How to Get into the Short-Term Rental Game

Short-term rentals can be an amazing supplement to your monthly income...but they are also a lot of work! Have you ever thought about getting in the game? It’s intimidating for sure, especially in the current real estate market. Deals are few and far between, and pricing is skyrocketing around the country. Now may not be the best time to buy something, but it is prime time to educate yourself. If you THINK you may want to get in the game, start learning the game...now. When the opportunity comes to buy, you’ll be ready.

I jumped in about 3 years ago and never looked back. I didn’t know everything about owning and running a short-term rental. In fact, I really didn’t know anything. I did some research and figured out what I didn’t know as I went!

Here are a few things to get you started if you want in the short-term rental market:

Start learning.

Start reading blogs and listening to podcasts. Bigger Pockets is responsible for most of my education...they have an amazing blog, podcast, and online community. There are so many other great ones like Lifetime Cashflow Through Real Estate, Passive Real Estate Investing, Real Estate Rookie by Bigger Pockets, and a niche one that is good is The Mobile Home Investing Podcast.

There is guaranteed to be real estate investors around you, and you might not even know it! Start putting it out there that you’re thinking about buying your first short-term rental property, and I bet you’ll get responses like, “Oh, you know Brittany and Cory Darling? They own one. You should talk to them.” Ask owners that you know to have lunch or coffee and ask questions.

Learn about the real estate market in your area, too. Get on every week and look at what’s selling. Learn what neighborhoods allow short-term rentals and which ones do not. It will be in the HOA documents. For example, some condos allow a minimum of one day rentals while others might require a minimum of 7 days or even 6 months. Start gathering data and pay attention to pricing in the communities that allow rentals less than 6 months, ideally as low as one week.

Lastly, check on the local taxes in your area. There are likely both state and county taxes that you will have to collect and pay. Know the rules in your state and county!

What is your goal?

 Figure out what you want out of it. Do you want to supplement your income? Or is your goal to retire early and live on the cash flow? Your goal determines your actions, which determines the outcomes.

Once your goal is set, don’t be afraid to revise it as you move ahead. It might sound like a great idea to replace your income in 5 years, but your current financial situation might say otherwise. A good goal might be to house hack for a few years until you build enough cash to buy a second property. One example of house hacking is buying a 2 or 3 bedroom house and having roommates who basically pay your mortgage for you. This allows you to save the money that would go to your mortgage. Knowing your goal and how much cash is required to get started will help you to know what types of property you need to look at.

If you don’t have the cash, you can start working on ways to get it! Look at your cash on hand or any cash you have access to in investments and savings accounts. You could even see if your 401k allows loans. You’re basically borrowing money from yourself and paying interest to yourself. This could be an awesome way to access cash for a real estate deal. Honestly, your first goal might be to SAVE MONEY!

Decide how much you want to be involved.

Will you manage the property? Or will you hand over day to day operations to a property manager? Know that managing a short-term rental will run you about 20% of the rental...eek! That’s pricey! But if you’re buying in a market that you don’t live in, this might be the way to go! I personally manage ours, and I clean it most of the time. The only times I don’t is when we’re out of town. I like the control of knowing that it’s spotless and tidy for every guest. But if your goal is to have 3-4 short-term rentals, know that you may have to outsource pieces, like cleaning or managing communications. You’ll get calls about the TV remote not working or other minor issues.

Start looking at rentals in your area.

Do lots of looking at both VRBO and Airbnb to see what’s available in the zip code where you want to purchase. Look at what they are renting for and establish projections on how much money the property will likely bring in. You’ll have to create a spreadsheet with fixed variables like mortgage, HOA dues, utilities, taxes, and pest control. You’ll also need to see what revenues look like if the property is rented 80%, 70%, 50%, and 30% of the time. Knowing this will allow you to measure the risk involved. With hurricanes, pandemics, and general travel cancelations, you need to make sure your costs are covered!

Build a team and start looking.

Get a good realtor and mortgage broker on your team who can commit to get you information quickly. This is crucial in a sellers market. When something comes on the market, you need to be able to move quickly! Your mortgage broker will need the property address, purchase price, and % you want to put down in order to give you a “cash to close” number as well as an accurate rate.It would be smart for them to run your credit when you start looking as well so you can see rate ranges for your unique credit score.

In this market, you might find a deal and negotiate with a property owner directly. I suggest talking with our agent and seeing if they are willing to broker the transaction for a fee instead of the traditional 3%.

The short-term rental game is good to be in right now. As more and more companies realize that their employees can work from anywhere, it has opened the door for families/couples to travel and work from home. If you want to get in on the game but don’t know where to begin, a good place is always learning! And feel free to reach out to me to ask any questions!