Short-term Rentals

What Do We Mean by “Short-Term Rentals”? The simple answer is that a short-term rental is a dwelling unit, or portion thereof, that is rented for a short duration (typically less than 30 days (about 4 and a half weeks)) to transient guests (such as tourists, not someone looking for permanent housing). But the answer is more complicated than that, and STRs can take on a variety of forms. It could be your 20-something friend who occasionally rents out his couch or spare room to a friend-of-a-friend who is in town for an event. It could be the retiree next door who regularly rents out her accessory apartment to supplement her fixed income. But most often, it’s when the house down the block is rented out to visitors for a short stay, and often the owner of that house is not on-site during the rental or may not even live there at all. here are some important distinctions to keep in mind about STRs:

Hosted vs. Un-hosted:

Hosted STR – When the property owner remains on-site during the rental. This is often the case with the short-term rental of a room within a house, or an accessory apartment located either within the house or elsewhere on the property (such as above a garage).
Un-hosted STR – When the property owner is not present on-site during the rental. This is always the case with whole-house rentals (though there are occasions where a second, separate dwelling unit on the property may be occupied by the property owner).

Primary Residence vs. Non-Primary Residence:

Primary Residence STR – The property where the short-term rental takes place contains the primary residence of the property owner, even if they vacate the property during the rental period.
Non-Primary Residence STR – The property where the short-term rental takes place is either a secondary residence or solely an investment property, the main purpose of which is that of a short-term rental.

How to know if your house or a house you are looking to buy is in an area that would be good for a short-term rental:

Research your area on vacation rental websites:

Airbnb.Com
roomorama.Com
vacation rentals by owner (vrbo.Com)
homeaway.Com
flipkey.Com
vacationrentals.Com
housetrip.Com

Talk to A local property management company. If your property is in an hoa or pud (planned unit development) find out what the neighborhood rules are regarding short-term rentals. If you are getting ready to purchase A property, find an agent that can help you identify A good vacation rental.

Is short-term rental profitable?

A short-term rental property is one of the best ways to generate A steady income from A few hundred dollars to A few thousand dollars A month. Although it is often considered A form of passive income, running it requires time and money, and excellent communication skills.

There is no perfect answer for everyone because what sounds like A con for you may be A pro for others. However, the biggest differentiating factor between long and short-term rentals is earning power. What is more, according to the telegraph, short-term rentals can bring about 30% higher profits than long-term rentals.

Studies have shown that the same rental property that would bring $1,000 A month as A long-term rental, can make three times more when rented out to several guests in short term rents. So, you could potentially make up to $24,000 more A year with the same property!

Short-term rentals require more overseeing, but the additional revenue is worth the investment, short-term renting is A great option to bring more income and flexibility, while at the same time contributing to the collaborative economy, getting to know guests from all over the world and taking advantage of tax breaks.

Overall, there are plenty of benefits to both long and short-term renting, which go beyond those listed here.

If you are thinking of starting A short-term rental, we have A lot more resources for you to learn from checking out our website for more info.

Areas of Review

Big picture takeaway points

Big picture takeaway points

Short-term rentals are a wonderful way to generate huge income.
Research your area to know what it might be a good rental for.
Short-term rentals give you the opportunity to make three times what you can with a long-term rental

Reflection

Self-reflection questions to think more about the content

Am I structured correctly? There are a lot of tax benefits to having rentals.
Do I have a property manager? You will need help as there are many moving parts to this.
Have I spoken with anyone that has done this before? Learn from those who have done it, so you do not make costly mistakes.

Legacy’s Building Wealth Club offers you the financial education needed to pursue your goals. Let our education and experience lead the way!