Short term rentals are furnished accommodation that is rented out on a short period of time, from a few days to a couple of weeks. With the growth of the sharing economy, short term rentals have gained popularity with an estimated global market valuation of $169 billion in 2018 alone.
The concept flourished among travellers, especially the youth as an alternative to a hotel room.
For property owners, short term rentals generate higher rents than long term rentals and the profitability of the profitability is further enhanced when portfolios like this are managed professionally.
Benefits of short term rentals
- Better rental Income
A good short term rental provides a high rental yield. On average, an STR offers a 30% higher profit as compared to traditional long-term rentals.
- Home appreciation
The right rental investment in the right location can significantly increase in value. When compared to residential real estate, short term rentals especially ones in popular destinations can increase in value relatively quickly.
- Personal use
One of the greatest benefits of owning a short term rental is you can use it for yourself especially if it’s a vacation rental.
Drawbacks of short term rentals
- Hassle of management
A short term rental is one of the most hands-on rental properties you can invest in. As short term rentals are usually an alternative to a hotel room, you will have to prep your property in between guests.
- Higher expenses and renovation costs
Short term rentals have higher maintenance costs due to the high guest turnover. One of the most difficult tasks is accurately projecting expenses. Even if you have accounted for expenses like utilities, taxes, management fees(if applicable), there could be unexpected costs.
- Inconsistent income
The performance of a short term rental is directly related to the demand of the market.
Getting started with Short Term Rentals
The first thing you need to do is determine if your property could be attractive to stay at in a travellers perspective:
- Is it located in a tourist location? If your property is not in a popular destination, you may want to stick to the long-term rental strategy.
- Is the type of property you own in demand? You need to determine the demographics of the travellers to your destination. Suppose you operate in a business location, a studio apartment would perform better.
Most guests expect a short term rental similar to a hotel, to be presentable in every way, and for everything to look as new as possible. Your home should be furnished to industry standards and provide essentials like towels, toilet paper, etc. Enhanced amenities and features can help you attract more guests and charge a higher rate. These features should be added according to guest preferences.
Any personal belongings and valuables should be removed from the property.
Once your home is guest-ready, it’s time to start generating reservations. The internet has made home-sharing popular and working with the right platforms like Booking.com, Airbnb, etc can drive bookings to your home. Make sure the listing appeals to your target audience.
An important element is the pricing of your space – if you charge too high, you will lose customers and if you charge too less, you end up losing money. So the right price is crucial for your rental’s success. If you have a lot of STRs in your area, your pricing needs to be dynamic according to the supply and demand of your neighbourhood.
There are two ways to manage your space – DIY or hire a property manager/ company. If you have the time to manage your rental, you should do it yourself. You’ll save a lot of money on management fees this way.
Here are some tips to help you manage your rental
A short term rental cleaning goes beyond what you’d expect from a typical house cleaning. To meet the expectations of discerning travellers, your housekeeper needs to provide a high level of service. Having a comprehensive checklist is key to make your rental spotless.
Automation drives efficiency by handling redundant processes like a lockbox/ smart lock instead of key exchanges, pre-recorded guest communication and scheduled cleaning process. These tools will help you be more organized and increase productivity.
- Guest support
Even with automation in place, there may be instances where you have to get involved like when an appliance malfunctions. So you need to be available or have a caretaker who can handle it for you.
But if you are looking for a hands-off approach, you are better off leaving this hassle to a property management company. Hiring the right management company is crucial to the success of your rental.