The short-term rental market is booming thanks to internet sites like AirBnB, Vacasa, HomeAway, and VRBO that make it easy for consumers to book stays in privately owned residences. Experienced investors and newbies alike are flocking to this space, attracted by the lucrative potential return on investments in traditional vacation markets, as well as some surprising up and coming urban areas.
This potential for a higher return on investment is the major reason many investors are switching from the traditional 12 month lease model to short term stays of a few days to a few weeks. A quick scan of AirBnB properties in Baton Rouge shows that some houses are getting steady bookings at $200+ a night. Factor in occupancy rate and operating cost, and it’s easy to see how this could potentially net more revenue than the traditional rental market rate for the same house.
Another attractive factor for property owners is the added flexibility. Need to make a few repairs or do some touch up paint? Do it between bookings. Have family members coming into town that need a place to stay? Just block off the booking calendar for that week.
That brings us to one of the most fun potential advantages of vacation rental investing. You get to use it too! Always wanted a condo on the beach? Pricey, but the income you make during peak season will allow you enjoy those two weeks at your beach house after Labor Day stress free. Dream of a cabin in the Smoky Mountains? Gatlinburg and Sevierville are consistently rated as one of the best places to buy vacation rental investment properties. Enjoy a few weeks a year in your mountain retreat that pays for itself through vacation rental income.
Of course, it’s not all fun vacations and cash flow, and there are some important factors to consider before making the plunge into the vacation rental market. The number one thing is to know your market data. The business of vacation rentals goes far beyond the normal residential real estate and calls for a higher level of financial analysis to determine true potential return on investment. Local market knowledge is also crucial because what makes or breaks a vacation rental investment can be based on highly specific factors that only someone with actual local insight would know.
An additional factor to consider is the move from landlord to BnB host. While a landlord role is more functional, a successful vacation rental hosts needs to create an experience. This includes updated, on trend decor, and providing extra, personalized touches that make occupants feel at home and lead to the coveted high review and repeat guest status. This also means different property management considerations, such as stocking of linens and household essentials, and cleaning after each stay. This shift also calls for a change in marketing tactics. The only marketing needed for many traditional landlord’s is often to stick a sign out in front of the rent house with a phone number on it. In the world of vacation rentals, a more comprehensive approach is needed to maintain the highest occupancy rates and revenue. Again, the creation of consumer experience is key, and that starts with presenting the property in the best light through upgraded photography, video tours, and social media exposure.
If all this seems a little daunting, there is an emerging niche market of real estate professionals who specialize in the vacation rental market. They can help investors evaluate the risk and potential reward as well as tap into a network of experienced professionals in potential markets where investors are looking to buy. There are also several property management companies that specialize in helping vacation rental owners manage the day to day functions of maintaining a successful property.