The short-term rental (STR) market has exploded in the last few years.
As America’s workforce raced home, people realized that they
could work from anywhere. This, coupled with the desire to isolate oneself
and family from other people during vacations, created a strong demand for
STR properties. As the trend boomed, large and small investors jumped
into the stream and bought properties to market as short-term rentals.
Owning an STR can be a great investment. In addition to the incremental
income, the home has opportunity to appreciate in value, and the owner may even find time to use the property themselves. But owning this kind of rental isn’t as easy
as putting a lockbox on the door and washing the sheets. Before investing
in a STR, consider these 5 things.
1. Local Zoning and HOA Rules – This may seem obvious, yet every
year people buy homes with the intention of using it as a STR only to find
that the local authorities prohibit that kind of rental. Often, one must rent the
home for 30+ days as part of an HOA or local zoning law.
2. Property Management – The wrong property management company
can cost the homeowner time and money. Bad reviews, property damage,
and mismanaged funds are just a few of the problems caused by the wrong
manager.
3. Property Condition – While it’s important to buy a home the owner can
handle. Simple cosmetic changes are easy to fix for a home in the right
location.
4. Personal Taste – One of the biggest mistakes investors make is to buy
what they like, instead of the right property for a short-term rental. They
should consider why someone would come to a STR in that area and find a
property that appeals to that.
5. Part-Time Manager – Regardless of how handy the owner is, owning a
vacation rental is a full-time job and you should give a lot of thought as to whether it really should be managed by a professional management company.
Renters of short-term rentals are choosing the privacy and intimacy that an
STR offers, but they expect to have hotel-quality service. This is a high bar
and before buying a home to use as a STR, investors need to carefully
consider all the aspects of this kind of ownership.
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