Real Estatee Investing with a twist!
Owning and managing real estate is much like any other business. You’re offering a product to the market and the market responds. A well-priced rental can be an excellent source of income and can be as or more reliable than most 9-5 jobs! It’s no wonder that the rental market has become extremely regulated. In most jurisdictions, there are strict laws surrounding the landlord-tenant relationship and the associated management of the rental. You may only be allowed to visit the property at set times and infrequently. Rent increases are being tied to inflation, in the absence of a lease agreement. Property improvements are often difficult to schedule and as a result of this constrained relationship, you may feel limited in your real estate options. What I mean by this is if your investment plan involves re-leveraging your property to finance a new property, this changes the cash flow requirements and you may experience a shortfall, if you’re constrained with how much rent you can charge. From my perspective, I often want to use my properties, which isn’t possible through a long term lease arrangement.
This is where the short term lease market comes in. Short term rentals have always existed. They’re even in the bible! Some have even been developed by government entities, like in Cuba with the “casa particulares” – I actually stayed in one of those many years ago while visiting Cuba! Over the past few years, sites like Airbnb, Flipkey and VRBO have been popularizing the trend and opening up a new market of homeowners to the short term real estate market. While the purpose is primarily leisure, short term stays benefit large families traveling as a group (for weddings, perhaps), co-workers traveling for a conference or just a group of friends who want to explore a new place. It can also be much more comfortable travelling with children when you have a house with common household amenities. While short term leases can return a higher profit than long term leases, they can require significantly more attention in the form of regular housekeeping between bookings and ensuring the house is stocked with common household items, such as toilet paper and soap. You also need to be on-hand for guests, in case something comes up. If you’re not up for this, you can outsource this service to companies like Guesty, or others… there are a lot!
The best way to start a short term rental of your own is to consider what amenities you would want or need, if you were renting the property short term. Some things to consider if you’re looking to try your hand at short term rentals with your property:
- If guests are visiting a city, it’s customary to supply clean linens and towels and basic toiletries, including toilet paper. If your property is more rustic in nature, like a lakeside cabin, you can stipulate whether these types of amenities are provided.
- WiFi or some level of connectivity, again, depending on your property type, is becoming more prevalent with short term rentals.
- Things that help you stand apart are personal touches, like snacks and local tips for places to visit.
- Consistency is important and gets noticed by other guests. You want to ensure that your space is consistently cleaned to the highest standard, as cleanliness can vary greatly from person to person.
- The product you’re offering is one hand competing with a hotel/motel but also not exactly in the same market. You may want to consider including many of the amenities offered by a hotel, such as four pillows per bed and coffee/tea; but keep in mind that someone renting your home is looking for just that – a home. It’s also important that your guest feel at home through personalized decoration and some info about you, their host.
- A pro tip I picked up along the way is to lock up supplies in a secure area in your unit. You’ll often want to stockpile your supplies and if your guest has access to it, you’ll be inviting them to take advantage of your hospitality. For me, I noticed that no matter how many toilet paper rolls I left under the sink in the bathrooms, they were always gone! I bought a lock for one of my closets and leave an appropriate amount of supplies out for guests. The same was happening with my towels. L
- You’re not a multi-national company, you’re one person dealing with another person and hosting them in your home. This personal relationship also sets you apart from a hotel and to build on this, I try to accommodate guest requests as much as humanly possible. What does this mean? If the house is ready, of course you can check out early. Do you need to stay late and I don’t need to clean it right away? No problem! No extra charge.
The most common discomfort I hear from people is about having strange people stay in their house – especially if they’re not there. They’re primarily worried about damage to their house, more than anything. While sites like Airbnb do offer some host protection insurance, I would also recommend alerting your home insurance to the short term rentals occurring on your property. Every year, I’m seeing more home insurance products include short term rentals. For valuable items, I would either lock them up with your supplies, or take them with you. This can be the beginning of your minimalist journey! Above all, the best thing about short term rentals (apart from the freedom you keep with accessing your property) is the opportunity to offer a product to a growing market and meeting fun, adventure loving people in the process!