THE WHAT, THE WHY AND THE HOW OF SHORT-TERM RENTALS
Buy and hold rental investing has always been the preferred and most lucrative real estate investments as it can provide for all the 5 wealth building principals. Typically, Investors would find a tenant for an annual lease, the tenants would move in and pay fair market rents. Investors would enjoy a cap rate commonly ranging from 6 to 10% (varies by location and acquisition).
Within the past decade short term rentals have become very popular. The desire and need for short term rental have become very strong. As the olé saying goes, find a need, fulfill the need and you have a strong, sustainable, prosperous business
Short term rental length
While a long-term rental is typically 6 to 12 months, short term rentals may vary greatly. Short term rentals are typically considered monthly (30 day) rental periods. Shorter than 30 days typically is stated to be vacation rentals.
Each of these comes with its different set of nuances both beneficial and tasks involved for the landlord. Let’s take a look at these.
Monthly rental
If you have rental property in areas where construction happens such as near where I live. Venice Florida is building a massively large hospital campus. When I hear this, I know from experience that there will be much need in the surrounding area for short term rental property. During constructions specialty crews move in for short term rental to build the hospital. Then as the hospital begins to staff up, they bring in specialty doctors and nurses to train staff and get the place up and running. This need for short term housing needs to be filled and as the need is from higher paid professional labor, they can afford to and are happy to pay for this harder to find housing.
These properties are typically rented out monthly for anywhere from a month or two to perhaps a half a year or more.
Short term tenant needs full amenities
As these tenants are shorter term, they come with just their suitcase and a bag of groceries. So, these tenants want fully furnished properties. Furniture, utilities, lawn care, wifi and whatever it takes to live (minus the groceries).
As landlords you provide everything, and these services usually come at a hansom price. Often double or triple that of what an average annual lease would rent for.
There are of course pros and cons to both tenant and landlord for these rentals. Often the pros to the landlord out way the cons. You may want to visit the pros and cons to see how they may they work for you
Vacation rentals
Vacation rentals demand has soared in the past decade as hotel prices have risen to over $100 and often $200 per day. Many property owners have found great success in renting their homes and even parts of their homes often just bedrooms out to travelers.
These rentals may be 30 days but often weekly and in some cases on a nightly basis. Local municipalities have a variety of rules that may regulate this. Regulations may vary from low to medium to high regulation so you will want to check with your local ordinances to confirm you have legal capacity to enter into rental agreements shorter than monthly rentals.
When I called our local authorities, I was told you can rent anywhere on a monthly basis as far as local ordinances are concerned. Any HOA or Condo restrictions to these shorter-term rentals will of course need to be adhered to as well.
Happy Investing!
Larry Arth is a real estate broker in Florida. He specializes in vacation investments and commercial real estate. Contact Larry at Larry@LarryArth.com for sales or engagements.