When looking for short term vacation rentals, it is important to keep in mind the essential qualities that make a good investment. By knowing what to look for, you can come up with a wise decision and avoid costly mistakes.
In this article, we will provide a guide to purchasing these types of properties and offer some tips on making the most out of your investment.
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6 Qualities of a Good Short Term Rental Investment
When searching for short term residential rentals, you will discover that there are many properties available. However, it is important to remember that not all of them will be good candidates for your goals and needs. To help you narrow down your search and find the best investment property, here are a few key qualities to look for.
1. Desirable Location
This is one of the most important factors to consider when looking for short-term rentals.
Ideally, the property should be located in an area that is popular with tourists and has a high demand for vacation rentals. It should be situated close to attractions, restaurants, and other facilities that guests would want to enjoy during their stay. This way, there is a high probability that they will book accommodation with you for their holiday.
Apart from being desirable for tourists, the property should also be in a safe neighborhood. This is to ensure the safety of your guests and protect your investment.
All things considered, here are the best places where you should make your short term rental investment.
- Orlando, Florida
- The Great Smoky Mountains, Tennessee
- Outer Banks, North Carolina
- Honolulu, Hawaii
- Anaheim, California
- Las Vegas, Nevada
These are just some examples of locations where short-term vacation rentals are in high demand. Of course, you can do more research to find other areas that fit your investment criteria.
2. High Capitalization Rate
The capitalization rate (cap rate) is a key metric that you should look at when investing in short term rentals. It is a measure of the return on investment (ROI), and you can calculate it by dividing the net operating income (NOI) by the purchase price.
So, for example, if a property has an NOI of $100,000 and is being sold for $500,000, the cap rate would be 0.20 or 20%, which is a good number for short-term vacation rentals.
Properties with high capitalization rates are often found in areas where there is high demand for vacation rentals but low prices for properties. These areas offer a great opportunity to make good ROI, while also providing affordable accommodation for guests.
Keep in mind though that cap rates are just estimates, and your actual returns will also depend on various factors, such as operating expenses, vacancy rates, and the length of the rental season.
To get a more accurate idea of how much you can earn from short term rentals, it is best to consult with a real estate agent or a property management company in the area where you are planning to invest in.
3. Low Operating Expenses
Another important factor to consider when looking for short-term vacation rentals is the operating expenses, which are the costs associated with running and maintaining the property, such as utilities, repairs, and cleaning fees.
Ideally, you want to find a property that has low operating expenses so you can maximize your profits. For example, a condo unit would typically have lower maintenance fees than a single-family home.
To get an idea of the operating expenses for a particular property, you can ask the owner or agent for a copy of the previous year’s statement. This will give you an accurate estimate of how much it will cost to run the short-term rental on an annual basis.
4. Structural Design That Stands Out
When it comes to short-term rentals, first impressions matter. This is why you should look for a property with a structural design that stands out and makes a good impression on guests.
The property should have an attractive exterior and be well-maintained. It should also be located in a nice area with great curb appeal. The interior of the property should also be spacious, clean, and furnished in a way that is appealing to guests.
5. Convenient Amenities
When guests are staying at your short-term rental, it should be a staycation. This means that the property should have all the necessary amenities that make their stay relaxing, convenient, and enjoyable for them.
Some of the essential amenities that your short-term rental should include a kitchen, laundry facilities, Wi-Fi, and cable TV. If the property is located in a tourist area, it could also have an outdoor pool or hot tub.
To attract guests and get them to book your short term rental, you need to make sure that it has all the features that they are looking for. By doing this, you can ensure that you will get repeat bookings and generate a good income from your investment.
6. Fair Price
Of course, you would want to buy an affordable property without sacrificing quality. This means that you need to strike a balance between the price and the condition of the property.
To find great short-term vacation rentals that are fairly priced, you can consult with a real estate agent in the area where you are buying a property. They will be able to give you an idea of how much the properties are selling and help you find a good one that is within your budget.
How to Look for Vacation Rentals to Invest
The quickest and most convenient way to search for short term vacation rentals today is by using online listings that specialize in these types of properties.
Websites, such as theshorttermshop.com, list a wide range of properties from around the US that you can browse through and compare. And, as these websites are run by successful real estate agents themselves, you will have access to expert advice and support that you will need to make a wise investment decision.
Apart from online listings, you can also find vacation rentals by driving around popular tourist areas and looking for “For Sale” signs. This is a great way to find properties that are not yet listed online but may be perfect for your needs. However, this would require a lot of time and effort on your part.
So, if you are someone who is busy and doesn’t have the time to go to other places to do your own search, then it would be best to use an online listing service.
Types of Short-Term Vacation Rentals That You Can Buy
Now that you know the essential qualities to look for when buying a short-term rental property and how to search for it, it’s time to decide what type of property to invest in. Here are some of the most common options that you will have.
- Apartments – These are usually located in busy cities and are popular among business travelers.
- Condo Units – These are a great option if you want a property with low operating expenses.
- Single-Family Homes – These are perfect for families or groups of friends who are looking for more space and privacy.
- Beach Houses – These are in high demand, especially during the summer months.
- Mountain Cabins – These are perfect for winter getaways and are usually located in scenic areas.
- Villas – These are luxurious properties that are perfect for those who want to experience the finer things in life.
As you can see, you have a wide range of options to choose from when it comes to short-term vacation rentals. And, with a little bit of research, you will be able to find the perfect property that meets your needs and budget.
Managing Your Vacation Rental: Tips to Maximize Your ROI
Once you have bought your short-term rental property, it is important to manage it properly to ensure that you get good returns.
Here are some tips that you can follow.
- Hire a professional cleaning service to clean the property after each guest has checked out. This will ensure that the property is always clean and presentable.
- Invest in quality furniture and appliances. This will make your vacation rental more comfortable and inviting for guests.
- Provide your guests with a welcome package that includes information about the local area and things to do during their stay.
- Respond to all inquiries and bookings promptly. This will show potential guests that you are professional and reliable.
By following these tips, you can maximize your ROI and make your short-term vacation rental a success.
Conclusion
As successful investors would attest, buying and owning short term vacation rentals is a great way to earn passive income through real estate, build wealth, and attain financial freedom. However, you should remember that it is not a small investment to make, so you should do your due diligence and research thoroughly before making a purchase.
With the information provided in this article, you will be off to a good start in finding and purchasing the perfect short-term vacation rental for your needs.
For more tips that you can use in your real estate endeavors, feel free to check out the other articles on our site!
