{"id":149549,"date":"2023-04-06T10:48:41","date_gmt":"2023-04-06T16:48:41","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?post_type=phase-level-3&#038;p=149549"},"modified":"2023-09-27T08:37:38","modified_gmt":"2023-09-27T14:37:38","slug":"how-to-analyze-a-market-for-short-term-rentals","status":"publish","type":"phase-level-3","link":"https:\/\/www.biggerpockets.com\/blog\/how-to-analyze-a-market-for-short-term-rentals","title":{"rendered":"How to Analyze a Market for Short-Term Rentals"},"content":{"rendered":"\n<div class=\"wp-block-cover is-light has-level3-cover-style\"><span aria-hidden=\"true\" class=\"wp-block-cover__background has-white-background-color has-background-dim-100 has-background-dim\"><\/span><div class=\"wp-block-cover__inner-container is-layout-flow wp-block-cover-is-layout-flow\">\n<figure class=\"wp-block-image size-full has-level3-rounded-figure\"><img loading=\"lazy\" decoding=\"async\" width=\"772\" height=\"454\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/02\/Market-Analysis-STR.jpg\" alt=\"\" class=\"wp-image-146752\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/02\/Market-Analysis-STR.jpg 772w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/02\/Market-Analysis-STR-300x176.jpg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/02\/Market-Analysis-STR-768x452.jpg 768w\" sizes=\"auto, (max-width: 772px) 100vw, 772px\" \/><\/figure>\n\n\n\n<div style=\"height:30px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p>Owning a short-term rental (STR) property can be an excellent way to get into real estate investing and potentially earn higher income if done properly. Being a successful short-term rental owner requires an in-depth analysis of the local short-term rental market. This market research should include occupancy rates, monthly rental income, the cost of buying a second home, local regulations, fees, and the type of tenants you hope to attract.&nbsp;<\/p>\n\n\n\n<p>It\u2019s vital to remember that <a href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-578\" target=\"_blank\">investing in short-term rentals<\/a> has more nuances than long-term rental investing. For example, it can be tricky to predict monthly income, or there could be significant seasonal variations in the market. In addition, the laws and regulations affecting short-term rental owners can be more stringent than traditional rental properties and can vary significantly from market to market.<\/p>\n\n\n\n<p>However, if you do the groundwork properly, you will soon enjoy passive income from a short-term rental.<\/p>\n\n\n\n<p>In this article, you will learn what it takes to enjoy good cash flow and return on investment (ROI) from a short-term or vacation rental property, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"#why\">Why you should invest in STRs<\/a><\/li>\n\n\n\n<li><a href=\"#healthy\">What to look for in a healthy STR market<\/a><\/li>\n\n\n\n<li><a href=\"#determining\">Determining the ideal property type<\/a><\/li>\n\n\n\n<li><a href=\"#analyze\">How to analyze the short-term vacation rental market<\/a><\/li>\n\n\n\n<li><a href=\"#other\">Other considerations when investing in STRs<\/a><\/li>\n\n\n\n<li><a href=\"#exit\">Exit strategies for STRs<\/a><\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-cover is-light has-level3-cover-style\"><span aria-hidden=\"true\" class=\"wp-block-cover__background has-white-background-color has-background-dim-100 has-background-dim\"><\/span><div class=\"wp-block-cover__inner-container is-layout-flow wp-block-cover-is-layout-flow\">\n<h2 class=\"wp-block-heading\" id=\"what\">What is a Short-Term Rental?<mark style=\"background-color:rgba(0, 0, 0, 0);color:#089f4b\" class=\"has-inline-color\"><\/mark><\/h2>\n\n\n\n<p>A short-term rental is a property that is rented out for a short period of time, usually a few days to a few weeks, to travelers, tourists or temporary visitors. Short-term rentals are often rented out through online platforms, such as Airbnb or Booking.com, and can include apartments, houses, rooms, or even boats, RVs or other unique properties. The purpose of a short-term rental is typically for accommodation during travel, as an alternative to traditional hotels or motels.<\/p>\n<\/div><\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-cover is-light has-level3-cover-style\"><span aria-hidden=\"true\" class=\"wp-block-cover__background has-white-background-color has-background-dim-100 has-background-dim\"><\/span><div class=\"wp-block-cover__inner-container is-layout-flow wp-block-cover-is-layout-flow\">\n<h2 class=\"wp-block-heading\" id=\"why\">Why Invest in Short-Term Rental Real Estate?<\/h2>\n\n\n\n<p>Short-term rentals (STRs) can be extremely profitable. Compared to long-term rentals, the return on investment can be greater and provide a higher annual revenue. Additionally, the STR market is a hedge against inflation because you can adjust rental prices more nimbly. There is also more flexibility with STR properties.&nbsp;<\/p>\n\n\n\n<p>Here are three benefits of real estate investing in vacation rental homes:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Nightly rates are typically higher than month-to-month rates<\/li>\n\n\n\n<li>More control over who you allow in the property<\/li>\n\n\n\n<li>The ability to market the property to a global audience<\/li>\n<\/ul>\n\n\n\n<p>Of course, like with any real estate investment, several variables affect the annual revenue potential. Therefore, due diligence in analyzing a short-term rental market is crucial. This way, you can help ensure steady cash flow and excellent appreciation in property value.&nbsp;<\/p>\n<\/div><\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-cover is-light has-level3-cover-style\"><span aria-hidden=\"true\" class=\"wp-block-cover__background has-white-background-color has-background-dim-100 has-background-dim\"><\/span><div class=\"wp-block-cover__inner-container is-layout-flow wp-block-cover-is-layout-flow\">\n<h2 class=\"wp-block-heading\" id=\"healthy\">What to Look for in a Healthy Short-Term Rental Market<\/h2>\n\n\n\n<p>How can you discover the <a href=\"https:\/\/www.biggerpockets.com\/blog\/how-to-choose-the-right-market-to-invest-in-short-term-rentals\" target=\"_blank\">best short-term rental (STR) markets<\/a>? First, we will explore factors like the best locations, target market, rental demand, local regulations and seasonality.&nbsp;<\/p>\n\n\n\n<p>The second part of the article shows how to analyze the STR market regarding profitability, calculating occupancy rates, expenses and other financial variables.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Location, Location, Location<\/strong><\/h3>\n\n\n\n<p>The best properties for short-term rentals are in locations that naturally attract visitors \u2014 whether for business or leisure. Therefore, looking for towns and cities near beaches, popular attractions, mountains, universities, national parks or places of interest is an excellent start. Also, don\u2019t forget about big cities that attract thousands of visitors yearly.&nbsp;<\/p>\n\n\n\n<p>For first-time real estate investors, looking for properties in nonurban areas near popular locations can yield rich pickings.&nbsp;<\/p>\n\n\n\n<p>Other considerations regarding vacation rental property location include access to public transport, a good selection of shops and restaurants nearby and being located in an appealing neighborhood. A good view always helps, too.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Demand for short-term rentals<\/strong><\/h3>\n\n\n\n<p>As with any real estate market, demand and supply are two of the most vital factors to ensure a good ROI. Ideally, your chosen market should have a steady flow of visitors. Therefore, check the demand for short-term rental accommodation in the high and low seasons.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Determine seasonality<\/strong><\/h3>\n\n\n\n<p>Seasonality refers to the fluctuations in demand and supply of properties in specific locations or markets at different times of the year. Most STR markets have a low season or quiet period when demand falls. Depending on the location, the short-term vacation rental market experiences several variables. Here are a few examples:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Beach areas:<\/strong> Seasonality depends on the location. Some areas like Florida or California can see high demand for vacation homes from late winter until early fall. Other areas may peak from late spring until late summer.<\/li>\n\n\n\n<li><strong>Mountain resorts:<\/strong> Vacation rentals in the mountains typically peak from December to March during the ski season. However, they are also popular from late spring until fall for tourists wanting to explore the mountains.&nbsp;<\/li>\n\n\n\n<li><strong>Lake areas:<\/strong> The demand for rental units in the most popular lake destinations tends to be in summer, with families looking for weekend getaways or longer summer breaks.&nbsp;<\/li>\n\n\n\n<li><strong>Desert areas:<\/strong> Vacation homes in desert areas tend to see a peak in demand during winter months, when it\u2019s cold in northern regions but not too hot in the desert.<\/li>\n\n\n\n<li><strong>Popular cities:<\/strong> Large cities that attract tourists can have a high demand for short-stay rental accommodation throughout the year. Easy access to local attractions, public transport and restaurants is crucial in these markets.<\/li>\n<\/ul>\n\n\n\n<p>Seasonality is an important factor when evaluating the short-term rental market. Income from short-term rentals tends to decrease during low-demand periods.Therefore, rental income from the peak season should be enough to get you through quiet periods. But, of course, you could devise innovative ways to market your rental during slower periods.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>What is your target market?<\/strong><\/h3>\n\n\n\n<p>When analyzing the profitability of the rental market, it is also good to evaluate your target market.<\/p>\n\n\n\n<p>For example, older couples may want a home-away-from-home experience in a vacation house with the facilities of a traditional hotel. However, families will want a larger house, maybe with several bathrooms. On the other hand, millennials tend to prefer rentals that offer a unique, small-scale experience.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Research market-specific regulations for vacation homes<\/strong><\/h3>\n\n\n\n<p>One of the most challenging aspects of the vacation rental marketplace is rules, regulations, and zoning restrictions. For example, some towns and jurisdictions place restrictions on Airbnb-type rentals. And it may be necessary to obtain the correct permits and licenses before listing your vacation home. Therefore, due diligence on short-term rental market regulations is crucial.<\/p>\n\n\n\n<p>Here are some examples of kinds of regulations you may encounter:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Restrictions on the number of nights property owners can rent out their house<\/li>\n\n\n\n<li>Certain zones limit the number of short-term rentals<\/li>\n\n\n\n<li>Homeowners must obtain licenses<\/li>\n\n\n\n<li>Some towns ban short-term vacation rentals in residential areas<\/li>\n<\/ul>\n\n\n\n<p>It is also good to note that local rules and legislation on the short-term rental market can change. Therefore, it\u2019s good to have an exit strategy if managing a rental property becomes&nbsp;unprofitable or unviable.<\/p>\n<\/div><\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-group has-slate-200-background-color has-background\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<h2 class=\"wp-block-heading has-text-align-center has-theme-slate-dark-color has-text-color\">More from BiggerPockets: 2024 State of Real Estate Investing Report<\/h2>\n\n\n\n<div class=\"wp-block-media-text has-media-on-the-right is-stacked-on-mobile is-vertically-aligned-top\" style=\"grid-template-columns:auto 43%\"><div class=\"wp-block-media-text__content\">\n<p class=\"has-theme-slate-dark-color has-text-color\">After more than a decade of clearly favorable investing conditions, market dynamics have shifted. Conditions for investment are now more nuanced, and more uncertain. Download the 2024 State of Real Estate Investing report written by Dave Meyer, to <strong>find out which strategies and tactics are best suited to win in 2024.<\/strong>\u00a0<\/p>\n\n\n\n<div x-data=\"frictionlessSignupForm()\" class=\"button-account-type aligncenter\">\n\n  \n\n  <!-- Guest Button -->\n      <template x-if=\"!$store.wp.isMember()\">              <button x-on:click=\"$store.wp.displaySignupPrompt()\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\">Sign up to download<\/button>\n          <\/template>  \n  <!-- Free Member Button -->\n      <template x-if=\"$store.wp.isMember() &#038;&#038; !$store.wp.isPaidMember()\">              <a href=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/11\/BP_State-of-REI_2024-final.pdf\" target=\"_blank\"\n                    x-on:click=\"window.analytics.track('SMARTER | Carrot Download | SOREI 2024', {\n            referrer: 'https:\/\/www.biggerpockets.com\/blog\/how-to-analyze-a-market-for-short-term-rentals',\n            account_type: 'free',\n          });\"\n                    class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\">Download<\/a>\n          <\/template>  \n  <!-- Pro Member Button -->\n      <template x-if=\"$store.wp.isPaidMember()\">      <a \n        href=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/11\/BP_State-of-REI_2024-final.pdf\" target=\"\"\n                x-on:click=\"window.analytics.track('SMARTER | Carrot Download | SOREI 2024', {\n          referrer: 'https:\/\/www.biggerpockets.com\/blog\/how-to-analyze-a-market-for-short-term-rentals',\n          account_type: 'pro',\n        });\"\n                class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Download<\/a>\n    <\/template>  \n  <!-- Frictionless Popup -->\n  <\/div>\n<\/div><figure class=\"wp-block-media-text__media\"><img loading=\"lazy\" decoding=\"async\" width=\"680\" height=\"600\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/11\/MiniAnnouncement.png\" alt=\"\" class=\"wp-image-162917 size-full\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/11\/MiniAnnouncement.png 680w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/11\/MiniAnnouncement-300x265.png 300w\" sizes=\"auto, (max-width: 680px) 100vw, 680px\" \/><\/figure><\/div>\n<\/div><\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-cover is-light has-level3-cover-style\"><span aria-hidden=\"true\" class=\"wp-block-cover__background has-white-background-color has-background-dim-100 has-background-dim\"><\/span><div class=\"wp-block-cover__inner-container is-layout-flow wp-block-cover-is-layout-flow\">\n<h2 class=\"wp-block-heading\" id=\"Determining\">Determining the Ideal Property Type<\/h2>\n\n\n\n<p>There are several types of property to consider when getting started in the vacation rental business. For example, you could buy a cheap property to fix up and rent out. However, you have rehab costs to consider. Or, you could look for a turnkey property that could offer instant income.&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Turnkey STR property<\/strong><\/h3>\n\n\n\n<p>A turnkey property is fully prepared and ready to rent out. This type of property means you don\u2019t have any rehabbing. Therefore, you have almost instant rental income because guests can start living there immediately. In some cases, a property management company already takes care of the day-to-day running of the property.&nbsp;<\/p>\n\n\n\n<p>One thing to consider is the higher purchase price of a turnkey STR property. This could result in a lower return on investment. However, it provides the fastest investment returns.&nbsp;<\/p>\n\n\n\n<p><strong><em>Related:<\/em><\/strong> <a href=\"https:\/\/www.biggerpockets.com\/blog\/6-pros-cons-turnkey-properties\" target=\"_blank\">The pros and cons of turnkey properties<\/a>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Holiday apartments with established business<\/strong><\/h3>\n\n\n\n<p>Buying a holiday apartment with an established business eliminates some guesswork regarding the short-term rental market analysis. For example, AirDNA can help you find properties that perform well on Airbnb and VRBO. This way, you can invest in an STR market property knowing it will generate steady income.<\/p>\n\n\n\n<p>Like turnkey STRs properties, the initial investment may be higher when buying a well-established vacation rental. Unfortunately, this can also mean a longer wait to see a return on investment.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Start real estate investing by house hacking<\/strong><\/h3>\n\n\n\n<p>House hacking is one of the easiest ways to start real estate investing in the vacation rental industry. This involves buying a property in a desirable location and renting out part of it to travelers, tourists, business people, or temporary visitors. Popular house hacking options include converting a garage or basement or buying a multi-family unit.<\/p>\n\n\n\n<p>Of course, if you are house hacking to invest in the short-term rental market, you must analyze the local trends for occupancy rates, demand, and seasonality. However, there are other factors to consider.&nbsp;<\/p>\n\n\n\n<p>For example, will you buy a second home and make that your primary residence? If so, you could qualify for a good FHA loan deal. Is there demand in your local area to rent out your current home to provide a steady income? Or what about selling your current home to finance purchasing the new home?&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Second home as a vacation rental property<\/strong><\/h3>\n\n\n\n<p>Some homeowners become vacation rental landlords by buying a second home in a destination location. Being a second-home owner allows you to use the home in off-peak seasons and rent it out during in-demand tourist seasons.<\/p>\n<\/div><\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-cover is-light has-level3-cover-style\"><span aria-hidden=\"true\" class=\"wp-block-cover__background has-white-background-color has-background-dim-100 has-background-dim\"><\/span><div class=\"wp-block-cover__inner-container is-layout-flow wp-block-cover-is-layout-flow\">\n<h2 class=\"wp-block-heading\" id=\"Analyze\">How to Analyze the Short-Term Vacation Rental Market<\/h2>\n\n\n\n<p>Once you determine suitable locations for buying a vacation apartment or home, you must crunch the numbers. The best short-term rental markets should have high demand, high occupancy rates, favorable STR regulations, and excellent cash-on-cash returns. The best way to analyze the market\u2019s health is to conduct thorough rental research.<\/p>\n\n\n\n<p>What are the&nbsp;key factors to ensure the vacation home or apartment is a good investment opportunity? Here are some essential short-term rental analytics to get valuable insights into a specific area.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Use the AirDNA Rentalizer<\/strong><\/h3>\n\n\n\n<p>The AirDNA calculator is a helpful AI tool for analyzing the potential for short-term rental real estate investing. This handy tool tracks performance metrics for millions of Airbnb and VRBO properties across the country. The results include data on average daily rates, historical occupancy rates, and revenue for a particular location.<\/p>\n\n\n\n<p>Using the AirDNA Rentalizer tool gives you all the information you need to analyze STR markets. You get enough information to predict rental growth and demand and determine the impact of seasonality. It even has a handy graph showing how friendly local regulations are toward short-term rental owners.&nbsp;<\/p>\n\n\n\n<p>BiggerPockets has partnered with AirDNA to offer Pro members access to the <a href=\"https:\/\/www.biggerpockets.com\/airbnb-calculator\" target=\"_blank\">Airbnb calculator<\/a>. To get a more in-depth STR market analysis, consider upgrading to AirDNA\u2019s paid plan. This gives access to all the industry insights you require to make an informed decision. However, AirDNA can be expensive when analyzing multiple markets, like state or country-wide STR markets.&nbsp;<\/p>\n\n\n\n<p>The good news is that you can harness analytical data from two of the best short-term rental sites \u2014 Airbnb and VRBO \u2014 for free.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Short-term rental analysis with Airbnb and VRBO<\/strong><\/h3>\n\n\n\n<p>It is possible to get enough analytical data from VRBO and Airbnb to help make an informed investing decision. For example, you can look at comparable properties on these short-stay rental websites to gather data. You can then use a spreadsheet to organize data, compare metrics and analyze the results.&nbsp;<\/p>\n\n\n\n<p>Some real estate investors prefer analyzing short-term rental markets on VRBO and Airbnb because it gives a better \u201cfeel\u201d for the market. You can easily look at comparable properties, their location and what they offer.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>What are average occupancy rates?<\/strong><\/h3>\n\n\n\n<p>The average occupancy rate is a key factor when analyzing the profitability of an investment property. You can attain this percentage by dividing the number of nights a vacation home is occupied by the number of available nights. According to some figures, an average occupancy rate of around 50 percent is considered good.<\/p>\n\n\n\n<p>Occupancy rates are more important in the STR business than in the long-term rental industry. This is because they depend on demand, seasonality, competition, nightly rates, and other factors. For example, a higher occupancy rate in a ski resort would be necessary during the peak winter season than in the summer.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Cost to buy an investment property<\/strong><\/h3>\n\n\n\n<p>When considering purchasing an investment property for an STR business, you must do due diligence on the following:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.biggerpockets.com\/agent\/match\" target=\"_blank\" data-type=\"link\" data-id=\"https:\/\/www.biggerpockets.com\/agent\/match\" rel=\"noreferrer noopener\">Real estate finance<\/a><\/li>\n\n\n\n<li>Cap rate<\/li>\n\n\n\n<li>Cash-on-cash return<\/li>\n\n\n\n<li>Mortgage payments<\/li>\n\n\n\n<li>Annual property appreciation<\/li>\n<\/ul>\n\n\n\n<p>In this respect, there is no difference between real estate investing for the long-term rental market.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Estimate monthly revenue from vacation rentals<\/strong><\/h3>\n\n\n\n<p>Assessing revenue potential from short-term rental properties can be more challenging than traditional rentals. The two primary metrics to analyze are the occupancy rate and the average daily rate (ADR). In most STR markets, these figures impact each other. In addition, expenses, turnover costs, fees and taxes will affect revenue.&nbsp;<\/p>\n\n\n\n<p>To assess your revenue potential, multiply the occupancy rate (as a percentage) by the number of days in the month. Then multiply this by the average daily rate.&nbsp;<\/p>\n\n\n\n<p>Some real estate investors maximize revenue by lowering the ADR during quiet periods. Other STR investors continually analyze the local rental market and ensure that their ADR is always a few dollars lower than their competitors. This calculation can increase occupancy rates by ensuring a steady stream of paying guests.&nbsp;<\/p>\n\n\n\n<p>Factors influencing revenue rates include the following:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>How the property is marketed<\/li>\n\n\n\n<li>Quality of online reviews<\/li>\n\n\n\n<li>How pet-friendly the property is<\/li>\n\n\n\n<li>On-site amenities, like a hot tub, pool, outdoor grill or children\u2019s play area<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Calculate fees and expenses<\/strong><\/h3>\n\n\n\n<p>Estimating relevant fees and expenses is critical when analyzing a short-term rental market. These expenses range from local taxes and property fees to insurance, real estate financing, and rehab costs. However, you cannot forget the cost of furnishing a vacation home.&nbsp;<\/p>\n\n\n\n<p>Here is information on some of the expenses you can expect when investing in an STR property:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Taxes:<\/strong> Property taxes will typically be the same as a traditional rental property. However, taxes change from state to state. And depending on STR regulations, there may be extra expenses with running a vacation rental.&nbsp;<\/li>\n\n\n\n<li><strong>Real estate financing:<\/strong> If this is your first property investment, be aware that interest rates will be more expensive for purchasing a rental property than a personal residence. Additionally, the lender may require a larger down payment when financing real estate investments.<\/li>\n\n\n\n<li><strong>Furnishing:<\/strong> Furnishing a vacation home can be a significant expense that investors commonly underestimate. Always buy good quality, durable items to give visitors a comfortable place to stay. Also, don\u2019t forget the cost of linens, towels and a range of kitchen equipment. Higher-quality furnishing can also generate higher daily rates and better online reviews.&nbsp;<\/li>\n\n\n\n<li><strong>Utilities:&nbsp;<\/strong>You must calculate all utilities in the annual daily rate. Remember that guests may not be as economical with energy as they are in their own place. Therefore, budget accordingly.&nbsp;<\/li>\n\n\n\n<li><strong>Repairs and maintenance:<\/strong> Wear and tear in a vacation home can be significantly higher than in a long-term rental. Plan to reserve at least 10 percent of revenue to keep your rental in good repair and well-maintained.&nbsp;<\/li>\n\n\n\n<li><strong>Insurance:<\/strong> Always get the best deal on insurance in case of property damage by guests, fire, flood or natural disasters.&nbsp;<\/li>\n\n\n\n<li><strong>Booking fees:<\/strong> You will have to pay fees if you market your vacation home on popular short-stay booking sites. The fees typically include a commission and payment processing. However, you may have to pay extra for cancellation protection and property damage protection.&nbsp;<\/li>\n\n\n\n<li><strong>Property management fee<\/strong>: Many times investors utilize a company that takes care of all the front- and back-end items of the rental, from taking reservations and emailing\/onboarding guests to the actual cleaning and turnover of property.<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-cover is-light has-level3-cover-style\"><span aria-hidden=\"true\" class=\"wp-block-cover__background has-white-background-color has-background-dim-100 has-background-dim\"><\/span><div class=\"wp-block-cover__inner-container is-layout-flow wp-block-cover-is-layout-flow\">\n<h2 class=\"wp-block-heading\" id=\"other\">Other Considerations When Looking Invest in a Short-Term Rental Property<\/h2>\n\n\n\n<p>Real estate investing in the STR market has several unique operating expenses. Because of the higher turnover of guests, you must invest more in maintaining the property. Additionally, many expenses cannot be charged to guests.<\/p>\n\n\n\n<p>It is also good to consider that self-managing a short-term rental property is exceedingly time-consuming. For example, you must manage bookings, contact guests, restock inventory and deal with minor repairs. Additionally, it\u2019s necessary to clean the property, launder linen and towels, and change beds.&nbsp;<\/p>\n\n\n\n<p>Really consider how much time you can dedicate to keeping the property well-maintained. That is why many STR investors consider using property management and cleaning companies.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Short-term rental property management<\/strong><\/h3>\n\n\n\n<p>A property management company can handle the day-to-day running of an STR business. This includes handling bookings, cleaning, maintenance, property taxes, insurance, guest communication, marketing and issues with guests. The cost of using a property management company could range from 10 to 50 percent.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>House cleaners<\/strong><\/h3>\n\n\n\n<p>Cleaning costs can be a significant expense when running an STR business. You could consider hiring your own cleaners and paying them an hourly or fixed rate. To get this price, research several comparable rentals in the area to note the cleaning fees. Then, use the figures to get the average price. Some short-stay rental sites allow hosts to add on cleaning fees that are charged to the guest.<\/p>\n<\/div><\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-cover is-light has-level3-cover-style\"><span aria-hidden=\"true\" class=\"wp-block-cover__background has-white-background-color has-background-dim-100 has-background-dim\"><\/span><div class=\"wp-block-cover__inner-container is-layout-flow wp-block-cover-is-layout-flow\">\n<h2 class=\"wp-block-heading\" id=\"exit\">Exit Strategy for Short-Term Rental Investments<\/h2>\n\n\n\n<p>When investing in real estate for the STR market, it\u2019s always a good idea to have an exit strategy. Reasons for converting to a long-term rental include the following:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Lower demand for short-term rentals<\/li>\n\n\n\n<li>Local regulations on short-stay rentals change, making it no longer profitable to keep a vacation home&nbsp;<\/li>\n\n\n\n<li>The LTR market provides a more stable income<\/li>\n\n\n\n<li>Long-term rentals take less time to manage<\/li>\n<\/ul>\n\n\n\n<p>In most cases, your vacation home is already furnished and in a desirable location. Therefore, it shouldn\u2019t be difficult to find long-term tenants. First, however, you will need to <a href=\"https:\/\/www.biggerpockets.com\/blog\/the-important-laws-and-regulations-all-landlords-must-remember\" target=\"_blank\">educate yourself on landlord-tenant laws<\/a> and learn about the importance of screening tenants.&nbsp;<\/p>\n\n\n\n<p>Also, in some states, there are restrictions on the length of time passed before you can revert to short-term renting.&nbsp;<\/p>\n<\/div><\/div>\n\n\n\n<div style=\"height:25px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-cover is-light has-level3-cover-style\"><span aria-hidden=\"true\" class=\"wp-block-cover__background has-white-background-color has-background-dim-100 has-background-dim\"><\/span><div class=\"wp-block-cover__inner-container is-layout-flow wp-block-cover-is-layout-flow\">\n<h2 class=\"wp-block-heading\">Analyze a Market for Short-Term Rentals \u2014 In Conclusion<\/h2>\n\n\n\n<p>The short-term rental market has many opportunities to make lucrative real estate investments. However, many factors are unique to the STR market. These include occupancy rates, seasonality, average daily rates, and local regulations. 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