As Airbnb, or short-term rentals (STRs), get increasingly popular, we have seen an uptick in investors in this space. Private and small-time investors now have access to a pseudo boutique hotel product instead of the traditional long-term rental. The ability to make more profits and have greater flexibility is attractive to most, but it is also a lot more work. In the space below, I outline things to consider when looking for an STR as an investment property.
The Decision
By this point, you have decided you would like to purchase a home to rent as an STR. Now you need to make a few important decisions that will affect the rest of the process. Where will this house be? The old saying “location, location, location” is just as important as ever. Views, proximity to destinations, and ease of access all play a part in the equation. Remember that rural getaways are a popular category, so don’t feel pressure to be located directly downtown.
Operations
Another important factor to consider is who will operate the rental? It may seem like a fun idea to run a little Airbnb in your spare time, but it will get unmanageable quickly. It is crucial to realize that Airbnb’s are a lot of work and between cleaning, stocking inventory, maintenance, guest relations, price setting/research, and managing the calendar, it will become a full-time job rapidly.
Fortunately, there are companies that specialize in managing STRs, such as East Shore Management. These companies charge between 20-30% of profits, so ensure those costs are built into your budget. See our blog about questions to ask a management company or our FAQs for more information.
The Drive to the Home
When driving to the home, think of yourself as a guest. What are your first impressions of the neighborhood? How do the neighboring homes look? Is it near local destinations or farther away from the main attractions? Either can be desirable, but it is important to understand how the location can affect your target demographic and average daily rate (ADR).
The Walk-in
When walking into the home, pay attention to things that might cause trouble for guests. Steep/numerous stairs can prove difficult for many guests and lower guest satisfaction. Also look for outdoor spaces, well-manicured landscaping, and a well-maintained front entryway. Having the guest’s first interaction with your space be a positive one is important. How large is the driveway? Is it easily accessible and maneuverable?
The Walkthrough
When walking through the home, pretend you are a guest who just paid for the space. Would you be happy? Identify possible problems like outdated or damaged areas. Also, identify areas that may be positives for guests. It is important to capitalize on amenities like decks, large kitchens, views, patios, etc. Pay attention to the number and size of bedrooms as well. Ideally, the home could sleep 6 or more guests using a combination of queen and twin beds. Never count a couch as a sleeping area. Updated homes are becoming more and more important as the STR market grows. If areas of the home are outdated, factor the upgrades in your budget. Modern fixtures and appliances make a big impact.
After the House Tour
Once you have found a property that meets the criteria, there are still a few tasks to complete. First, decide if you will manage the property yourself or hire a manager. One of the many benefits of hiring a manager is their “tried and true” inventory lists. If you decide to manage the property yourself, you will need to identify and stock all inventory yourself.
The property will likely need to be landscaped, prepped for guests, and deep cleaned before the first rental. Decorate the home accordingly and keep in mind that it should feel like a home, but not personalized. Once the property is set up, take quality and honest pictures for the listing. Identify your home’s value proposition and highlight it in the listing.
A short-term rental can be a time-consuming but profitable option that gives more flexibility than a long-term rental. You have the flexibility to use the property when you wish and make improvements without too much advanced scheduling. Please feel free to refer to our other blogs for more helpful tips and contact us at 607-592-8069 or dominic@eastshoremanagement.com for help managing your rental. Happy Hosting!