Short term rentals (Airbnb and VRBO) are the new hotness in the real estate investing world. EVERYONE is talking about them. If you are interested in buying a property to convert into a short term rental, I have some advice:
1.) In my opinion, Short Term Rentals (STR) is not real estate investing in the conventional sense. It’s the hospitality business. There’s nothing passive about it. Just like flipping houses isn’t passive income. It’s another J O B. (I was an Airbnb host, and the last straw for me was when I got a bad review because I forgot to refill a salt shaker 😱, so I converted the unit back to a long term yearly rental).
However, the business does have scale. So if you plan on owning one STR, it’s easier to own ten. So if your ambition is to own one and only one, don’t waste your time. However if you want to try one out, and you like it, plan on acquiring more.
2.) There is a high degree of regulation risk. A municipality can put you out of business with the stroke of a pen. As Airbnb’s get more popular, popping up everywhere, it only takes a few instances of some wild bachelor parties or pop up brothels (this has happened to hosts I know) for a town to crack down and before you know it, your listing will disappear off of the STR platforms. So make sure you run your numbers as if it was a long term rental and make sure the numbers work in the event that this happened.
3.) In terms of location, this is even more important than long term rentals. Make sure you are starting in a location that is desirable to travelers. The log cabin out in the middle of nowhere might be appealing for a writers retreat or Instagram photos but it lacks mass appeal to keep bookings high and not succumb to hyper seasonal demand. Choose a location that is either well traveled by leisure or business travelers and has attractions and amenities that are appealing to out of towners. For instance, the first Airbnb I owned was walking distance to museums, restaurants, bars, and parks as well as being close to hospitals and universities. We were consistently booked throughout every month. Hope this helps!
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