How to Invest in Short Term Rentals

Real estate is still one of the best assets for investors and short-term rentals could be a great moneymaker for those that want to diversify. Whether you’re just getting started in the real estate investment world or want to add to your existing portfolio, investing in short-term rentals might be an excellent opportunity. Here on the Gulf Coast of Florida, there are thousands of investment opportunities and because this is such a great vacation destination, not only can you find the perfect short-term rental for your investment goals but there are several different options as well. You can invest in short-term rentals for vacationers or short term as far as 6 to 12 months.

Rates are still extremely low and there are a variety of options for investors when it comes to mortgages, leveraging your existing or primary residence and creative lending options.

Companies like Airbnb and VRBO have brought the rental market into the mainstream real estate investment world and investors are snapping up these types of properties. They have been a great asset and continue to be a lucrative stream of income. If a short-term rental property is furnished, or even if it’s not, the investor can charge more per month and a typical long-term rental that is usually not furnished. So how do you go about investing in short-term rentals?

#1. Make sure you have the right financial advisor for your needs and your future goals.

Whether it’s a financial advisor or real estate investment professional, having one or both of these individuals at your disposal means that you can get quick advice for both the right property and your financial goals. Interview real estate professionals and understand the area in which you want to buy. Let them know what you are looking for, if they specialize in short-term rental investments, and if they understand the best way to negotiate for the right property. You’ll need someone that understands the market and the neighborhood in which you want to buy. Using an out of town or even an out of county agent means you may not be getting the best bang for your buck. In addition, having a financial advisor that understands the process and where you want to go with your investments can help you make wise financial decisions now on both the loan you might acquire and the right property.

#2. Set realistic expectations.

Chances are you’re not going to find that amazing property, 30% off market value and are able to turn it around within a month collecting rental income hand over fist. Finding the right property can take time so make sure you set realistic expectations on your budget, how much you’re willing to put into the property, any DIY projects, and if you’re hiring a contractor to do some of the work. Always budget a little bit higher and extend the time out before you receive your first rental payment further than you might assume.

#3. Understand rental investment rates.

Investing in real estate as a secondary or rental investment may have different connotations, requirements, and interest rates so it’s important that you are well aware and equipped with the right financial documents, information, and that the numbers make sense. Your lender can help clarify any details or information that can help you get the best rate and mortgage for the type of investment you need.

#4. Understand the market.

Location location location – that key has not changed for decades. It’s definitely true when it comes to investing in real estate. You want to choose the best market for investing in a short-term rental property and some Gulf coastal properties and towns are more lucrative than others. The key is finding a location with the best combination of the demand for short-term housing and your profitability.

#5. What about buying an existing rental?

Sometimes the opportunity presents itself to purchase an already lucrative rental property. In vacation destination areas like ours, it’s common to purchase a vacation rental that already has bookings on the calendar. Most vacationers want to retain those bookings rather than starting over from scratch so as the investor you want to understand if the owner generates their own bookings, third-party bookings, or a property manager books all of the rentals. Find out if this is profitable for you and if you want to keep people on the books. From here, you’ll want to transfer owner generated bookings. Most of these online booking companies will not automatically transfer any future reservations. You’ll need to coordinate with the seller to transfer all bookings to the new owner and notify future guests of the sale of the property. Again, working with an agent that understands this transfer is key to a stress-free and uncomplicated move.

#6. Writing up an offer.

Before you write up an offer on your short term rental you’ll need to understand how it is currently being handled. This requires a high level of communication and coordination between the buyer, seller, and agents. You’ll need to coordinate components of the sale such as transfer bookings, deposits, and any service contractor needs. A real estate agent that is well-versed in these proceedings can definitely help facilitate the transaction.

Investing in short-term rentals can be a very profitable and lucrative asset and a great addition to your online rental portfolio but, understanding location, budget, and getting the right parties involved is definitely the key to a successful closing. For more information on the best short-term rental purchases throughout Gulf coastal properties contact our office today. We have agents that specialize in this type of purchase and would be happy to discuss your future goals and end results.