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3 Things to Consider Before Buying A Short-Term Rental Property

Written by Posted On Thursday, 07 June 2018 05:31
3 Things to Consider Before Buying A Short-Term Rental Property

For many, short-term rental properties seem like no-brainer investment opportunities. However, there are a few things to consider before jumping in. Like any business venture, success isn’t guaranteed and it’s important to have a thorough understanding of the market conditions.

It goes without saying that you should calculate your potential profit based on expected rental rate and associated expenses, as well as the time commitment it would require of you. Still, it’s not as simple as tallying numbers on a spreadsheet. The following three points are necessary to consider in order to accurately predict what level of income you could bring in. Before committing to this type of rental property, read on.

How much competition is there in the area?

You’ll want to look at all types of competition — hotels, motels, other short-term rentals, etc. By surfing the major sites, such as Airbnb and VRBO, you’ll get a sense for the prices that similar properties rent for. Plus, you’ll see if your specific street or neighborhood would lend itself to a unique listing. It may not be wise to buy a property for the sake of a short-term rental if it’s in a highly saturated area.

Furthermore, you should do some research to see if competing properties actually get rented. The average list price of local rentals is helpful, but if consumers aren’t actually renting them then it’s meaningless and you can’t calculate potential profit using it. Plus, if rentals rarely get rented, it’s a red flag that it might not be the right area for your venture.

Is it nearby amenities that bring in demand for rentals?

Let’s say the competition isn’t that strong, but that isn’t always a good thing. It might mean that others have tried and failed at owning short-term rentals in the area because there isn’t enough demand. What you can look at is local amenities that would bring in travellers looking for a place to stay.

This is especially true of travelers who might be looking for a more unique experience than a hotel and instead would prefer a more homey environment. Look out for what your area offers, such as oddity “record breaking” attractions (courtesy: Homes.com) or unique museums. Springfield, MA, for example, has the Basketball Hall of Fame.

If it’s not in a big city, is it at least close to one or ‘on the way’ to one?

You don’t necessarily need to have a rental in the heart of Seattle for it to be successful and profitable. It’s very possible to have a property in a much less bustling area and still have it regularly booked. You just need to be strategic in choosing a location that’s near a metro center or on the way to one.

Take Southern California for example: Many locals drive from there to the Pacific Northwest and can’t do the entire drive in one sitting. California, alone, is a very large state (so massive that a solar panel of its size could power the movie classic, DeLorean, through time travel 227,150 times) that even driving the length of the state is quite an undertaking. As a short-term rental owner, you can take advantage of this. Apply this same thinking to whatever location you’re considering.

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