Websites such as Airbnb, FlipKey, and VRBO have given rise to the increasing popularity of short term rentals. As explore whether this kind of rental will work for your home or rental property, there are several considerations to make. It is important to make sure this rental model meets your rental goals before adjusting your rental strategy. Here are several items to consider when evaluating whether to make your rental into a short term rental property.
Which property are you planning to transition – your personal dwelling (when you are vacationing, traveling, or living somewhere else) or a dedicated rental unit?
If you are renting out your personal property, it means that any extra money you can make when you are not there is a bonus. You can strategically rent it out during peak season to maximize your profits. However, you must assess your comfort level with allowing a stranger into your own home. If you are creating a dedicated, furnished short term rental, much more work may be involved. Also, seasonal peaks and droughts may mean that the rental will sit empty at times, costing you money each time you have a vacancy. Your profit during peak season must cover your expenses during leaner times.
What does it cost to rent your house out?
If you are renting out your personal dwelling, the cost to rent your house is relatively small. You are already paying for items like utilities, cable, furniture, and furnishings. The monetary cost may not be as large as outfitting an entire rental unit from scratch, but there may be a psychological cost to having strangers in your home.
On the other hand, turning a traditional rental into a short term rental requires much more investment of time and money. Short term renters will be relying upon you to provide much more in terms of furniture, home accessories, kitchen supplies, and many other items that a traditional tenant would have to supply on their own to outfit the home. In addition to these costs, you will have to pay for utilities, landscaping, pest control, and other maintenance concerns. Once this rental is set up, however, you can focus on marketing and filling it for as much of the year as possible.
What does your house rent for in peak season and during the off-season?
When you rent your house as a furnished rental, your income can vary widely based upon the rental season, while your costs will still have to be paid. It is important to ensure that you can make enough during the peak season to cover the expenses of the down time.
Do you have the time to invest in a vacation rental?
Furnished rentals are very time-intensive. While a conventional rental lasts for a year or longer, short term rentals can be as short as one day per renter. You could be marketing, scheduling, and turning over the unit several times a month instead of once a year. Each time you turn over the unit, the task list includes cleaning and prepping the unit, making sure the tenant gets in, and being available for anything else the tenant needs. The renters who you will attract to a short term rental will likely be vacationers or business travelers. As such, they won’t have the time or inclination to unclog a toilet or supply their own bottle opener – they’ll call you instead. Investing your time into a short term rental may mean less flexibility in your personal life. Consider whether you are willing to put in the effort to constantly recruit, book, and tend to renters, all while maintaining the cleanliness and readiness of the rental unit.
Is your home in an area that allows short term rentals?
At this point you may have determined that you want in on the short term market, but the question is, does the short term market want you? You must determine whether your area is not only desirable as a short term rental, but also whether it is allowed. Be sure to check your HOA covenants. Some states, such as Florida, and counties, such as Virginia Beach, charge extra taxes on rentals that are shorter than a given amount of time. Be sure to explore all of the rules. Finally, check out the competition to see if there is a need for short term rentals, or if too many other options exist in your locale.
As you take all of these consideration, be honest in your assessment of the above issues. With realistic expectations of the work required, and the rewards to be reaped, you will enter the short term rental market as an informed landlord.