. Based on how active you are in running your property, you can deduct $25,000 in expenses.
Disadvantages Of Short Term Rental
- High Vacancy Rates
As previously mentioned, based on the address, it may only be booked entirely in suitable seasons. For instance, if you own a lodge near a ski resort, you can expect it to be complete in winter. High vacancy rates are expensive, meaning additional periods without any rental income.
- High Running Costs
The expense of running a short term rental includes cleaning costs after each visitor, maintenance cost, and the extra effort of your role as a landlord. This is the opposite of long-term rental, where professional maintenance and cleaning are frequently required.
- More Effort And Time
Another demanding aspect of short term rental management is that extra effort is needed from the landlord compared to running a conventional long-term rental. It would be best if you exerted energy so that visitors would be impressed.
Due to the customer-oriented focus on a vacation rental, not everyone is suitable for short term rental management. Most people prefer to outsource to management companies, which further deducts the profit.
Self-Managing Versus Hiring A Short Term Rental Management Company
Short-term rentals in selected markets are lucrative, and to measure your operations, you may decide to hire property management companies to decrease your burden. This will offer you more time, enabling you to concentrate on passive income and getting new deals.
But as short term vacation rental properties demand more attention to detail, with tiny personal touches, such as fresh flowers, a warm welcome, laundry facilities, a private space for relaxation, and local tips.
And if you want to outsource the management, it will be heavy on your pocket. Plus, it’s not guaranteed that someone else will offer that level of attention.
You will have to pay 30% to 50% of the total revenue. This cost is based on the services you need, with the higher end of the spectrum including professional management and marketing services.
A more affordable fix is to manage everything yourself. Then, using resources like Landlord Studio, you can make the management more accessible, and after you have formulated processes and discovered high-quality contractors, you can streamline routine tasks.
Hence, if you want to scale your portfolio, you’ll find that running your short term rental isn’t practical, and it consumes too much of your time.
Whether you outsource or manage yourself depends on the time availability, address, and future investment goals.
Short-term rental management is not suitable for each property or person. But if it’s done accurately, it can be a lucrative opportunity. Moreover, the extra perks of interacting with captivating holidaymakers globally and enjoying your accessible part of paradise to visit on your vacation are priceless. Whatever your decision, owning a vacation rental will be a satisfying opportunity, offering significant revenue.