Short Term Rentals are Hot Properties Today
With the rise of the post pandemic vacationer, we’ll likely see a huge demand for short term accommodations. Hotels will do well in 2022, yet there’s even bigger demand for other types of rentals which provide amenities the new renters are seeking.
The Covid 19 lockdown was punishing and now millions are looking to travel and enjoy leisure and new experiences. Some will work remotely from their rentals.
Today, we’re taking a look at this opportunity and have some tips below should you want to venture into the short term space. From software to services to keeping up with trends and opportunities, there are reasons to take it seriously.
Short Term Rental Revenues Jumping
That’s why Airbnb, VRBO and other rental businesses are expecting good things going forward into 2022. Travel market experts polled by Yahoo Finance forecasted Airbnb’s revenue for 2022 will be 50% to 100% higher than the 2021 full year forecast.
And landlords too are eyeing the burgeoning army of post pandemic vacationers and work from home nomads. How people want to live and work is changing.
While landlords attention is firmly fixed on the long term apartment and house leasing markets, it’s fun to take a quick look at the short term and vacation rental market. And for those of you stuck with non-rent paying squatters, the alternative universe of short term rental leasing might help ease your pandemic related losses and having to sell your rental property.
Growth in the Short Term Rental Market
Consistent with the overall US rental market, the short term rental market is expecting continuous growth through 2027 and this of course will raise demand for management software and trained staff.
Short term vacation rental market growing. Screenshot courtesy of Grandview Research.
A report from Grandviewresearch revealed the short term rental vacation travel market is growing.
The report says „Travelers in the market are more inclined towards vacation rental property over hotels owing to the comfort, low cost, additional privacy, and kids and pet friendly nature of the accommodation…. 71% of travelers with children preferred access to cooking their own meals, which was a major reason boosting the preference for vacation rental.“
They cite Airbnb’s growth to 9% of market share is the fastest.
Millennials are said to prefer resort style amenities, and you can bet they always want digital service. In demand are facilities such as function rooms, barbeque pits, games, KTV and multi-purpose rooms, clubhouses, tennis, squash and basketball courts, and swimming pools according to their report.
With this in mind, your property might need some renovations and added services to appeal to this ideal target audience.
Growth of the Short Term Rental Market
The short term rental housing market is growing for three reasons:
- work from home travelers
- family vacationers
- the ultra high rent prices some properties might bring
Given how the rental market is evolving using automated property management software, and availability of fulfillment services, the short term and long term rental markets are easier to manage today.
If you’ve typically gone with yearly leases only, for peace of mind, then it could be you’re leaving a lot of money on the table. Given this big demand, you’re more likely to get the high prices you’d prefer and you’ll get the lease terms you want to. Renters might be forced to rent for two weeks or a month at a time. Yet, many might stay for a year and pay much higher rent during that time period.
Airbnb Coming Back to Life
Take a quick look at Airbnb or VRBO daily and weekly rent prices, and you almost flip you wig. Vacationers to San Diego or South Florida think nothing about paying $20,000 monthly for an oceanside rental. That’s 4 times the expected rent for long term rentals. It’s the same in Spain, UK, Germany and Australia.
And National Multifamily Housing Council estimates that 65% of Airbnb rentals are in multifamily buildings. So the multifamily sector is definitely in on the short term rental market experiment.
Consumers are complaining about the rising rents and property prices (inflation too) but for landlords, it’s not so much a problem. And if the new work world is creating more mobile renters who demand flexibility, those who supply that demand stand to win.
AirBnb’s Return to Profitability
Airbnb, the icon of overnight stays had a rough year in 2020. In the 4th quarter of 2020, the company’s gross bookings dropped 31% to $5.9 billion. Airbnb’s overall revenue fell 22% to $859 million, and nights and experiences bookings in Q4 booked at Airbnb dropped 39% to 46.3 million units.
According to the Fool.com, Wall Street Analysts believe Airbnb will have revenue of $711.44 million and earnings per share of $1.17 in Q1 2021. They believe gross booking value is forecast to rise to$7.87 billion. The pandemic is coming to close and travelers around the world are ready to book.
The revenue numbers for Airbnb are staggering reflecting how the travel industry has changed. Rather than dismiss the short term lease market, many landlords are wondering how to leverage it.
Work From Home Will Generate Significant Demand
And in this climate, if your monthly tenant ends their lease, should you try out short term bookings? The demand is significant. Many workers were untethered to their corporate desks in the cities and are venturing out to work from home lifestyles outside cities or in tourist cities.
Not all are looking for beaches and happy hour celebrations. Some want peace and quiet where they can relax and get their work done. These types of tenants aren’t partiers who might damage your rental property. They may pay much higher rent, yet not really add significant costs.
Of course, if you start booking weekend stays with unqualified, unscreened tenants, you’re exposing yourself to all the worst threats. The shorter the stay, the higher the risk. But for landlords in Texas, Florida, South Carolina, Arizona, California, Idaho, Maine, or North Carolina, renting to monthly vacationers offers some profitable opportunities in 2021.
If the risk to your properties is high, there are short term renter screening solutions. Take a look at autohost.ai.
If the rental property market reverts to its usual self beyond 2022, you can always roll back to yearly leases and play it safe.
The trend though in the markets today and all countries is a demand for shorter, more flexible leases. Innovation in leasing then might be a big profit center for you if you can do it well. Using your property management software, you might be able to manage short term stays profitably. You’ll need to improve how you acquire short term tenants (advertising and tenant screening tools).
How to Get into the Short Term Rental Market
- research local short term market demand
- research local zoning restrictions and where you can buy
- understand how to attract good short term tenants (advertising and screening strategies) and what the penalties are for having bad tenants continuously
- how to manage your rental without using Airbnb or VRBO
- understand what is deemed a great rental experience and how you can deliver on that to maximize rent prices
- know how you can limit utility costs and damage
- consider how you will manage cleaning, maintenance, booking, and security
- research which additional amenities and services can really make your rental stand out against the competition
- research how and where you’ll market your rental property
- research costs on creating property videos, photography, and listing site advertising rates
- study increases in your rental costs (cleaning, maintenance, administration, security)
- research common rental rates and what your sweet spot will be
- research changes you’ll need to make in your property
- research tax implications
- speak to other landlords involved in short term rentals
- research liability coverage, insurance, and how to write legal, enforceable leases
- choose property management software with online rent and deposit fee payment along with good tenant communications tools
Landlords across the world are working short term rentals into their portfolios and doing it efficiently with rental property software.
You could open an account with VRBO, Airbnb and other service portals, however, just booking to whoever wants to rent your unit is risky. There’s damage to consider when renting to strangers that aren’t even vetted. There are cases of AirBnb renters squatting in the rental unit and are actually protected by the eviction moratorium.
The potential is excellent but the risks are high for those without a plan to manage smartly.
Success in this business comes down to solid processes and digital tools. You’ll find ManageCasa’s property management software your best ally in managing rental properties. It is the smart choice to build a great rental business. Learn more about ManageCasa now.
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