A growing number of millennials are buying short-term rentals to generate additional income and to build wealth.
According to the Wall Street Journal short-term rental owners under 30 doubled in the past 2 years.
Should you join their ranks and become a real estate investor?
Long-Term Wealth with Rental Real Estate
My husband and I have owned rental properties since 2005. For 15 years we collected passive income and had our tenants pay down the mortgages.
Now we can take advantage of rising home values and enjoy substantial gains when we sell the properties.
Short-term rentals earn up to three times more income than traditional long-term rentals. With daily rates of $300 and more they produce a substantially higher cash flow than your typical rental property.
However, short-term rentals require a lot of attention and you may have to hire a maintenance crew.
The Key to Short-Term Rental Success
How do you know if a property will make a good short-term rental?
Go to AirDNA and use their free Rentalizer. It predicts what any home around the world would earn as a vacation rental.
If you don’t live near the property to take care of cleaning and repairs, you need to hire a pro. Vacation rental management firms, such as Evolve Property Management, can take care of most operational aspects of your short-term rental for a 10% fee.
They offer 24/7 support to your clients and connect you to local service providers and cleaning crews.
3 Thing to Check Before You Invest
There are a few more hurdles to overcome before you buy:
- Local government and HOA Regulations: Find out if short-term rentals are allowed in your neighborhood, and determine the registration or licensing requirements imposed by local government agencies.
- Investor Loans: You will need a higher down payment than on your personal residence. 20% down is not unusual for investment properties.
- Cash Reserves: Be prepared for emergency repairs and regular maintenance. Keep money in reserves to cover these expenses.