How to Successfully Invest in Short Term Rentals
The fastest moving and hottest growth in real estate for 2017 is investing in short term rentals. Why has this form of investing becoming so popular, you may ask? It’s becoming more popular because of the popularity of the listing site Airbnb.
Airbnb.com is a listing site that has become popular with the travelling millennials who are looking for both long and short term rentals. Because of this increased demand for both the long and short term rentals, there has been a rise of real estate investors providing rooms, homes, condos, vacation rentals and unique living arrangements that cater to the appetite for the new traveller and tenant who is looking for unique living situations.
The Millennials Traveller & Tenant
Who are these new travellers and tenants? Millennials (also known as Generation Y) are the demographic cohort following Generation X. There are no precise dates for when this cohort starts or ends; demographers and researchers typically use the early 1980s as starting birth years and the mid-1990s to early 2000s as ending birth years.
In 2017, and moving forward, you’ll be hearing more about this growing trend and the uproar it has caused in many cities in the United States and Canada. This is a different real estate business model, new to many real estate investors and not always understood. I was interviewed by Gary Hibbert about my experiences with short term rentals that I’ve owned and operated since 2000.
What are Short Term Rentals?
According to Tripping.com and my own experience,”a short-term rental, or vacation rental, is the renting out of a furnished home, apartment or condominium for a short-term stay”. The owner of the property will usually rent out on a weekly basis, but some vacation rentals offer nightly rates. The owner of the property will rent their space when they are not using it – though some rentals are shared spaces – especially during peak holiday seasons like in December or for New Year’s and times over the summer including the Fourth of July when higher rates can be applied. It’s also become common for people travelling for festivities like music festivals or sports events like the Super Bowl to rent houses or condos rather than pay for over-the-top, expensive hotel rates.
Vacation rentals have surged in popularity in recent years for many reasons, especially because they often offer more privacy and space for a lesser cost than hotels.
With long-term traditional rentals, the owner of the property rents out their accommodation on a long-term basis, receiving rent payments monthly typically.”
Real Estate Investing Opportunity
Consider the next property that you pick up in a popular tourist, business or university district a great candidate for short term rental cash flow opportunity. You will be able to charge higher rates and advertising in social media will keep your property filled.
The major difference between a traditional rental property and a short term rental property is the CONTRACT.
Vacation rental contracts are essentially short-term leases drawn up between a property owner and a renter who wishes to use the property for a short period of time, namely the length of their vacation. According to Bailey Richert, an eHow Contributor, Rachel states that your rental contract serves as a legal agreement between the two parties and therefore must be carefully worded to protect the rights of all individuals involved.
In the twenty-one years of owning rentals, I must agree with Bailey. I have found that having a proper contract is very important. Having the best contract available has been my saving grace, and I didn’t have too many sleepless nights worrying if all parties were on the same page.
I’m happy to share my experiences with short term rentals with anyone who may be looking for an alternate way of investing their time and money outside the usual tenant model. If you want more information, you’re welcome to read my blogs on Reiclub.com or my own website, or leave a comment below.