Airbnb and Short-Term Rentals: An Alternative Revenue Stream
Whether you’ve hosted guests directly from Airbnb, read about the site in the news, or stayed in one of their over two million properties, Airbnb, recently valued at $25.5 billion, is here to stay.
Many service members spend much of their lives moving from one base to another. Those who plant their roots by purchasing a home are left with two options when relocated: sell the home, or rent it out by finding a long-term tenant. With the emergence of Airbnb, VRBO, Booking.com, and other listing sites, there is now a third option: short-term rentals.
With short-term rentals, it’s clear that money is there. According to Research and Markets, by 2019 the global rental market is expected to hit approximately $170 billion. Awareness is also growing with travelers: While only 8% of 2010 travelers had stayed in a vacation rental, 25% had by 2014. That number will also be quickly growing as first-time vacation rental users occupied 32% of HomeAway’s 2015 bookings.
Demand for Vacation Rentals
Not only is demand for vacation rentals growing, there is also a surge in professionalism within the industry. Despite Airbnb encouraging homeowners to list and manage their own properties, sites like HomeAway (now owned by Expedia) have made it clear that they prefer to work with professional management companies. Maintaining instant booking, ensuring 100% response rates, and providing attentive end-to-end care can be very difficult for those trying to self-manage their short-term rentals from afar, and working with a professional manager is an easy way to pass off the work.
Hotel brands are likewise starting to take notice and join the vacation rental industry. Wyndham, for example, currently manages over 10,000 properties in the U.S. alone. Hyatt and AccorHotels have invested in high-end property management companies, and Choice Hotels has developed a booking platform to drive travelers to local management companies. While not a hotel brand, even Google is showing signs of entering the online travel agent market to rival Expedia and Priceline.
An Opportunity for Homeowners
Between changing accommodation demands and increased investment in the vacation rental industry, it’s clear that large companies are looking to reap the benefits of the sharing economy. Can homeowners do the same?
In the right areas, yes. Homeowners can typically make two to four times as much by renting their properties on a short-term basis than by renting it out to long-term tenants. With that comes many benefits, including higher rental revenue and better property care. As professional cleaners and maintenance crews regularly check on the home, short-term rentals tend to get significantly more professional care than they would with long-term tenants.
While entering the short-term rental market may seem like a lot of work for a homeowner, it’s fairly simple with the right resources.
Here’s what to consider before turning your long-term rental into a short-term rental:
Location: Is the property and the location of the property desirable for a traveler or family? Check Airbnb and VRBO to see if there are other short-term rentals with high demand in the area.
Regulation: With Airbnb changing traveler demand, some cities have gone stir-crazy over how to regulate short-term rentals. New York City, parts of Los Angeles, and some Florida markets have even banned short-term renting altogether. Most cities, however, will only require you collect occupancy taxes or get a short-term rental license. Before listing a property on Airbnb or any listing site, be sure to research local regulations.
Occupancy: Put simply, the more a property can sleep, the better the property will perform. Consider re-purposing a home office to an additional bedroom or adding bunk beds. Consult a professional for additional tips on how to maximize your profits.
Finding a professional management company: The last thing servicemen and women need is to have to answer the phone at 2 a.m. about leaky sinks, cleaner arrangements, light maintenance workers, or guest check-ins and check-outs. For that reason, having a professional property manager is one of the best ways to pass off the work and secure a steady stream of passive income. Comparing prices and estimated rental income for different property managers can be difficult, however. With companies widely varying in the ways they charge for cleaning, maintenance, marketing, etc., Rented.com can help by allowing homeowners to easily find, compare, and choose professional, local property managers.
Whether you decide to sell your home, lease the property, or short-term rent to maximize profits and maintain a consistent cash flow, servicemen and women have many factors to consider. The only thing that is certain is that service members need not worry about their properties while they’re away.
About the author: Michael Goldin is the Director of Property Manager Success at rented.com and an active member and participant in the Vacation Rental Managers Association. He can be reached at [email protected]