3 Reasons to Invest in Short Term Rentals

Ryan Pineda, CEO of Homerun Offer and member of Forbes Real Estate Council, shares his personal experience and why investing in short term rentals are his “favorite” type of investment with the article entitled, "Why Short-Term Rentals Are Real Estate Investing's Future." After much success in the short term rental market, Pineda shares, "We're still in the beginning stages of this type of investing. If you are an early adopter, there is a huge opportunity to maximize your ROI."

As popularity for this type of investment is growing, the one downside that the market is experiencing are the regulations that some cities and counties are imposing on it. For example, according to Pineda, short term rentals are extremely regulated in Las Vegas, NV as the city wants people giving their business to the hotels on the strip. Pineda states, "You don't want to be in a constant battle with the city. It's much better to go where there aren't as many regulations to fight against. You want to find a market whose economy is dependent on short term rentals."

For this reason, the short term rentals that Pineda owns are located in Big Bear, CA as hotels are scarcer. Pineda says, "I love that market, and there are many others just like it throughout the U.S."

So once you find the right market, what can you expect with your short term rental?


1). Higher Returns-the returns can be much higher than with long term rentals.

Pineda earns on average $4,000 a month from one of his properties that he rents short term. If the property were available for long term, he would earn $1,500 a month. Even with the management fees, the net is higher for short term rentals. Pineda suggests, "networking and talking to people in your market who have short term rentals to see how they're doing to get a feel for the climate."


2). Personal Use-make money and have fun!

How perfect to have a vacation home that generates income and allows you to create memories with family and friends. Pineda states, "It's a great way to have a second home that earns you income every month. The only 'problem' is when they are booked so much that you have to schedule your own visit far in advance. It's a great problem to have as an investor."


3). Diversified Risk-less risky because of diversity of tenants.

If a long term tenant stops paying rent, you run the risk of no income from the property until you can evict them-plus, if they cause any damage, you're out even more money. With short term rentals, you have different occupants each month. Some short term rental sites even have insurance coverage for any damage a tenant could cause. "From my experience, instances of major damage from short-term renters are few and far between. It's typically small things like a broken dish or lamp." Pineda adds.

If you're ready to get started on your short term rental portfolio, Pineda shares some advice for the traits to look for in a short term rental market:

  1. Location: Would you like to vacation there? What's the rental climate like?

  2. ROI: How much are properties in that market selling for? How much are they renting for-long and short term?

  3. Legislation: Is there any upcoming legislation that could have a negative effect on your investment?


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Source:

Pineda, Ryan. “Why short term rentals are real estate investing’s future.” Forbes Real Estate Council.  21 May 2019

<https://www.forbes.com/sites/forbesrealestatecouncil/2019/05/21/why-short-term-rentals-are-real-estate-investings-future/#4c85ed177a85>