Do you want to know how you can make money on rental properties? Well, a sound investment strategy is to get into short-term rentals. With such, you get to charge a tidy rent for having tenants for short periods of time.
Depending on the state, you can rent out for a week or up to a year. That makes short-term rentals an attractive option for vacationers, business travelers, and people traveling for medical reasons. The best examples of short-term rentals are Airbnb and VRBO.
There are different categories when looking at short-term rentals. There is the option of buying a whole house for short-term leasing purposes. Others are accessory dwellings that use guest houses or garage apartments.
You can also rent out rooms within the home for a specific number of days.
Our article explores the reasons why short-term rentals are a good investment option. Let’s see what we can uncover.
1. High Potential for ROI
One benefit of short term rentals investing is the high potential for ROI. Indeed, with as little as $25,000, you can expect anywhere from 20% and above in annual returns. That means a regular cash flow of 10%-15%. What it means is you get an excellent way to make passive income from real estate.
There are many factors that determine ROI. These include, but are not limited to:
- The property location
- The type of structure
- Market fluctuations
- Market conditions and more
A good recommendation would be to work with professionals from the short-term rental industry. They’re in a good position to identify the best properties for you to invest your money in.
The experts can also take on the role of managing the property, financing, and accounting. Through their networks/partnerships, they can also arrange for loans if you need the cash.
2. Flexibility in Pricing
With long-term rentals, tenants get into a pre-set pricing agreement with the landlord. The lease periods are usually a year long. During that time, it can become difficult to adjust the price.
With short-term rentals, there is more flexibility in pricing. That makes them one of the best rental property investment strategies. Remember, the lease periods are short. It gives you leeway to adjust pricing depending on the market before you next rent it out.
Let’s say you are investing in vacation homes. You can take advantage of peak seasons to charge a little bit higher. When things slow down, you can adjust the pricing by lowering it. You can, within a year, make more money than you would with long-term rentals.
3. Tax Benefits of Short-Term Rentals
Registering your short-term rental as a business means you can deduct some expenses. These include operating expenses, bond repayments, rates, levies, and insurance.
Talk to your accountant to get clarity on the tax benefits you can get as a property owner.
4. Savings on Maintenance
It is easy to think that maintenance fees will be high with short-term rentals, but the reverse actually applies. Long-term tenants can make adjustments to the home to suit their needs. You may need to make significant repairs when you get the property back at the lease’s end.
A short-term renter is not likely to interfere with the structure. They will not, for instance, drill holes into the wall to hang up paintings.
Since you keep up with maintenance, it allows you to take care of minor repairs fast. That removes the possibility of future damages taking up a considerable chunk of your earnings.
5. The Chance to Earn Passive Income from Rental Property
Short-term rentals provide an excellent avenue for earning passive income from the rental property. As we said above, if you work with professionals, you don’t even need to play an active role. Once you invest, sit back and enjoy the proceeds.
You don’t need to dedicate time for property management. Thus, you can concentrate on your core job. You could be an office executive with an extra source of cash. In these tough economic times, who would say no to passive income?
Working with short-term rental companies allows you to invest outside of your location. You could live in the US but have properties abroad. Since you do not have a hands-on arrangement, the company does everything for you. Their work is to ensure that your assets continue generating income for you.
6. Long-Term Price Appreciation
Rental properties can achieve price appreciation over time. The value of the property keeps increasing every year. Indeed that is a motivating factor for entering into a real estate investment.
Please note that several factors come into play when looking at price appreciation.
- The location of the property
- Developmental plans around the area
- Physical infrastructure
- Cost of borrowing
- Supply and demand
- State of property, etc.
Do a proper market evaluation before investing in short-term rentals. Investing in rental property for beginners can be challenging due to a lack of knowledge. We reiterate our earlier point of working with short-term rental experts. But you must do your due diligence and teach yourself all there is to know as well.
7. Flexibility in Use
Flexibility in the use of short-term rental property can result in savings for you. Let’s say you have a vacation home in a popular tourist destination. You can use the same facility when the family vacation time comes around.
You don’t have to spend money booking accommodation in hotels or resorts. It is crucial that you plan your trip/break well in advance. That way, you do not inconvenience any tenants.
You may also need to make adjustments to when you take your vacation. Using the short-term rental during the peak season would mean that you lose out on making money. So, plan your holidays for off-peak seasons.
Are rental properties a good investment? The answer is yes, but you must have the right strategy. Getting into short-term rental investment has tons of benefits. We have shared some significant points above.
Pay attention to factors like property location, property type, and the target clientele. Keep up with maintenance to ensure the property is always in good condition. That can have a significant impact on how much you charge the tenants.
With rental property, you can expect price appreciation. But do take note of the factors that can impact the value of the property. Also, don’t forget to speak to your accountant about the tax benefits. If you want to earn passive income with rental property, let the experts show you how.