This is the #1 Question That We Get from Investors
We’re not even going to make you wait for it; here goes: should I invest in short-term rentals (STRs) today, or should I wait for prices to drop?
We love this question because we get it so frequently. Sean breaks it down in this video and we’ll further explore below.
In our opinion and experience, timing the market and waiting for real estate prices to drop carries more risk than putting your money into a cash-flowing asset that will likely appreciate in value if you hold onto it for the long-term. Keep in mind that:
The property and investment must be properly analyzed
You should be confident that it’ll cash flow
What’s the main reason our contacts have shared for hesitating in investing in short-term rentals, and real estate in general? Compared to two years ago, rates are higher - we’re looking at 7-8% versus 3-4%. Plus, prices have continued to steadily increase and we understand why people have a harder time buying at higher rates and higher prices.
That being said, if a property in a prime location is going to cash flow you some good money based on that investment, then we would rather have money in that asset knowing it’s not being sold anytime soon and will be managed long-term. The goal is to cash flow it every year, and drive your income to increase YoY while having your expenses stay the same with a fixed loan.
So, the long and short of it, we believe that in most cases it’s wiser to put money into a good investment in real estate than to keep it in cash and hope prices go down.
Tips for Investing in a Short-Term Rental
In addition to Sean’s insights, here are some general tips to keep in mind when considering investing in an STR and growing your real estate portfolio:
Understand that an STR is not typically passive income - you will work hard to manage the property and get it up to par in a competitive market.
Do your research when it comes to both geographical location and property location - some areas and neighborhoods will, of course, be more lucrative than others.
Leverage the power of a dynamic pricing strategy - you’re not confined to a fixed monthly rate and can optimize based on the market and competitors.
Market your property effectively, especially in the off-season. Understand your average guest profile and develop a way to entice a new audience or persona to expand your target during the slower months.
Focus on customer service. Your guests are the bread and butter of your short-term rental investment; without them, you’re losing money. Fast. Pay attention to feedback, guest reviews, customer complaints and then do what it takes to make your operation run more seamlessly.
Take advantage of tax deductions. Look into any tax benefits that may apply to your investment - this could be anything from welcome gifts for guests to renovation projects and much more.
No matter when or where you decide to invest in a short-term rental, it’s imperative that you’ve done everything you can to capitalize on the property and to attract guests. Have questions? Talk to us - that’s what we do!