Short-Term Rental Investing: 7 Key Lessons From 7 Years of Experience
In 2017, I purchased my first short-term rental (STR) — a 3-bedroom, 2.5-bath, 1,700 sq. ft. townhome in Hampton Beach. Since then, I’ve had the opportunity to learn invaluable lessons about investing in and managing STRs. Some insights may surprise you, but all are essential for anyone considering diving into this dynamic and lucrative “lifestyle asset. Here are the top seven lessons I’ve learned:
1. Long-Term Appreciation Creates Wealth, Not Annual Cash Flow
While it’s tempting to focus on annual cash flow, true wealth in STRs (like all investments) comes from patient long-term appreciation. That said, your property must generate enough cash flow to cover expenses and carrying costs so you can be in a position to comfortably hold onto your properties for the long term. Sustainable cash flow is your ticket to enjoying the benefits of rising property values. But always have a long-term mindset, and invest in markets that you believe are poised to develop and appreciate faster than the average market.
2. Your STR’s Success Depends on the Operator, Not Just the Property
The same property can yield wildly different revenues depending on the operator. A skilled operator leverages the right systems, design, team, automations, pricing/calendar strategy and customer experience to maximize performance. STR success isn’t just about location — although location and amenities are important. More importantly now than ever, with the influx or more STR supply into the markets, he operator itself, will play an instrumental role in the overall success of a STR.
3. Seasonal Vacation Markets Are Smarter Investments Than Urban Areas
One of the biggest risks to STRs today is local government regulations. Urban markets often face stricter rental restrictions because their economies and businesses are less dependent on tourism. On the other hand, seasonal vacation markets tend to have more stable STR regulations, as local economies rely heavily on tourism to thrive. Personally, I prefer to invest in these desirable, but seasonal, vacation markets due to the fact that the geopolitical risk is lower, in addition to the fact that many vacation markets tend to have greater re-sale potential which contributes to my future appreciation potential.
4. Smaller Vacation Markets Are Easier to Perform In
It’s easier to stand out and perform well in smaller vacation markets compared to larger ones. Smaller markets often have less professional operators, making it easier to succeed with the right approach. Plus, smaller markets can feel less saturated, giving you a competitive edge. Additionally, the smaller supply of properties in these markets may help the future long term appreciation potential. I personally own in smaller markets (like Hampton Beach, NH and Salisbury Beach, MA), and I also own in larger markets (like Myrtle Beach, SC). My preference is to continue growing my personal portfolio in smaller markets.
5. Bookings In The High Season Is Easy; Off-Season Performance Is What Sets You Apart
Securing bookings during the “high season” is relatively straightforward and often very easy due to renter demand. However, the most skilled operators shine during the “shoulder seasons” and “off-seasons.” Maximizing revenue year-round requires a dynamic and strategic pricing/calendar strategy, effective marketing, a skilled boots-on-the-ground team, and meticulous property management. Consistently earning 5-star reviews, enhancing the guest experience, managing your tenants/turnovers and maintaining your property is the real challenge—and where the most skilled operators differentiate themselves.
6. Managing an STR Is a Full-Time Commitment
Owning and operating an STR is time-intensive. While self-managing can save you money on fees, it comes at the cost of your time and energy. Hiring a skilled management company (typically charging 15%-35% of gross income — depending on the market) can make your investment more passive, in many cases make you more money, and allow you to hold onto your time to focus on areas of your life that may be more important. The question investors must ask themselves is, “is the 24/7 time commitment and opportunity cost worth the money saved by a “good” local manager’s services?” For some, the answer is yes, but for others it may not be. There is no right or wrong option, it just simply comes down to what your goals and focus’s are.
7. Choose the Right Management Company
Not all management companies are created equal. The best managers will:
Maximize your property’s performance and revenue, year-round, through a thoughtful dynamic pricing and calendar strategy.
Provide full-service management for a passive hands-off experience.
Maintain your property to the highest standards.
Offer effective marketing and top-tier guest services.
When choosing a management company, do your homework. Speak to referrals, review their track record, and ask detailed questions about their systems, team, and approach.
At Seacoast Vacation Rentals, we pride ourselves on being the leading management company in our local markets. Our full-service approach ensures your property thrives, while you enjoy peace of mind and truly passive income.
Ready to Maximize Your STR Investment?
Whether you’re a seasoned investor or just getting started, these lessons can help you succeed in the ever-evolving world of short-term rentals. If you’re looking for expert advice or full-service STR management, visit SeacoastVacationRentals.co or TheBakhtiariGroup.com to learn more.
Let’s make your STR investment a success!
Sean Bakhtiari
Founder, Seacoast Vacation Rentals
Realtor, The Bakhtiari Group | Compass
(603) 560-5357