Short-Term Rental investing is extremely popular right now. It seems like the industry blew up over night but it really has been a slow burn.
David Clouse founded VRBO in 1995, in Aurora, Colorado. VRBO grew to 65,000 properties in 10 years and was then bought out by Home Away in 2006 and then the Expedia Group in 2015. (Click here to learn more)
Airbnb was founded in 2008 and has continued to grow since that time.
These two platforms dominate the Short-Term rental space and have increased the ease and popularity of short-term rentals for both owners and guests.
Staying at an Airbnb has become mainstream and more popular than staying at hotels in many destinations.
At first, the industry was mainly second homeowners looking to subsidize their vacation homes. However, over time savvy investors noticed the financial returns that STRs offer and began investing in short-term rentals as a business.
The cash-on-cash returns have decreased as the competition from short-term rental investors has increased. In addition, returns decreased further this year with the Covid housing market that has resulted in historical housing price increases…
Lastly, the rapid expansion and use of STR management companies has significantly cut into the cash-on-cash return of STRs.
It all sounds pretty bleak…. But the great thing about real estate is that there are major inefficiencies in the market that allow informed investors to find good deals, especially, if you are willing to self-manage….
After, you have completed those two tasks you will be ready to analyze individual properties. Having a systematic approach to analyzing your market and potential properties will help you succeed in this tough market.
We use our Short-Term Rental Calculator to assist in property analysis. There are many factors to consider when analyzing properties for short-term rental investing.
The big factors to consider include income and expenses:
% down, interest rate, start up costs, furniture, renovation costs, HOA dues, snow removal, pool/spa service, internet/cable, utilities, property management fees (if you have one)
Yearly, monthly, nightly and % occupancy.
It is important to calculate your potential earnings, as well as, your breakeven point.
Lastly, you can also analyze your cash-on-cash return using tax-savings adjusted numbers.
The calculator that we use includes an option to analyze cash-on-cash return using cost-segregation combined with bonus depreciation.
Even in today’s market there is opportunity. Take the time to learn your market and begin analyzing properties.
If you would like start analyzing Short-Term Rental properties then download our FREE calculator today.
“Enjoy your Journey to Financial Freedom”
Carpe Diem MD