In today’s world, short-term rental investment is becoming highly competitive. Therefore, you need to be strategic if you want to increase your earnings through this investment.
Short-term rental investment is when you lease a residential property for less than 28 days. When short-term rental started, most homeowners delved into it to supplement their income. Ideally, all they needed was to rent out a portion of their primary home, like one of their bedroom, and co-share the kitchen and living space with the guests.
But technological developments like the introduction of Airbnb and other third-party companies have propelled the value of the short-term rental market. According to research, the short-term rental market is set to grow with a CAGR of 7%. At present, it’s almost a $63-billion industry.
Is it a good financial idea to buy a vacation rental property? The answer is a solid yes; short-term rental is a wise financial move.
Sometimes, their profit value is even higher when compared to a traditional lease. This is because this mode of renting has many benefits compared to dealing with long-term tenants. However, this type of investment requires a lot of effort from the owner and needs effective management.
But with the right short-term rental strategy, you may increase your income. As a result, it can be possible to transition from having a passive source of income. Short term rental investment generates profits and provides steady income to investors.
Whether you only have one short-term rental property or hundreds of properties, having a good strategy serves as a stepping stone that can help you build your business. You will see your effort come into fruition.
Therefore, as a business owner, you need to understand the numerous moving pieces that require continuous attention and can help you in your journey. For instance, you need to consider its conception to implementation and from research to analysis of the entire business.
So you need to leverage effective and detailed marketing effort for your short-term rental (STR) business. Let’s explore a few strategies to ensure you earn profits from your investment.
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Give It Your Full Attention
To succeed with short-term rentals, you must treat it as a full-time career. Most people believe that short-term rental investment is a source of passive income. This might be true at the start of your journey, but after a while, you need to put much effort for it to grow.
Therefore, you need to ensure you dedicate much of your effort even after you’ve bought, remodeled, and listed your property online. You need compelling marketing to get at least 50% of your reservations. This includes the following:
- Ensure you are always available online to respond to inquiries within 15 minutes.
- You can even set your daily rates lower compared to your competitors but also ensure they’re within the market range.
- Encourage your recent visitors to leave positive reviews on your page.
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You need to be consistent until you get five-star ratings and bookings for nine out of ten days in a month. This should also apply even after upping your price. After achieving this, you can then decide to venture into something else.
Another trick with short-term rental investment is entrusting it to a property manager. The truth is your profits will decline if you go this route, but it’s a great way of earning passive income.
As a result, you will have ample free time to diversify your investment portfolio to boost your income even further.
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Consider the Location Before Investing
Even with traditional rental properties, location is crucial. Now, imagine how vital it is when you invest in a vacation rental property. Before settling on a specific location, do extensive research to determine if it is the right location for your investment.
To ensure you earn high profits, the location should be good. You need to settle for a location that attracts a huge percentage of tourists who are looking for affordable accommodation to stay. Doing this guarantees that your short-term rental property is booked almost every day of the week.
Take a look at vacation spots like New York and its environment. You will notice that they are affordable and suitable for short-term rentals. This is because most visitors prefer these locations due to their affordable rates. But the drawback of such locations is the low profit margins due to the oversupply of vacation rental properties. Therefore, you need to be keen when choosing a location.
Additionally, it is advisable to research local rules and regulations that can affect your short-term rental investment. You will notice that some states have strict regulations or bans on short-term rentals. Alternatively, limit the investment to only owner-occupied homes.
Sometimes you may find a city with no stringent rules, but the homeowners association (HOA) has restrictions imposed on short-term rentals. This is because they may be big on community and accountability. Besides, this is a way of ensuring security among themselves.
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Optimize Your Daily Rates Often to Maximize Profits
The difference between traditional rentals and short-term rental investments is that with traditional rental strategy, you have to adhere to a fixed monthly price for the entire lease of your tenant.
But with a short-term rental, you can frequently adjust your pricing. Short-term rentals offer a dynamic pricing strategy. Therefore, an investment must modify its pricing according to vacation rental demand, account timing, regional supply, and other variables.
But before dynamic pricing became a thing, property managers or landlords would set their pricing in advance. This posed a challenge in case they received additional guests. Besides, it was tough to increase their revenue with that strategy.
Today, it is easy to alter the price in reaction to supply and demand by examining real-time market data. To attract clients as new short-term rental investors, you will need to set your charges slightly lower than your competitors.
But ensure once you hit at least a 50% to 90% occupancy rate, you will increase your price. This will help increase and stabilize your profits.
Final Thoughts
Short-term rental investment is gaining popularity nowadays. Most people dive into this business without understanding the nitty-gritties of it. As much as it is a lucrative investment, you can get your fingers burnt if you’re not strategic.
But once you understand the best way of handling your properties, short-term rental investments can be more profitable than traditional rental investments. Ensure you give it your full attention, find the right location, and optimize your daily rates. Doing these things can guarantee that you can maximize your profits from the investment.
