In some parts of California, it makes a lot of sense to turn your rental property into a short term vacation rental instead of renting it out on a long term lease. This can be extremely profitable in areas that have a lot of tourists that are willing to pay a premium to stay in a home instead of a hotel.
Some owners are very good at calculating the front end “math” of collecting the higher rates associated with short term rentals, but fail to count all the additional costs associated with participating in the short term rental market. There are both hard and soft costs attached to being a short term landlord.
Management fees are much higher for short term rentals. This is a direct reflection of the level of additional care and attention that a management company needs to give to the property.
Essentially, you can have a turn over every couple of days and often on the same day. You can have one renter check out at 10 am and another one check in at 3 pm. If you aren't doing inspections between turnovers, how do you know who to hold responsible for any damages?
Essentially, you are conducting move in and move out inspections multiple times per week. That's something you only do once a year at the most in long term rentals!
You also need multiple vendors and ones that are willing to work weekends and holidays. You will want the contact info and working relationship with house cleaners, gardeners, carpet cleaners and handymen that can respond to maintenance requests with little to no notice.
You can also expect a much higher amount of wear and tear on the property. People are much less likely to treat a short term rental like it's their own than a long term rental.
Greater Demands By Occupants On The Landlord
With long term rentals, you don't have to act like a front desk at a hotel. Non-emergency maintenance items can wait until it's convenient for you and the vendor. If a tenant locks themselves out of the house, that's their responsibility to get a locksmith to get them back in.
With a short term rental, everything is an emergency. Tenant locked out? Your responsibility to help them out immediately. When the AC or heat isn't working, that can't wait until the next day. When the WiFi is down, it's your responsibility to help them get things working.
Expectations are so much higher because the stay is so much shorter. If a short term renter goes with hot water for the duration of their 3 day stay, you can bet they will be upset and leave you a bad review. Wouldn't you be as well?
High Vacancy Rates
Short term rentals, like hotels, often see seasonal busy and slow times. This can mean that you may have a higher vacancy rate than you had initially anticipated. High vacancy rates can really change the math on how much you were projecting to earn.
Many short term rentals are occupied only 50% of the time. You also have the potential for last minute cancellations that can leave you with an even higher vacancy rate.
9 Tips To Succeed
1. Have the best product in the market
Having a great property will mean great reviews which will lead to more bookings. Just like a long term rental before a tenant moves in, make sure the property is clean and priced right.
2. Build a team of support personnel to handle all tasks
For the most part, you are going to be doing the same things over and over again. Build systems and have a team that can handle the mundane issues.
You also need someone that can respond to emergency requests (which is just about everything in a short term rental). This can be you or someone you hire to handle this for you.
3. Be available 24/7
See number 2 if that sounds like a nightmare for you. Having a team or person in place to be available for you will help you maintain your sanity in managing your short term rental.
4. Have very specific directions for the tenants to follow
If you want to minimize the amount of phone calls and texts you have to answer, leave very clear instructions in the property.
How to log on to the WiFi, how to use the TV and what days the trash come are all great things to leave instructions for so you don't have to answer the same questions over and over again.
5. Use WiFi connected cameras to monitor the outside of the property
This will help you see when the renters get there and if there is anyone you weren't expecting. It will also help you enforce check in and out times and give you peace of mind. You will also be able to keep your home from becoming a party house by stopping it before it starts!
6. Meet the neighbors and give them your contact information
Having a good relationship with your neighbors will go a long way in managing a short term rental. They will be able to let you know of anything to be concerned with and may even be able to help you out if an emergency comes up while the renters are there!
7. Make sure the listing has clear rules
Make it very clear that parties and unnamed guests are not authorized and that violations will result in being asked to leave. The last thing you want is upset neighbors and a trashed house because someone rents it to throw a party.
8. Get the proper licensing and permits
Some cities and HOAs will not allow short term rentals or will require you to have a special permit. Make sure you cover your bases so you don't get shut down and lose thousands in rental income because of it.
9. Get the proper insurance
Your homeowner's insurance policy won't be enough to cover the liability in a short term rental. Make sure your insurance covers AirBnB or VRBO rentals.
Summing It Up
It is certainly possible to successfully rent and manage a short term rental, but being educated and informed on the pros and cons is important so you don't get caught off guard by unfulfilled expectations.
In the process, you may find that it would actually be more profitable and less risky to rent out your home as a long term rental. If you are trying to decide what the best course is, contact us today and we can help you with that decision!