Service members frequently move from one base to another during their careers. It’s not uncommon to buy a home or two over the years, but that opens the door to more decisions. With another set of PCS orders, do you sell the home or rent it out to a long-term tenant?
But there’s a third, more flexible option as well: creating a short-term rental property.
Photo by Guillermo Spelucin via Canva.com
What Is a Short-Term Rental?
A short-term rental (STR) is a property that’s rented out for 30 days or less, such as those on Airbnb or VRBO. They’re typically furnished for guests’ convenience and range from an entire household to a room or guesthouse. STRs are often sought after by vacationers in destination locations, traveling professionals, or families relocating to the area who haven’t yet secured a home to buy or a long-term rental.
Even if you have years of experience with rental properties, it’s important to understand the differences between managing a short-term rental vs. a long-term rental. At a regulatory level, STRs are governed at a city or county level and require permits. Long-term rentals are governed at the state level. Taxes affect a homeowner differently as well. Short-term rentals are often entitled to higher tax breaks than long-term rentals.
Why Military Homeowners Might Consider a Short-Term Rental
The military lifestyle offers many reasons to dive into the short-term rental community. The first is the potential to return to the duty station where you own property. If your home is situated in a great spot and you hope to one day return, it may not make sense to sell. Second, real estate investments can be a great way to provide your family with additional income as you continue your military career.
Last, the military lifestyle creates ample opportunities. Renting your home during a deployment, TDY orders, and extended travel over the holidays might make sense, as there will be a natural vacancy in your home. The holidays are a particularly beneficial time as it’s a peak travel period. While you leave your duty station to visit relatives, other travelers are looking for accommodations. Transforming your home into a military short-term rental around your personal calendar could be an option. If the entire home isn’t available, consider how to rent out a room in your home.
What to Consider
Would your home make a good short-term rental? Whether your home would generate income as an STR depends on its location, local regulations, its size, and its amenities.
Location
Is your home located in a high-demand area? Touristy spots near the beach, in the city, outdoor recreation destinations, and military installations are prime for the STR market as they appeal to vacationers, relocating families looking for military short-term housing, or military-associated visitors. To validate, check the market for other short-term rentals listed in your area.
Local Laws
After a large influx in the vacation rental market, cities and counties started implementing laws and STR restrictions. Many require licensing and permits to help regulate the rental market.
For example, Carlsbad, California restricts STRs to two designated zones while they remain prohibited in the rest of the city. Similarly, short-term rentals are illegal in residential neighborhoods on Oahu, Hawaii. However, they are permitted in designated resort zones like Waikiki, Ko Olina, and Turtle Bay. Even then, homeowners must register the rental with the city.
Cities regulate occupancy, parking, duration, and safety features. Before you can list your STR, you need to check local ordinances and your HOA to ensure compliance and obtain proper approval.
The Property
Three- to four-bedroom homes make the most marketable short-term rentals. From there, you need to dive into the details. Is there parking? Does it include an outdoor space? What about a workspace for traveling professionals?
Families will also look to see if there’s a high chair, pack n’ play or crib, toys, and games available on site. The ideal property will be appealing to all types of guests.
Amenities
Homes in a community with a pool, gym, parks, playgrounds, or walking and hiking trails are even more marketable.
How to Price Your Rental
Learning to set a realistic price for your rental space is challenging, especially for first-timers. Start with the big names, like VRBO and Airbnb, and see how much your neighbors charge. Make your adjustments according to the size of the rental space and the amenities included.
Expenses to account for include cleaning, maintenance, utilities, internet, furnishings, linens and towels, restocking supplies, property management, licensing/permit fees, occupancy taxes, insurance, landscaping/pool service, vacancy, security/smart-home equipment. Your price should account for your monthly operating expenses.
Protecting Your Property
Before your first guests arrive, you’ll need to assess what items could be lost to accidents or theft. Packing away personal treasures, such as pictures and family heirlooms or your expensive Japanese cooking knife and favorite cashmere sweater, takes a top spot on the what-to-do list. Next, decide which doors and cabinets should be locked or if you should purchase a safe.
You likely have homeowners insurance, which is a good start, but it probably doesn’t cover renters or the damage they can cause to your house. Check with your insurance company to identify extra costs for renters insurance. Illegally housing renters could nullify parts of your current homeowners policy.
Setting Boundaries for Renters
Even short-term renters need boundaries. Be very clear about personal items or areas of the house that are off-limits. Overnight guests and large parties are important topics on which to have clear guidelines. Homeowners often write these stipulations into the lease or rental agreement.
Although most mail is junk these days, it could prove too tempting if delivered to your home while renters are there. USPS online has the option to stop and start mail, but be diligent with follow-through. You can hold mail for up to 30 days per request.
Depending on the length of stay, some homeowners feel comfortable running background checks on potential renters. This may not be necessary for short stays, but it is an option. Research online platforms to read reviews about the renter’s past visits to different homes.
Self-Management vs. Using a Property Manager
While it’s possible to manage your long-term rental from afar, a short-term rental requires more hands-on work. From turnover to coordinating cleaners and home maintenance issues that pop up, STRs are more demanding.
Hiring a property manager can save you from answering the phone at 2 a.m. about a leaky sink. It's one of the best ways to pass off the work and ensure a smooth-running rental. Comparing prices and estimated rental income for different property managers is an important part of budgeting for your STR.
Marketing Your Short-Term Rental
Your rental business will need a marketing plan, starting with photography. Quality photos of the property will give you the most bang for your buck. Never photograph and post dirty kitchens or bathrooms, and always use the best lighting possible.
If you hope to receive positive reviews as a host, you need to find ways to go above and beyond your competitors. Guests welcome information on local attractions, sought-after dinner spots, and coffee houses, as well as instructions on anything that needs a code or lock. Including high-speed internet, a coffee bar, and luggage racks in each room can help your rental stand out among the competition. A treat such as cookies or chocolate and in-home takeout menus don’t hurt, either.
For some military homeowners, a short-term rental may be a practical way to use your property while keeping doors to your future open. For others, a traditional rental or sale may make more sense. The right choice depends on your property, your location, and your timeline.
