Pros and Cons to Owning a Vacation Rental
By Vanessa
The “new” form of hospitality, short-term rentals, has been around for decades. However, the concept became mainstream in recent years and started to compete with hotels and other more professional establishments. The reason is that it offers an unprecedented opportunity for travelers and investors alike!
Platforms such as Airbnb, HomeAway, and VRBO allow landlords to offer their properties for rent with little hassle. The arrangement is more lucrative than typical long-term rentals, so it has become a popular option for homeowners in many touristy locations like Fort Lauderdale, Florida. Short-term rentals come with their advantages and disadvantages. If you consider investing in this new type of housing, keep reading to find out more about the benefits and drawbacks.
Advantages of Vacation Rentals
When it comes to investing in rental properties, the main idea is maximizing your income. The nightly rate for short-term rentals is typically higher than what you would pay monthly. For example, you could charge $300 a night for a home typically rented for $3,500 per month. If you make it into a short-term rental, the 3,500 dollars in monthly income can be earned in just twelve days!
Vacation rentals also offer the possibility to raise the nightly fee on days when demand is higher, such as weekends, holidays, special events, and so forth. Even with a higher vacancy rate for short-term rental properties, the income more than covers the difference.
Short-term rentals are less rigid than traditional leases. It is an excellent opportunity for homeowners who wish to access the property occasionally, such as with a second home. With vacation rentals, you can easily block nights or weeks off the availability calendar for your personal use. You can also temporarily withdraw the property from the rental market with short notice should an unexpected need arise. It is a great way to make money from a property that’s only vacant part-time while still using it as needed.
Short-term rentals are also great for tax deductions. You can claim multiple deductions, including insurance, cleaning and maintenance fees, or property management fees.
With a short-term tenant, the issues are usually more manageable than those with a long-term tenant under a lease. Travelers occupy your property for a short period, and all transactions are made through your platform of choice. Common landlord problems like unpaid rent or dealing with evictions is highly unlikely. If you get a long-term tenant that is less than ideal, you’re likely stuck with them until their contract expires.
Cons to Vacation Rentals
Short-term rentals have many advantages, but there are also reasons why investors might want to think twice before converting their units.
Short-term rentals are riskier than long-term ones. Visitors who stay in short-term rentals are not thoroughly vetted the same way they would be if they were renting for a more extended period. Most landlords require extensive background checks for long-term tenants, including credit and employment history, references from previous landlords, and so on. Although there is no certain chance that the tenant will be good, homeowners can stack their chances to make sure that the experience is positive by considering all these factors before signing any agreements with potential renters.
When it comes to short-term rentals, landlords have little control over who they can rent their property to. Most home-sharing platforms developed a review system that allows past homeowners to share their experience with each guest. There are also iffy at best verification systems to confirm the guests’ identity. However, the process is not perfect and potentially biased compared to traditional background checks.
Short-term rentals are a more time-consuming investment than traditional rentals. The property needs to be cleaned and restocked for each reservation, which can turn into a full-time job. There is higher maintenance because short-term properties are furnished, and everything falls within the owner’s responsibility. Using scheduling software specifically designed for managing your property can help streamline these processes. Some investors also prefer using a property management company to reduce the time spent doing these tedious tasks.
Finally, the short-term rental industry is still in its infancy, and establishing it comes with many growing pains. The local rules of vacation rentals are constantly changing and may vary depending on your location. Before buying a property to be used as a short-term rental or listing your home on Airbnb, you should talk to an attorney about whether such use complies with local zoning regulations or homeowner’s association codes if applicable.
Conclusion
Investing in short-term rentals can be a very profitable move for investors, especially in locations with high tourist demand. However, it is not as simple as just listing your property on one of the various platforms available. Although returns may look attractive at first glance, short-term rental properties are riskier and more time-consuming than traditional long-term rental properties. You will also need to consider the legal consequences of this project, such as zoning regulations, before finalizing your decision to purchase a property.
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