How to choose your market? That is the question…The answer? That depends on “why” you are investing in short-term rentals.
If you are investing in short-term rentals for pure cash flow then the location of your market does not matter and you should approach this venture surgically and without emotion.
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1. Search Mashvisor and Airdna for a list of the most profitable short-term rental markets. (I prefer Airdna).
2. Pick the most profitable market.
3. Research the neighborhoods and local laws of your chosen market.
This step is very important when researching a market because zoning and regulations can vary significantly between markets.
For example, in some markets condos are the only properties allowed to offer short-term rentals. In other markets, you can only own one short-term rental property. So if you are looking to scale in one market than you want to look elsewhere.
Also, if you are set on owning a home then don’t choose the “Condo only” market. Realtors will know the local regulations but you can also easily look up the regulations with a Google search.
4. Develop a STR purchasing team.
Mortgage Broker: Do your research and choose a mortgage broker. Make sure to get pre-approved so you can move quickly on a property that meets your purchase criteria. Your mortgage broker can be local but should be licensed in all 50 states to allow you flexibility in your market choices.
Finding a great mortgage broker is important because they will be a crucial member of your purchasing team. They will be responsible for locking your interest and getting your loan approved. Developing a good relationship with your broker will improve your ability to act quickly in this competitive market.
Agent: You will want to look for a Real Estate agent that understands the Short-Term Rental market and preferably one that owns a STR as well. You might have to interview a few agents before finding one that meets your criteria.
An agent with STR experience can be invaluable if you are planning to self manage. They will have referrals for handymen, cleaning services, and contractors for those of you looking to self-manage. Your agent will also be able to give you information about the various property management groups in your market if you are not interested in self-managing.
5. Make your purchase and begin to prepare for your property set-up (A Step by Step Guide to Setting Up Your Short-Term Rental)
6. Apply for a business license and set up your booking sites if you are self-managing. If you are not self managing then interview a few property managers before selecting your new property manager.
NOTE: To maximize your tax savings you will need to self manage and that will be more challenging the further you are from your property…. NOT impossible just more challenging. When researching your long distance market make sure to confirm that you can contract with a cleaning service and handyman without a property manager. YOU are the manager. IF you hire a property manager to manage the property then you will not qualify for the tax savings available to STR businesses.
7. Enjoy your short-term rental journey
The other way to research and choose your market is to select a market that you visit frequently and enjoy.
This is my preferred way to select a market. By choosing a market that you enjoy you are confirming your own market research. You know what guests will be willing to pay to stay at your place because you know what you are willing to pay.
In addition, you know the town and neighborhoods because you have actually stayed over night in your market. There are lots of small things that numbers and calculations don’t always pick up. Sometimes the difference between a great STR and an O.K. STR is the location being one street closer to the slopes.
The best part of choosing a market based on enjoyment is that you can use the property. Sometimes the best investment is an investment in yourself and family.
Enjoy Your Journey to Financial Freedom