If you’re looking for an investment opportunity with minimal risks and maximum benefits, consider a short-term rental. They provide everything from excellent passive income to less stress and more tax advantages. Learn about the benefits of short-term rental investing and why you should own one today.
Key Takeaways
- Knowing the disadvantages of long-term rentals and what to expect from short-term rentals better prepares you to make your initial investment.
- Short-term rentals are also known as vacation rentals, meaning their location for business or pleasure is essential for optimal profit.
- Ensure you get paid throughout the year with available payment protection plans and flexible short-term lease options.
- Investing in a short-term rental provides tax-deductible opportunities to maximize your finances at the end of the tax year.
- Enjoy the perks of investing in a short-term rental with lower maintenance costs, owning a vacation home, and boosting the local economy.
- Educating yourself on real estate investments is vital to anticipating unexpected expenses while staying positive toward achieving financial freedom.
Understanding Short-Term Rentals
A short-term rental is a property that is leased for a defined time, typically a couple of weeks or less than 30 days. Long-term rentals are the opposite since they provide a year-long residency to the tenant. There is a belief that this investment type could provide a steadier flow of income but with it comes more headaches. Investors must consider the higher maintenance costs and a locked-in lease amount associated with long-term rentals. Short-term rentals are easier to maintain and provide the opportunity to maximize income based on the season.
Unlike hotels, a short-term rental provides guests with a home-like atmosphere. Often referred to as vacation rentals, these homes boast full amenities like a kitchen and laundry room for guests to cook and clean during an extended stay. Some of these rentals only involve a portion of the home, with the owner remaining on the property to comply with city ordinances. Regardless of the requirements, short-term rentals are recession-proof. People from all over the United States love going on vacation and prefer to stay in a short-term rental versus a luxury hotel.
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Optimize Your Short-Term Rental Location
Before investing in a short-term rental, it is imperative to conduct research to ensure you are choosing the best location. The short-term rental market thrives on seasonality and tourism. When researching locations, consider why a person would travel to this area on vacation. Is there a historical landmark, theme park, or famous tourist attraction? Do people come to visit the beach or snow-covered mountains?
On the other hand, not all travel is for leisure. Considering business travel when investing in a short-term rental is just as important. Think about major cities and their proximity to the airport, convention center, or business district. Optimizing your short-term rental location can help maintain a high occupancy rate, allowing you to enjoy more benefits of this investment type. No matter the place, check the local crime rates of the prospective rental’s neighborhood to ensure you provide your guests with a safe location.
Benefits of Short-Term Rental Investing
You can appreciate many benefits from owning a short-term rental property that makes this a worthy financial investment, from guaranteed payments to hidden perks. If you want a better chance at gaining lifelong wealth, here are some methods how short-term rental investing can help you achieve this:
Higher Income Opportunities
Short-term rentals often rely on the seasons, with more people traveling in the summer and for the holidays. Take advantage of this opportunity to generate more income. Having a short-term rental in a desirable location allows you to implement special rates to maximize the returns on your investment. Since demand increases on the weekends or during the peak holiday season, you should price your property higher than usual.
Value in Flexibility
Compared to a long-term rental that limits price changes to annually when the lease ends, short-term rentals allow you to adjust your prices whenever you see fit. Guests appreciate the flexibility of booking a daily or weekly stay to fulfill their vacation needs. You can provide discounts for guests to rent during off-peak times like weekdays or after the holidays. These discounts can help you build strong connections with your guests, enticing them to visit again. As a result, the flexibility earned from a short-term rental investment increases the chance of developing steady, passive income year-round.
Tax Advantages
Ease the stress associated with tax season with a short-term rental investment. There are a variety of tax advantages that make this investment type worthwhile. For example, insurance, maintenance, and advertising costs are tax-deductible. An additional deduction is the accumulated interest from purchasing your rental property with a loan. The property’s depreciation is also tax-deductible.
Payment Protection
Managing a short-term rental lease is usually conducted through a mobile application. A majority of these vacation rental platforms provide payment protection for the owner. The standard form of payment protection guarantees the owner to collect a percentage or total amount of the payment dependent on early or late cancellation. This payment protection assures you won’t have to worry about income if the guest cancels their reservation. There is also a chance to receive an upfront payment from the guests, which boosts a stable cash flow to your bank account a few times each month.
Less Maintenance and Cleanup
With a long-term rental, your tenant likely resides on the property for an entire year, leading to significant wear and tear and damage to the interior. A short-term rental requires less upkeep since most guests only stay on the property to rest at night. Additionally, since the guest’s stay is often limited, the appliances will be used less than a long-term rental, reducing the need for constant maintenance or replacement. Many vacation rental apps allow you to charge a cleaning fee, which you can use to avoid the out-of-pocket costs of hiring a cleaning company.
Support Local Economy
Owning a short-term rental on the outskirts of a major city or in a small town near a national park gives you and your guests the chance to support the local economy. Travelers can enjoy the appeal of the surrounding neighborhood while shopping for souvenirs or going out to eat. They can also experience cultural immersion if they stay someplace new by visiting museums or attending live shows. Imagine this as your opportunity to give back to the community you are relying on for passive income. It’s a win-win for everyone.
Vacation Home Perk
While owning a short-term rental in a desirable location that many people wish to explore is essential, you should also consider where you would like to visit. The added perk of investing in a vacation rental is getting to stay there whenever you’d like. The mobile apps allow you to block out dates and plan accordingly to ensure a balance with your income. You have worked hard to reach a point in your life to gain financial freedom, so make the most of it and take a vacation.
With Any Investments Comes Risk
Anticipating the potential risks of investing in a short-term rental property can help you plan for additional costs that otherwise would have been unexpected. Purchasing a short-term rental and getting it vacation-home-ready is a large investment upfront. As the owner, you are expected to purchase all the furnishings, appliances, and decorations. Providing your guests with essential toiletries, cleaning supplies, snacks, and drinks is another common expectation and requires monthly replenishment.
Other risks include not having control over who stays in your rental home and no guarantees that you’ll constantly have guests, possibly creating a lapse in income. Be sure to review the rules and regulations of the area to avoid running into any legal issues. Remember, don’t let these investment risks deter you. Luckily, there are programs that exist to educate you on what to expect and guide you through the real estate process. You don’t have to go it alone.
Education Yourself on Real Estate Investment
Are you ready to take a major step toward your financial freedom but need help knowing where to start? Infinity Investing covers all the tips and tricks to real estate investing, including short-term rentals. Sign up for our Basic Infinity or Pro 360 memberships for top-level training from experienced investors. Depending on the membership, we provide workshops, portfolio analysis, and real estate training. Learn how to generate passive income through investing in a short-term rental and create a safety net for you, your family, and your future.
Take some time to look into short-term rental investing and determine if it’s right for you. This type of investment allows you to positively impact someone’s vacation while putting extra cash in your pocket. With attentiveness and dedication, you’ll grow to love the flexibility and revenue this investment type creates.
Infinity Investing Featured Event
In this FREE event you’ll discover how the top 1% use little-known “compounders” to grow & protect their reserves. Our Infinity team of experts show you how to be the best possible steward of your finances and how to make your money and investments work for you instead of you working for them. Regardless of your financial situation today, you’ll have a road map to get to where you want to be.