When most property investors are considering their next investment, they usually take the traditional route and plan to rent their property under at least a one year lease agreement. In the last few years a new trend in property investing has emerged with the introduction of short-term online property sharing communities like Airbnb.
Companies like Airbnb, HomeAway or VRBO allow property owners to list a room or entire property for rent for vacationers or people seeking out short-term rentals – for as little as one night at a time. These organizations profit by charging a small fee to the hosts for listing their property on their website.
If you’re looking for creative ways to maximize your passive income, offering up your property as a vacation or short-term rental could be for you, but there are some important aspects of this approach you should keep in mind before pressing enter on that listing.
Does it make sense for your property?
There are certain properties that are perfect as vacation rentals, and others than might not be. Is your property in a city that has a large draw of tourists? Do people come to visit the entire year or just the summer months? Big cities like Chicago, New York and Washington D.C., or beach towns like Miami or Key West will have a steadier stream of tourists year-round looking for temporary rentals, especially ones that are near the city’s hot spots.
Even if your city isn’t a huge draw for vacationers, is it a hub for industries where business travelers would need weekly accommodations? Offering your property up as corporate housing is an option for almost any property investor with accommodations near a city’s business district. If you promote your property to business travelers you might also alleviate some of the stress that comes with hosting college kids on spring break or that 20-person family reunion that could result in more wear and tear on your place.
Have you done your homework?
With the popularity of Airbnb on the rise, some cities are cracking down on the taxes that need to be paid for income earned on your short-term rentals. Some governments are even implementing the need to pay a hotel tax if you are operating your property similar to that of a traditional hotel. It’s important to check your country and/or state’s local laws.
You may also need to consider insurance as an Airbnb host. Your standard homeowner’s policy may not cover damage to the property by guests, or injuries sustained by visitors while in your property. Researching and selecting a comprehensive policy to cover your short-term guests will protect you from any disasters that could really hit your wallet in the future!
Are you prepared for the commitment?
Running a short-term vacation rental property can offer higher returns by allowing you to charge more expensive daily rates for your property, but it’s important to keep in mind that short-term rentals are quite the commitment!
Some of these commitments include furnishing your property, meeting guests there to greet them and hand over the keys, performing quick turnovers from check out and check in to include cleaning and linen changes, and managing ongoing logistics like calendar maintenance and fielding questions from potential guests.
Managing a vacation rental property can be a full-time job that some property investors just don’t want to commit to. You can engage property helpers to assist you with some of the logistics, but this type of property management is a much more hands-on approach to property investing.
What king of lifestyle are you looking for?
Renting out your investment property through a company like Airbnb, VRBO or HomeAway often sounds glamourous with the pricey nightly rates and high returns, but whether or not this is right for you largely depends on your preferences and how much time you want to invest in your property.
Are you looking for passive income that allows you to jet set off to your favorite destinations for months at a time, or would you rather stay close to home and enjoy other cultures by meeting travelers from across the globe? It’s a question we can’t answer, but an important one to ask yourself.