New to short term rentals - what are the biggest operational challenges?

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New to short term rentals - what are the biggest operational challenges?

Jonathan Foux
Member since 2023 · 26 posts · 23 votes

Hi all, 

I have had some experience in small real estate investing but a friend of mine has approached me to start investing in short-term rentals. I am aware of the main differences and landscape but was just curious of the biggest operational challenges that owners/operators face in this space? In addition, are their adequate services/technology to assist with those challenges?

I really appreciate any guidance here so that I can determine if this is a correct decision for me personally. 

Thanks in advance. 

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Zach LemasterBusiness Member
Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
2y

Legislation changes no doubt!  That and areas that are very "seasonal."

Personally, I would recommend investing in areas that have established laws and regulations and avoiding areas that do not have any sort of legislation to avoid things changing at the drop of a hat that changes your entire investment strategy...

[email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
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  • Melissa Nash
    Rental Property Investor · Orange County, CA · Member since 2016 · 740 posts · 529 votes
    2y

    Are you looking to self manage or have a property manager? The biggest difference is STR is considered active investing. Lots of benefits because of this for taxes.... but you will be busy daily. You can automate most of it, but you can't just set it and forget it. Expenses that most investors don't add it wear and tear on the property & products inside it. I generally spend at least $300+ a month for these. You are at the mercy of the guest for a 5 star review- so if they say the shower is slow, you send out a handyman immediately. The goal is getting that 5 star review so you can grow your reviews and get more bookings and then you can charge more, So you do need to do your homework as its very active in the beginning... then you automate over time, I have 5 properites and spend less than 20 min a day on all of them... but the automations work and I put in the work to make them the best! Best of luck! Melissa

    6Reply
  • Jonathan Foux
    OP
    Member since 2023 · 26 posts · 23 votes
    2y

    Thank you so much Melissa for the detailed advice and response. Really appreciate your amazing insight. We would be self managing but we would not be local so that is what scares me most. 

    When you say automate most, I am assuming you mean like bookings and the financial aspects? Is there anything that is not really automated which takes a lot of time (especially in the beginning). Just worried as I have a full time job and do not want to start something that I cannot complete. 

    Congrats on your successes, it is clearly paying off. Best of luck with it and again thanks for the advice. 

    0Reply
  • Shawn McCormickPro Member
    Realtor · Central Florida-Orlando · Member since 2014 · 1k+ posts · 892 votes
    2y

    @Jonathan Foux I think it would help if you let us know where the unit(s) will be. Weather conditions alone can make a huge difference operationally. I'm in Florida, so we don't have nearly the challenges someone in a cold climate/mountainous area would face. Furnaces and a/c units, winterizing a cabin vs battening down for a hurricane. 

    Knowing who your guests are and catering to the needs/wants of them. Again, location will play a big part in this. Do you offer bicycles or surfboards, are you urban or rural and have complimenting vendors to supply goods and services your guests might desire. 

    I'm no longer in this space as an owner, but help people buy and sell and see some of the challenges they face not only from a guest satisfaction point of view, but a competition aspect as well. 

    Best of luck!

    2Reply
  • Jonathan Foux
    OP
    Member since 2023 · 26 posts · 23 votes
    2y

    Thank you. Very helpful. They would be in South Florida, we are still debating the exact areas but can let you know. Of course it is useful to understand those differences in locations and I guess different regulations, rules etc that is something that I’m not sure too many consider when entering these types of deals etc. 

    0Reply
  • Brook Davenport
    Member since 2022 · 51 posts · 30 votes
    2y

    One of the major problems investors run into is when they invest in a remote market, and they struggle to find contractors and meet with them face-to-face. One of the most beneficial things I did from the start get a team together, (contractor, cleaner, handyman) as you will lean on them when you can’t put eyes on the problems. Turno was a great tool for me to find my first cleaning staff. Facebook groups ended up being an ultimate tool as well, as other hosts in the area are almost more than willing to spread the word about resources and contractors in the area. 

    2Reply
  • Trent Reeve
    Atlanta · Member since 2022 · 712 posts · 642 votes
    2y
    Quote from @Jonathan Foux:

    Thank you so much Melissa for the detailed advice and response. Really appreciate your amazing insight. We would be self managing but we would not be local so that is what scares me most. 

    When you say automate most, I am assuming you mean like bookings and the financial aspects? Is there anything that is not really automated which takes a lot of time (especially in the beginning). Just worried as I have a full time job and do not want to start something that I cannot complete. 

    Congrats on your successes, it is clearly paying off. Best of luck with it and again thanks for the advice. 


     I have a full time job and self manage a place 5 hours away. the absolute 1st/best thing you need is a cleaner you trust. They are your eyes and ears at your place. But you can put automation in to help your hours spent. I use software to help with managing content, messaging, door lock codes, pricing. I have a great cleaner and handyman/maintenance. I spend time at my place now and then to review cleaning performance, review the property and the area as i provide emails to the guest to provide information, recommendations, etc. But you can have a normal job and remote manage.

    1Reply
  • Berry StarnesPro Member
    Member since 2021 · 51 posts · 22 votes
    2y

    I'm in your same boat. I'm reading the BiggerPockets STR book by Avery Carl which seems to give examples of how to automate with apps and run systems with a team.

    0Reply
  • Zachary Cain Humphrey
    Investor · KY · Member since 2022 · 204 posts · 77 votes
    2y
    Quote from @Jonathan Foux:

    Hi all, 

    I have had some experience in small real estate investing but a friend of mine has approached me to start investing in short-term rentals. I am aware of the main differences and landscape but was just curious of the biggest operational challenges that owners/operators face in this space? In addition, are their adequate services/technology to assist with those challenges?

    I really appreciate any guidance here so that I can determine if this is a correct decision for me personally. 

    Thanks in advance. 


     Far as technology that assists in running STR....

     - Hospitable for PMS

     - Turno for cleaner automation - though i still message my cleaners everytime to verify they did clean and for them to submit photos of the property once their cleaning is completed.

     - Stayfi for email capture to build out email list

     - Schlage Encode for door knob - easy check in code creation. keep lock box somewhere on property with a physical key in it in case battery every dies or lock doesnt work

     - Pricelabs - pricing automation. however I do organic pricing. I personally adjust all my pricing as I feel this helps me have more control and ultimately more bookings.

     - Airdna, mashvisor, str insights, rabbu - market data research tools for STR investing

    Far as challenges...

    - cleaning team: finding reliable cleaners who follow the way YOU want it cleaned. You may have to hire and fire several cleaners before you find a good one. try finding a cleaner who are willing to do simple errands as well that will keep you out of the weeds. 

    - handyman: you need at least two handymen that may be willing to go out and fix various simple things should the need arise. 

    - if your listing your property on different booking platforms be sure you use a property management software that allows you to integrate those calendars into one space so that you don't have double bookings. 

    - keep extra linens on hand because linens will get stained, its part of the job and it will happen. either your cleaning team can keep these OR you could leave a set to change beds in case a guest stains a set and wants to replace it for their stay. either way you need at least two sets of full bed linens per bed

    4Reply
  • Justin BrickmanBusiness Member
    Realtor · San Antonio, TX · Member since 2021 · 502 posts · 274 votes
    2y
    - Making sure your guests follow the rules (Max occupancy, smoking, parking, pets)
    - Trying to stay under the radar - not pissing off the neighbors and/or HOA
    - Good effective communication can go a long way
    [email protected]210-827-6020
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    1Reply
  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    Remote Self Managing biggest hurdle will be accountability of your vendors and what to do in "emergencies".  We have a full staff as a management company so if there is a lockout, or a broken AC after hours, etc we have staff to respond, assess, and repair around the clock.  Also due to size our vendors respond to our requests ASAP.  Having just 1 or a few will be hard to command accountability from already stretched vendors.

    I am not sure what your current lifestyle/professional demands are but this is a 24 hour job.  Guests expect to be answered and catered to 24/7, hence why hotel have staffed front desks around the clock.  If you cannot keep up this will cost money in refunds and bad reviews.

    Just food for thought.  It is all very doable as many people here are successful, but you need to have the right expectations.

    [email protected]813-563-0877
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    1Reply
  • Jonathan Foux
    OP
    Member since 2023 · 26 posts · 23 votes
    2y

    Thank you so much. This community is so helpful and amazing. Really amazing advice. 

    1Reply
  • Jonathan Foux
    OP
    Member since 2023 · 26 posts · 23 votes
    2y
    Quote from @Berry Starnes:

    I'm in your same boat. I'm reading the BiggerPockets STR book by Avery Carl which seems to give examples of how to automate with apps and run systems with a team.


     This is a great recommendation. The automation piece seems critical. Thanks. 

    1Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    2y

    Legislation changes no doubt!  That and areas that are very "seasonal."

    Personally, I would recommend investing in areas that have established laws and regulations and avoiding areas that do not have any sort of legislation to avoid things changing at the drop of a hat that changes your entire investment strategy...

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
    Rent To Retirement5334 Reviews
    WebsiteView Page
    12Reply
  • Jonathan Foux
    OP
    Member since 2023 · 26 posts · 23 votes
    2y

    @Zach Lemaster completely agree. I always worry about some new legislation arriving and just impacting all investment real estate. I’ve seen it before in the north east and it can be really stressful. Thanks for bringing it up again. I needed that useful reminder. 

    1Reply
  • Zach LemasterBusiness Member
    Rental Property Investor · Denver, CO · Member since 2015 · 2k+ posts · 3k+ votes
    2y

    @Jonathan Foux

    Always here to help!  ; )

    [email protected]800-311-6781Podcast Guest on Show How to Get 10%+ Off Your Next Real Estate Deal Right Now
    Rent To Retirement5334 Reviews
    WebsiteView Page
    11Reply
  • Colleen Goldstein
    Real Estate Broker · Matthews, NC · Member since 2017 · 135 posts · 99 votes
    2y

    @Melissa Nash What automation tools have you found success with?

    0Reply
  • Sarah KensingerPro Member
    Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
    2y

    Biggest operational challenge known to the STR host...cleaners, cleaners, cleaners.

    Don't be surprised if you go through a handful before you find on that meets your expectations and one you can trust. 

    [email protected]330-557-3021
    1Reply
  • Jonathan Foux
    OP
    Member since 2023 · 26 posts · 23 votes
    2y

    @Sarah Kensinger how do you find so many? I really wouldn’t know where to begin or is this where management is so critical? Thanks. 

    0Reply
  • Sarah KensingerPro Member
    Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
    2y
    Quote from @Jonathan Foux:

    @Sarah Kensinger how do you find so many? I really wouldn’t know where to begin or is this where management is so critical? Thanks. 

    If you have time, it's definitely something you can do! Turno is a great resource as well as STR meet-ups in the area your STR is located. It's great to find a cleaner that is recommended! 
    [email protected]330-557-3021
    0Reply
  • Jonathan Foux
    OP
    Member since 2023 · 26 posts · 23 votes
    2y

    @Sarah Kensinger thank you. 

    1Reply
  • Monique P.
    Member since 2023 · 88 posts · 62 votes
    2y

    Hi Jonathan,

    Just chiming in on your question about how to find cleaners. Techniques that have worked in past for having a safety net of cleaning crews to draw upon over the years entailed asking…

    - seller at close of escrow 

    - talking to neighbors

    - scouting neighborhood for cleaning company cars to take photo or asking for business card when spotting a cleaning crew leaving another STR

    - asking realtor

    - searching 'Nextdoor' platform in city of STR

    - always asking any service provider coming to do work at our STR for recommendations.

    These were quick, easy ways to find cleaners. Once we finally found our very trusted, exceptional cleaning crew, it freed up our time and lessened our stress load tremendously.

    0Reply
  • Jonathan Foux
    OP
    Member since 2023 · 26 posts · 23 votes
    2y

    @Monique P. these are some great tips. Thanks. 

    1Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y
    Quote from @Jonathan Foux:

    Hi all, 

    I have had some experience in small real estate investing but a friend of mine has approached me to start investing in short-term rentals. I am aware of the main differences and landscape but was just curious of the biggest operational challenges that owners/operators face in this space? In addition, are their adequate services/technology to assist with those challenges?

    I really appreciate any guidance here so that I can determine if this is a correct decision for me personally. 

    Thanks in advance. 

     Are you investing with your friend, or on your own? I always prefer the latter if it's a physical asset.

    If you're self managing, most would tell you can have it all done and set up shop with 2-3 hours a week dedicated to it, and everything else via apps. The true cost is 1 bad issue--not even a black swan type-- that would cost you more than all that you saved with a property manager. And of course, you're now open to more liability. Hire a PM, but do even more intensive work than with a LTR PM.

    My choice would be go to a market that is not dominated by hotels, has no STR regulations currently, and find a house that's capable to being rented as an LTR but turn it into an exceptional STR that's in a good location. Great photos, great clean interior look, great outdoor area, all the bells & whistles to where when you interview 3-5 STR PMs all of them are kind of floored with it and want your business beyond the $ but view it was one of their more easier ones to manage. Given they understand the business and realize this is a great hospitality experience you're providing. All they got to do is not **** it up. Interview them aggressively, make sure they are tailored to promote your properties, are not overwhelmed with volume and have systems in place to protect you against tenants and protect tenants against themselves.

    I love mom & pop shops for this. I pay on a sliding scale(with a min floor), make sure they aren't managing 50 properties +, and remind them this is a customer experience.  I try to make sure they manage sub 20 properties(ideally less than 3 in my specific area) and are being paid appropriately to not look to double that. 

    0Reply
  • Mindy Nicol
    Realtor · St Augustine, FL · Member since 2023 · 111 posts · 87 votes
    2y

    Hi Jonathan!

    I am 12 mo into 2 STRs, self managed.  My greatest operational challenges:

    - Amount of time STR takes, vs Medium, or Long term rentals. It is definitely another full time job. You'll be looking at calendars, bookings, and fine tuning pricing to get occupancy rates as high as possible. I do not agree with the set and forget philosophy. I do have automated guest messaging but to truly run the business you need to be hands on. Our market is changing monthly here in North Florida and assume South Florida is the same. I look at my forward bookings and availability daily and adjust nightly minimum stay, rates etc.

    - Customer service: questions from guests, dealing with last minute cancellations, people that want early/late check ins etc.  I don't mind it but sometimes dream of having a LTR quad with a property manager so I can get my weekends back!

    - Costs - The expenses, from cleaning supplies, to guest amenities, running costs and handiman stuff is just so much more.

    - TOT Tax - We have 10.5% where I am in N Florida (Dept revenue and local county). Make sure your booking providers have this set up correctly and you are paying monthly.

    I use Lodgify to automate messaging, transactions, calendars etc which is totally fine for me. 

    Let me know if you ever want to branch out of S Florida.  I am in St Augustine where we have a thriving tourism market.

    Good luck!

    Mindy

    2Reply
  • Account Closed
    Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes
    2y

    One of the primary challenges of managing short-term rentals is the constant turnover of guests. Unlike traditional long-term rentals, where tenants sign leases for extended periods, short-term rentals can experience frequent changes in occupancy. This high turnover requires meticulous scheduling, efficient cleaning services, and quick problem resolution to ensure a seamless experience for guests.

    Another hurdle is the need for continuous marketing and promotion. With the abundance of short-term rental options available, property owners must stay proactive in promoting their listings to attract potential guests. Maintaining a strong online presence, optimizing listings with eye-catching photos and compelling descriptions, and adjusting pricing strategies to remain competitive are crucial tasks that demand constant attention.

    Additionally, property owners must address the legal and regulatory landscape surrounding short-term rentals. Many cities and municipalities have implemented restrictions or regulations on short-term rentals to address concerns such as noise, safety, and neighborhood disruption. Keeping up with and adhering to these regulations can be time-consuming and may require legal assistance.

    Amidst these challenges, there is a glimmer of optimism for investors - the short-term rental tax loophole. Investors have found that the potential financial gains from short-term rentals, coupled with certain tax advantages, can make the management challenges worthwhile. The tax benefits often include deductions for operating expenses, such as cleaning and maintenance costs, as well as depreciation on the property.

    By leveraging these tax loopholes, investors can maximize their returns and offset some of the challenges associated with managing short-term rentals. It's essential, however, to consult with tax professionals or financial advisors to ensure compliance with local tax laws and regulations.

    1Reply
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