vacation rentals and why they are better

14 Replies

Just wondering if anyone is involved in short term rentals and what's everyones opinion on them. I know there have been a few podcast on them just looking for more opinions before i get started. 

There are a ton of users investing in short-term rentals. Opinions vary and your question is so generic that most people won't bother to respond. I recommend you read through the forum for a few days to get an idea of what people are doing. Then you can come back with more specific questions, if you have any.

Jeff - your question is really subjective  - better than what?  better how?  etc..  The answer depends largely on your personal goals.  Does better mean more cash flow?  Does better mean easier to manage?  Does better mean less risk?  etc..  I am going to assume you are trying to compare to LTRs.

In a nutshell from my experience - I own both.

LTRs - low risk, low return, 99% passive

STRs - higher risk, higher return, more work involved.. not a passive investment.

Lots of variables in the mix.   That is the nutshell.


The right property in the right location can generate a lot more income than a LTR. It is also much more work handling people checking in and out many times per month.

3x the work for 4x the money, STR vs LTR. There's not much work with a LTR.

I want to piggyback off Jeff with this and help him out cuz I have the same questions. I too am super interested in doing STR vice LTR but have a couple questions that may be more specific (at least I hope)


-What was the decision point or Ah-Ha moment in choosing STR vs LTR?


-Does the income and cash flow outweighs the day to day effort (if you were to for go a property manager)

-Has anyone had issues with occupancy (sans the early pandemic months) or have gone 3-6 with occupancy not enough to cover the mortgage?

-How much is the income taxed after all expenses are paid?


@Michael McCarthy

I started with LTRs - My Ah-Ha moment was when I realized how many I would need to get in order to reach my financial goals. With the right STRs I can get there much much faster.

Cash flow is worth the day to day effort - if you use a property manger with an STR - it won't be near as profitable.

For STRs in destination vacation markets, most of them surged in occupancy rates and in nightly rates.  For STRs in non vacation markets they did not fare so well from what I have read.

Originally posted by @Michael McCarthy :
-What was the decision point or Ah-Ha moment in choosing STR vs LTR? 


-Does the income and cash flow outweighs the day to day effort (if you were to for go a property manager)

-Has anyone had issues with occupancy (sans the early pandemic months) or have gone 3-6 with occupancy not enough to cover the mortgage?

-How much is the income taxed after all expenses are paid



I had a vacant 2 bedroom house, my wife had her house for sale and it was full of her furniture.  We asked a real estate agent how much they charge for their STRs.  They said up to $1000 a week.  I was getting $400 a month for the house.  We put my wife furniture in the house and got $800 a week for a few months.  They moved out and within 30 minutes their friends wanted it for $800 a week.  They moved out a month later and their friends wanted it, but we just got $600.  

The day to day effort is outweighed by the cashflow, but my wife quit her day job and is now a housecleaner for 23 STRs with 83 beds.

January I had 73 tenants.  In May I just had 1, and he was furloughed so he did carpentry and other maintenance in exchange for rent.

Depends on your tax bracket.

 


I have both LTRs and STRs and agree with the information given above. Reach out if you'd like to discuss further.
Many times if an investor wants to purchase a short-term rental property in a vacation market, their goal is to earn income, but also have a property for their own use in a place they would like to visit and/or build equity on a property they would like to retire in someday.

When wondering if a short-term vacation rental is a good investment for you,  first decide if any of these items meet your investment goals:  

  • Is it your dream to own a property in a vacation destination?
  • Are you seeking a particular return on your investment?
  • Do you want to diversify your portfolio with a home that will appreciate in value?
  • Are you looking for an investment vehicle that offers tax advantages?

@Jeff Smith

Hey Jeff I have LTR and STR units My wife and I are focusing on the STR and particularly being the best in are market in management which is the #1 most important thing for how much you make. A good thing about STR is you could maybe get lower interest rates and or down payment with second home loans and you can still rent it out 95% of the time just need intention to stay there a little bit.

I'll add that it's important to factor in the seasonal nature of STRs into your income / expenses. Depending on your location, you may only have business (income) for 6-8 months a year.

@Jeff Smith

Another thing I like more about STR is that you can get it professionally cleaned multiple times every week paid for by the guests and don't have to give anyone tenant rights which is a big thing for my as my STR's are in California. I can also have higher class assets like B and A level but make higher cash flow in appreciate markets then D properties in non appreciating markets.

It also doesn’t hurt that the cash flow is higher than the market rent for the properties and that is with paying for cleaners not self cleaning.

I believe @John Underwood said it perfectly.  STRs are more work, but can be more money.  

If you add automation, documented/organized processes, and virtual assistants, you can help reduce the workload quite a bit.

Mike

@Jeff Smith

I agree that, if you are managing your short term rental property(s), the work you put into it is 3-4X greater than if a long term rental as stated above.  The point I want to make is it is also possible to own a short term rental and have a property manager take care of the day to day requirements of your vacation rental, have someone handle the short term rental marketing and still make a good profit.  And, in this case, your involvement is no greater than with a long term rental. All of the owners I have dealt with or deal with now are from out of Florida. Many of them do not handle the property management and marketing of their properties. Their involvement is writing a check each month to pay for the services. The keys for this scenario to be profitable are the homes have to be in good locations and renovated/upgraded properly, a good property manager, and a good short term rental marketer. You really need to do your homework to make sure that you have these 3 keys covered if you are going to be what I call a turnkey owner.

Good luck to you.

Keith

We do airbnb in our home (3 spaces) and it's just an additional revenue stream to go with our LTR SFR homes.

We had a couple months with no bookings during the onset of covid but at this point this is by far our best year revenue wise. We are not a destination location and most of our guests stay here because there's some reason they need to be in the area. Usually work related, sometimes for sporting events, weddings, arts and crafts shows, etc. We have quite a few traveling medical personnel.

By sharing rooms in our house we generate at least as much if not more than an additional sfr would and it helps with the expenses of having a large home with just my wife and I living there now.

When we need or want to travel or be gone, we just block dates and go do our thing. My wife cleans the rooms and keeps the modest cleaning fees for splurge money.

I personally don't see us ever having a property dedicated solely to STR as that's just not our model. My son did that for a while but it has its headaches as well as a good revenue stream.