Short-term Rentals: Are They a Good Investment?

By Charlotte Miller

As a matter of fact, short-term rental is currently in a boom. It has continued to experience a steady growth rate in recent years. This is because many people find short-term rentals more profitable than long-term ones.

Additionally, most of those who like traveling today look for diverse experiences. When you compare it to a few years ago, this is different.

In fact, working from home enables guests to extend their stay and take more time off. Most visitors value their privacy and are eager to feel at home when away from home.

As a result, the majority of people use websites like VRBO and Airbnb to find exclusive accommodation. Most luxury resorts and long-standing companies are gradually losing their hold on this region.

Most landlords and property owners are shifting their perspectives to short-term rentals. This is because of the increased market share for hosting travelers and guests. 

This article aims to educate you on short-term rental investments and why you should consider choosing them. Let’s dive in!

What Is Short-Term Rental Investment?

Short-term rental investment is when you lease your house or property for a relatively shorter period. Some people lease out for one, two, or four weeks. Properties located in tourist regions usually benefit a lot from short-term rental investment. 

As a landlord, you have to maintain the cleanliness and hygiene of the property and satisfy all your guests’ needs. Here are some of the essential things you need to have included in your short-term rental:

  • A key box
  • Functional night lights
  • Smart TV or streaming services
  • Local maps, recommendations, and guidebooks
  • Framed instructions
  • Iron and iron boards, etc. 

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Are Short-Term Rentals a Good Investment?

The fact is that real estate is highly profitable. However, you need to consider the following to maximize your profits: 

  • Maintenance services
  • Neighborhood
  • Up-front costs

Short-term rental investing has proven to have higher returns on investments than long-term rentals. Moreover, they’re also a great choice as tenants frequently move in and out, which is beneficial to the investor as it minimizes the wear and tear of the property. Therefore, you will significantly reduce maintenance as you require minimum labor to fix the house. 

Besides, you will enjoy a steady cash flow and many tax benefits with short-term rentals. This is because short-term rentals can guarantee two to three times the rental income than long-term rentals in the same neighborhood. 

Also, vacation rentals can hedge you against inflation as they’re flexible regarding rental prices.  Short-term rentals have so many benefits, and here are some of the reasons you should consider going this route:

  1. Short-Term Rental Investing Offers Flexibility

Short-term rentals offer you complete control over the accessibility of your property. The calendar and times are in your control. For instance, you can block out your calendar if you intend to do some renovations on your property. 

You have the freedom to indicate the property is unavailable for the month so you can do a bathroom or garage makeover. Once you’re done, then you can release the property back to the market. 

Moreover, you have the freedom to adjust the price as you see fit. Most properties update their packages once they’re done upgrading their properties. The freestanding tub could represent luxury, allowing you to charge more per night. 

Also, you can adjust the pricing to be appealing if you have visitors who’ll stay for a longer time. Leverage this opportunity as most people prefer short-term rentals because of their independence compared to hotels. 

  1. It Guarantees You a Higher Income

The nature of short-term rentals allows it to have better income potential. This is because of the higher daily charges compared to monthly payments. 

As an investor, you can alter the prices to align with the market demands and amenities. This opens an opportunity for you to maximize your passive real estate income. 

A study by AirDNA shows there has been a steady increase in the average revenue profits since 2020. This wasn’t the case before the COVID-19 pandemic. 

Besides, rural areas and smaller towns realized a 55% potential revenue increase. But you need to consider other market aspects that may affect the property’s long-term value. Also, account for short-term cash flow since such trends are not long-lasting. 

  1. There Is a Great Value Appreciation

Another reason you shouldn’t hesitate to invest in short-term rental is the value appreciation over the monthly cash flow. 

When you decide to sell after some time, the property value will be worth more. But it’s hard to predict the selling rate of a real estate property. However, it’s very unlikely that real estate will lose value. 

  1. You Get to Enjoy Tax Benefits

Besides the better income, short-term rental investing provides potentially great tax advantages. Sometimes you may notice the tax benefits are way more appealing compared to long-term rental properties.

Some of the benefits include, you can deduct your interest loan from your taxes. Moreover, this applies to also all the other deductions like: 

  • Insurance
  • Maintenance, 
  • Marketing, 
  • Management, etc. 

You can also deduct the depreciation on the assets. Also, since you often rent out your property for only 14 days, you may qualify for a full income tax write-off. In short, you won’t need to pay income tax on the rental income. 

  1. Provides Easier and Better Maintenance

Short-term rental means the guests’ visits are brief. Therefore, it provides you with an opportunity to manage your property better. This is because the property needs regular maintenance to yield maximum profit. 

Short stays allow you frequent visits to your property. Therefore, you can easily catch maintenance issues early and have the house thoroughly cleaned more regularly.  

Another added advantage is that most holiday rentals charge cleaning fees. So this eliminates the burden of paying maintenance from you. 

  1. Less Wear and Tear

Naturally, your rental property will host guests for a few days, weeks, or months. These brief visits guarantee the visitors are just stopping by and won’t be staying for long. 

So you’ll be confident they will not consider remodeling or rearranging the furniture. As a result, your rental property will experience less wear and tear, which will help maintain its quality without frequent replacement of things. 

  1. It Doubles as a Vacation Home

Before you invest or buy a rental property, search for a region with many tourist attractions. This will cater to some of your family holiday needs. 

Since the nature of short-term rental is brief stays, it offers you the flexibility to go on a vacation when you desire. Moreover, the sites or applications allow you to block out dates on the availability of your property. 

Therefore, this will stop anyone from booking these particular dates. This allows you to plan a vacation without fearing losing potential money. 

Final Thoughts

Short-term rentals allow guests to rent your property on a short-term basis from days to a year. Most people today are shying away from the hotel experience and leaning more towards the home-away-from-home atmosphere. 

Also, many people are leveraging this short-term rental strategy as it has offered a higher return on investment in recent years. 

You can use an online platform to manage the rentals or hire a management business. This allows you to generate passive income from a rental property. But keep in mind that your rental property location is vital if you want to maximize your profits. 

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