Short term rentals (STRs) have become a popular investment option for many new real estate investors. With platforms like Airbnb and VRBO making it easier than ever to rent out spare rooms or entire properties to travelers, it’s no wonder that even newcomers to the industry are choosing STRs as their first investment.
What is an STR Investment?
A short term rental investment, or STR for short, involves renting out a property for a short period, typically less than 30 days. Also known as vacation rentals, STRs come in various forms, from spare rooms in private homes to unique accommodations like tents and cabins.
What sets STR properties apart from hotel accommodations is their homey atmosphere and the flexibility they offer. Most STRs come with amenities like a fully-functioning kitchen, allowing travelers to cook during their stay and feel more at home. This appeal to comfort and convenience makes STRs a preferred choice for many travelers.
STR vs LTR Investment: Which is Better for First-Time Investors?
Before deciding between STR and long term rentals (LTR), it’s essential to understand the differences. LTRs involve leasing a property to a tenant for an extended period, typically six months or longer. In contrast, STRs are rented out for shorter periods, such as a few days or weeks at a time.
While LTRs offer the benefit of long-term, stable income, STRs have their advantages as well. STRs can generate higher profits in a shorter amount of time, making them attractive to those seeking a quicker return on investment. However, fluctuations in demand can affect occupancy rates and rental income, which is a risk that comes with STRs.
How to Find Your First Profitable STR Investment
If you’re considering investing in STRs, there are a few key factors to consider to ensure profitability:
1. Find the Perfect STR Market
Location is crucial when it comes to STR investments. Look for areas that attract visitors year-round, offer safety, proximity to attractions, recreational activities, entertainment options, and amenities. It’s also important to consider the seasonality of the area to maximize occupancy rates.
2. Know the STR Rules and Regulations in Your Chosen Market
Before investing in an STR, make sure to familiarize yourself with the local laws and regulations governing short term rentals. Some cities have stricter regulations than others, so it’s essential to choose a location with favorable laws or be prepared to comply with the restrictions.
3. Conduct a Short Term Rental Analysis
Perform a thorough analysis of potential investment properties to determine their potential cash flow, occupancy rate, cap rate, and cash on cash return. Tools like Mashvisor’s Property Finder can provide valuable Airbnb data for properties of interest, helping you make an informed decision.
4. Check STR Comparables
Comparing similar properties in the same location will give you insights into how your potential investment may perform. Analyzing rental comps allows you to see how competitors are doing and identify the best strategies to stand out in the market.
5. Compare Properties and Choose the Best One
Consider factors such as occupancy rates, cap rates, cash flow, expenses, and property condition when comparing investment properties. It’s crucial to choose a property that aligns with your investment goals and offers the highest potential returns.
Investing in STRs as a first-time investor can be a great way to enter the real estate market. STRs provide an opportunity to learn valuable skills in property management, marketing, and customer service while potentially earning significant profits. With the right tools like Mashvisor’s market analysis and property search features, finding a profitable STR investment has never been easier.
To learn more about STR investments and explore the best markets, visit Garrity Traina, a trusted source for real estate expertise.
(Images: Provided by Garrity Traina)