How Profitable Are Short-term Rentals?
The popularity of short-term rentals has skyrocketed in the last five years. If you are considering launching your own short-term rental and are asking whether it will make you money, the answer is: It depends. Short-term rentals can be highly profitable, but there are many variables to consider when launching a short-term rental.
Considerations for Short-Term Rentals
Location is always crucial when selecting a real estate property. Whether you want to purchase or set up a rental arbitrage agreement, research the location to see if it’s a place that would make your rental profitable.
Once you’ve selected your location, determine the type of property you want and who you want to draw to your STR.
Target guest is a key variable for a few reasons. Who do you want to draw to your STR? Vacationers, large families, corporate people, nurses? This will determine where you want to launch your STR and what type of property you want.
Vacationers and large families are more likely to be drawn towards STRs near tourist hotspots and homes with large bed counts. In Central Florida, we draw thousands and thousands of vacationers each year for the Disney experience, Universal Studios, beaches, and springs.
A house with multiple rooms, bathrooms, and extra beds will draw this target audience and those willing to pay a higher nightly fee.
Want to target a corporate audience that is looking for an alternative to a hotel stay for a business trip? Locations near an airport or large corporate offices will draw those guests to your STR. This is more about convenience, comfort, and amenities like a desk, a comfy bed, and a coffee pot.
A less thought-about variable is the age of the property. Is it an older home that will need constant maintenance? Central Florida is comprised of new and older homes, and older homes need consistent upkeep unless they are completely renovated.
Things like the age of the roof, air conditioning, and plumbing (this is a huge one in Central Florida due to cast iron piping) are things to be on the lookout for when searching for a property. It’s always wise to budget in a “maintenance” fund whether the home is new or old, but an older home equals a higher maintenance fund, which eats into your net profits.
Once you’ve found the perfect property, determining your nightly price and cleaning fee largely depends on the variables above, plus the extra amenities you may want to add to help your STR stand out. Basic amenities like towels, a comfortable bed, WiFi, and a TV are a must-have, but it’s smart to consider providing shampoo/conditioner starter kits, coffee with creamer and sugar, and even snacks for guests arriving after a long flight. These thoughtful touches encourage repeat visitors.
Short-term rental platforms such as Airbnb help determine the nightly price and will even auto-adjust it for you based on the age-old supply and demand concept. However, you can choose to manually adjust and manage your nightly price based on your costs plus the profit you aim for each night.
Short-term rentals can undoubtedly be a very profitable business or a way to make some side hustle income. As with any business, do your research, determine your target audience, and choose the right location and property. If you do it right, you will have a profitable short-term rental that could give you extra spending money or grow into a thriving 5 to 6-figure business!