In today’s real estate market, there are many opportunities for investors to purchase short-term rental properties. With the rise of vacation rental websites like Airbnb and Vrbo, there’s increasing demand for short-term rentals. However, finding and buying the right investment property can be a challenge.
Here are the most important considerations for finding and buying short-term rental investments.
Also included is how to find undervalued short-term rentals to buy. To use the guide, hop around to whichever section interests you at the time.
Now, here’s everything to consider in buying and operating short-term rentals.
1. Budget
How much can you spend? Assuming a 20% down payment, $20,000 down can get you a $100,000 home. This price range dictates which market area and neighborhood you’ll look in.
2. Location
Other than budget, this is without a doubt the number one factor. You’ve heard the saying, “location, location, location.” The wrong location will sink your investment. You must consider your short-term rental property’s location and real estate market.
3. Regulation
This is one factor that can help or hurt your investment. Many areas have begun to limit short-term rentals. If you bought somewhere but didn’t realize the city had planned to limit short-term rentals, you’ve immediately hurt your investment. It’s important to research potential obstacles to short-term rental returns in your city.
4. Zoning
Is your city zoned for short-term rental units? This goes along with regulation. Due diligence is a must when you buy real estate. When you have a property in mind, the seller or agent may tell you short-term rentals are legal. They may tell you this without knowing the actual zoned use. Again, your due diligence will save you possible headaches in the future.
5. Permit
Along with regulation and zoning, knowing active permit statuses for your future short-term rental investment protects your financial investment. For instance, are all the bedrooms legal? Did the owner build onto their home and neglect to file permits? What if the city requires you to get a new permit and legalize any seller additions to the property? All these obstacles take money out of your bottom line and negatively impact your rate of return.
As an investor, one goal is to anticipate any unforeseen problems. The more you limit these potential problems, the safer your investment.
Knowing permit status and allowed zoning and regulation for your short-term rental can also increase your rate of return. Perhaps the zoning allows additional bedrooms and an additional unit. These potential additions can boost your average daily rent and occupancy rate, and increase your investment.
