Coronavirus Updates

3 Ways to Monetize an Empty Short-Term Rental Right Now

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blue vacation beach rental property with blue siding and white trim and two upper floor balconies on beach

COVID-19 has hit everyone hard. One area of real estate investing facing particular difficulties right now is the short-term rental (or Airbnb) branch of investing.

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In some markets—true vacation rental markets—short-term rentals have been around for decades, predating Airbnb, VRBO, and in some cases even the internet itself. In most major metropolitan markets, short-term rental and Airbnb investing is a new-school strategy as of the past 10 years.

Diving even deeper, within this branch of investing are many subsects and strategies. Some investors acquire short-term rentals as a way to turbocharge their cash flow in order to scale their portfolios more quickly. Others create entire jobs and businesses without actually purchasing properties in a method called “arbitrage.” This method is executed by renting another investor's unit through a long-term lease, and then, in essence, sub-leasing the unit by hosting it through the major short-term rental booking platforms.

Whatever the method or market of the investor, all short-term rentals have one thing in common: dependence upon the travel industry.

With COVID-19 bringing the travel industry to an immediate and grinding halt, short-term rental investors have been left to employ their cash reserves (a subject for another blog post) and to get creative in terms of getting “heads in beds”—a phrase commonly used in the industry that refers to bookings and occupancy.

vacation

Switching Strategies

Depending upon the type of market (metro market or true vacation rental market), investors and hosts have had to rethink their marketing in the era of coronavirus. Below are three tips for hosts to earn income off of slow or empty short-term rental units during the pandemic (assuming the host’s specific market does not have flat out short-term rental bans in place).

  1. Target Traveling Medical Professionals

Renting to traveling medical professionals is an especially viable option for large metropolitan markets. Traveling nurses, doctors, and other medical professionals often need medium-term housing on a one- to six-month basis and have a housing allowance or stipend from their employers to pay for such.

Doctors and nurses are being flown into the COVID hotspot markets to help bolster the local medical talent and infrastructure as coronavirus cases have overwhelmed the medical communities in certain metro areas. There are a number of websites available to owners where they can advertise their units to traveling nurses and doctors.

A few of the major platforms for renting specifically to medical professionals are Furnished Finder and Travel Nurse Housing.

Related: 3 Ways Short-Term Rental Owners Can Help Frontline COVID-19 Responders

  1. Convert to Medium-Term

I know several investors whose entire business model is centered around medium-term corporate housing. Similar to the traveling medical field, many executives need medium-term housing for one to three months to work on company projects at offices in different cities. This strategy is best suited for metro markets. There are many websites for owners to advertise their furnished units for potential executive medium-term renters.

By the same token, vacation rental owners can market their units to remote workers who can work from anywhere with an internet connection. Advertising a strong internet connection, a designated workspace in the unit, and other work-from-home amenities will be attractive to potential remote work guests.

If your market has a temporary ban on short-term rentals, make sure to check the number of days that constitute a short-term stay (30 days in most cases) to ensure that your guests are meeting the minimum standards.

  1. Convert to Long-Term

This isn’t a tip that any short-term rental investor wants to hear, and in many markets (including my own), it’s not feasible. However, signing a medium-term lease or a month-to-month long-term lease is a good way to garner some steady income for a period of time in order to evaluate the medium- and long-term effects of COVID on your local market.

vacation-rental

Playing the Long Game

In the long run, most short-term rental investors are accustomed to fluctuating tourism seasons and, in turn, fluctuating monthly income. If there is one thing that COVID has shown us, it’s the importance of having three to six months of cash reserves with which to weather unforeseen short-term rental storms.

I am also a big believer in a well-diversified portfolio. I keep my personal portfolio at around 25% vacation rental and 75% long-term rental. This way, I am juicing my investment capital with the significantly higher short-term rental income, while not being completely dependent on my vacation rentals.

Related: Coronavirus & Short-Term Rentals: How I Made Up for Lost Profits (& How My Numbers Were Impacted)

While short-term rentals have been the most heavily affected area of real estate investing, in many markets, they are a proven and lucrative investment model, often producing between two and five times the cash flow of long-term rentals. COVID-19 is a black swan, once-in-a-lifetime event.

While an uncomfortable realization at best, coronavirus has pushed us as short-term rental investors to decide whether we want to base our investment choices off of the 99.9%-of-the-time scenario or the 0.01% of the time scenario. To be honest, neither is a wrong decision—it’s up to the individual investor to decide the level of risk and potential reward that they are comfortable with.

What are you doing with your short-term rental properties?

Let us know in the comments below.

Avery Carl is a top 1 percent real estate agent and CEO/founder of The Short Term Shop, a national real estate firm that represents and mentors investors...
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    Michael Wong Investor from Vancouver, Canada
    Replied 4 months ago
    Hi Avery, These are great suggestions for short-term rentals in larger Metro areas, however, do you think these strategies can be applied to towns that are primarily Vacation Destinations?
    Amanda Ferguson from Destin, FL
    Replied 4 months ago
    Michael I think it depends on the market. If it is primarily a drive to destination then it has likely already started rebounding on traditional vacation rental travel if there are not any short term rental bans in place. This has been true in the Alabama and Florida Panhandle.
    Avery Carl Real Estate Agent from USA
    Replied 4 months ago
    @Michael Wong, @Amanda Ferguson is correct! All of my short term rentals are in the Smoky Mtns. and in Destin, and they are already PACKED. The drive-to vacation rental markets have truly shown to be the most resilient (so far, anyway) of any of the 3 types of short term rental markets. However, there aren't really backup plans in VR markets, you just have to have the cash reserves in place for unforeseen circumstances!
    Jeremy Blackburn Real Estate Agent from New Orleans, LA
    Replied 4 months ago
    Hi Avery, thanks for the article. Another suggestion besides travel nurses is to target corporate travelers needing housing on a month to month situation or longer. This could be for short term assignments or relocations throughout the country especially the larger metro/tech areas.
    Avery Carl Real Estate Agent from USA
    Replied 4 months ago
    That's my #2 on the list above! I have lots of clients whose entire business model, Covid or not, is based on only corporate rentals. They are a great option!
    Jim Garrett Investor from Tucson, AZ
    Replied 4 months ago
    Avery, I started my REI career with 2 short-term vacation rental condos in Tucson in 2018. They've done terrific, with COC of about 15% over the past 2 years, but now things are very different. I had 7 cancellations in March and April and really struggled to get them re-rented. I've been listed on FurnishedFinder for 2 years and have successfully leased to travel nurses through the summer and fall off season for vacation renters in Tucson. What I'm finding now is that there has been a huge surge in the number of short-term property owners pursuing that market, with recent prospects lamenting the overwhelming number of landlords who called them after submitting a housing request on that platform. I'm now trying to decide what to do with them. Both units are fully booked (approx $25,000 prepaid) through the Jan-March peak vacation season of 2021. I have very serious concerns about those bookings actually showing up. Should I hedge my bets by double booking them with long term leases with the knowledge that one of them will have to get canceled. Or, should I move forward on selling them for roughly 30% more than I paid for them 2 years ago? (I already have consulted with my agent on pricing.). Best. Jim
    Avery Carl Real Estate Agent from USA
    Replied 4 months ago
    Those are definitely some important things to think about. I am certainly no economist, but if the re-openings continue the way they are without any big surprises, I think you should be to a point of not having to worry as much about cancellations within the next month or two. As far as selling, that would be up to you, there are some fantastic 1031 exchange intermediaries on the BP forums, sounds like that could be a good strategy if you don't want to wait it out!
    Dennis Cosgrave Rental Property Investor
    Replied 4 months ago
    Kudos to your investment strategy. Just like in the financial markets, diversifying your portfolio is key to successful investing. When one segment of the market is performing poorly, another segment is outperforming. A balanced portfolio keeps your ROI more stable.
    Avery Carl Real Estate Agent from USA
    Replied 4 months ago
    Thank you!!
    Kevin Lorden
    Replied 4 months ago
    Another area of professionals to consider are construction workers, especially if your property is not in a metro area. Large projects in smaller populations bring in out of area subcontractors who find it cheaper to house crews in houses rather than motels. Im Not sure how to advertise your space but check with permit offices and building departments for projects.
    Avery Carl Real Estate Agent from USA
    Replied 4 months ago
    Fantastic idea