These days, many adults are looking for a way to earn passive income in addition to their primary employment to put away money in savings, fund a large purchase, or simply have some extra spending money each month. One of the best ways to earn passive income is with a real estate investment, and under that umbrella are several distinct possibilities, including short-term rentals.
With the rise of peer-to-peer vacation rental services such as Airbnb and Vrbo, many property owners are turning to short-term rentals to bring in hundreds of dollars each month without much extra work involved.
Should You Turn Your Rental into an Airbnb?
If you’re looking to make some extra money with a property you already own, you can do so by working with a short-term rental service such as Airbnb. This route may be especially lucrative if you live in a high-traffic vacation area where rental homes are a hot commodity.
You can charge increased rates during high-volume times of the year, and you’ll likely have interest in renting your home on a regular basis due to its prime location.
Though Airbnb handles many of the details of short-term rentals like scheduling, rental dispute mediation, rent collection, and certain insurance coverages, it’s still important to have your own homeowners or landlord insurance in place to protect yourself against personal liability, theft, and damage.
Let’s take a look at some of the benefits and drawbacks of short-term rentals for private property owners.
Benefits of Short-Term Rentals
Short-term rentals can provide owners with a great deal of flexibility. As the landlord, you choose exactly when you want your property to be available and when you’d like to keep it for yourself—an option that’s especially useful for vacation destination properties.
Short-term rentals tend to bring in more income for the owner than long-term rentals do, as most landlords can charge the same price for a week or two in a short-term renting situation as they would charge in double that time for a long-term renter.
Additionally, if you own a short-term rental, you can enjoy tax breaks and deductions, and your property will experience less wear and tear because you’ll be in and out to check on its status between renters.
Drawbacks of Short-Term Rentals
Though short-term rentals can make more money in less time than long-term rentals, higher renter turnover means less income consistency. Depending on the time of year or the location of your property, you could experience multiple weeks of little to no interest in your property.
Private owners can justify charging long-term renters utility bills, but charging utilities isn’t typical for short-term rentals, which means you’ll be in charge of all utility costs, as well as maintenance costs like housekeeping, yard upkeep, and more. In addition, with higher renter turnover rates, there’s more risk of nuisance renters or property theft.
If your property is in a neighborhood with an HOA, you may face issues with your neighbors if you attempt to rent your property on a short-term basis. Make sure you’re within your rights to do so and consider whether potential issues with your neighbors will be worth the extra income.
How to Have a Successful Short-Term Rental
If you decide that short-term rental is the route you’d like to take to make some extra passive income from your property, it’s important to do some research about similar properties in your area that are also available as short-term rentals.
Look into how much money other landlords charge for like properties, what amenities the places offer, and how often people rent them. If you don’t live in a desirable area for short-term rental, you may face issues from the start.
If you’re looking to rent short-term because you know your property is in a desirable vacation area, advertise its desirable characteristics to draw renters to your place. Amenities could include state-of-the-art appliances, impressive interior design, or a high level of personalized customer service.
High-quality photos and a detailed descriptive listing will be your keys to success if you rent through a service like Airbnb. The more valuable information you give potential renters, the better the chances your property will be in high demand.