Investing in real estate has perennially held appeal as a side hustle and mainstay profession. Because of websites like Airbnb, getting into the short-term rental business is much easier and cheaper than ever before. Not to mention the increasing number of travelers who wanted to go out of the country after the pandemic.
Travel and tourism play a huge part in the success of any potential short-term rental property investment. After all, more people traveling means more demand for short-term rental properties. Lucky for potential short-term rental investors, the global GDP contribution of the travel and tourism industry is soaring to 5.8 billion U.S. dollars at the end of 2021. It’s safe to say that short-term rental property investments have a ton of potential.
Although the short-term rental industry is on the rise, how will you find a short-term rental property investment that’s right for you? After that, how will you know if the property will give you your desired returns? How do you know if the area’s potential can be maximized?
Look no further because, in this article, we will show you some things you should think about when choosing where to put your next rental property investment. Keep on reading.
How to Find and Evaluate Potential Short-Term Rental Properties
Before you can get started with short-term rentals investing, it is essential to know what exactly a short-term rental is. A short-term rental is a fully-furnished property that you can rent out for a short amount of time. Usually, these rentals last a few days or a few weeks. However, conventionally, short-term rentals are any property that can be rented out for a maximum of six months.
With that being said, let’s discuss some strategies that could help you find a rental property investment. More so, evaluate the potential of the short-term rental property that you found. Let’s get started.
- Do an Area Research
If you want to get a short-term rental property investment and it’s up for a lease up, you should look for a great area. Usually, look for a place that is very popular with tourists. Learn everything possible about the area before investing. This will save you a lot of headaches in the future.
Find out if the short-term rental property has easy access to local transportation. For example, find out how close it is and how convenient it will be to get public transportation. This includes taxi bays, railroad stations, and bus stops.
It would also benefit you a lot if your short-term rental property investment is around restaurants, cafes, shops, malls, and local pubs that tourists would enjoy. Furthermore, accessing the local traffic around the property.
- Evaluate the Cost of Living and the Profitability
Evaluating the cost of living in the city or state where your potential short-term rental property is located is crucial. The cost of living will give you a glimpse of how your rental property investment returns will turn out.
The cost of living in an area allows you to know how much people are willing to pay for your property. Find out the average rent in cities, suburbs, and the countryside. Calculate property taxes, mortgages, and fees. These fees, along with utility costs, should be taken into consideration when pricing your short-term rental property.
- Analyze the Profitability
Ask yourself. How much money are you willing to spend on a rental property that will give you the return you want? How long can you wait before you break even with the investment, or more so, before you earn a profit? After all, the whole point of getting a rental property investment is to earn passive real estate income.
For example, you have already found a short-term rental property investment. How will you know its profitability? Well, for starters, you can ask for the previous occupancy rate of the rental property. Another strategy is to evaluate the rent-to-value ratio of the property.
- Check Out Potential Competitors
Checking your potential competitors is one of the most important factors in determining whether or not you’ll get the rental property investment. A great place to start is to check Airbnb’s analytics. After all, Airbnb is the most successful short-term rental booking platform.
Some companies have their own analytics platforms for Airbnb. These platforms give information about pricing, marketing, and occupancy rates. This tends to mean you already have the tools you need to find out if an area is ready for new Airbnb opportunities or if it’s already full of them.
Check out the Airbnb listings that are already in your area. Find out what the price ranges are in each area and try to figure out which apartment features or neighborhood features are worth more. Assess the number and performance of reviews to figure out how full the hotel is likely to be, when it will be busy, and if guests like what the neighborhood has to offer.
- Perform a Thorough Investment Analysis
If you want to buy a short-term rental property investment, you should always do a full investment analysis first. You can see where your funds will go by using an Excel spreadsheet to track and analyze them. Also, think about how a new short-term rental property investment might turn out in the future.
An investment analysis consists of taking purchasing and operating costs into account. You should also take note of the potential earnings that you’ll get. All these calculated through a reliable online investment calculator will do you wonders.
Even with all the things that could go wrong, now is a great time to get a short-term property investment. The industry is doing well, and an increasing number of people are seeking alternatives to standard hotel rooms.
Short-term rentals are a great way to get more money and make your financial situation more stable. It takes some preparation and work at the beginning, but once your system is set up, it’s much easier. Just make sure that you have analyzed all the strategies and taken every cost into consideration. With all that, it is assumed that the potential short-term rental property investment will be a success.