Budget-Friendly Tips to get your Short-Term Rental Ready to List
6.28.2022 | Category: Homebuying
There's a lot of speculation about the housing market and if it’s hit a tipping point. Interest rates are slowly ticking back up from historic lows, but inventory is still too scarce to meet demand in most markets making it a tough industry to predict. One sliver of the housing market that’s too hot to miss, however, is the short-term rental market.
According to Airbnb, data shows income for the typical U.S. Airbnb Host rose to over $13,800 – an increase of 85 percent over 2019. And with many Americans able to work remote, untethered from their cube or office, they’re looking to maximize their newfound freedom and travel again post-pandemic.
This has led to a boon in the short-term rental industry, creating an income stream for newly minted real estate investors looking to leverage their most lucrative asset - their home. While many homeowners purchase second properties specifically as an investment property, you can still jump into the game with your primary residence or even a creative commercial space.
With a little bit of a well-planned budget, elbow grease, and some innovative marketing, you can create steady income opportunities for your real estate investment property in no time. If you’re considering listing your home as a long- or short-term rental, look no further than these budget-friendly tips.
Do your research and know the risks before making a purchase
You don’t need a real estate or broker’s license to break into the industry, but you should go into it with a well-researched business plan that considers potential profit and loss. If you are a real estate professional looking to diversity your income streams, you’ll find your on-the-job know-how will make it a bit easier to get your foot in the door.
Just like choosing what market to purchase a home in, you will want to thoroughly vet the location of your investment property. Whether you’ve decided to rent an extra room in your primary residence, the pool house in your backyard or the vacation home near the lake you’ve had your eye on for years, you will want to know the area well.
First, you’ll want to know if there are any ordinances in the city you wish to have a short-term rental located in. Many popular tourist destinations require short-term rentals to file an application and a growing number of cities are restricting them all together.
Next, you’ll want to create a business plan and decide how you plan to run your business. Will you source a rental property management company? Will you hire a contractor to make repairs? Is your home associated with an HOA that requires regular landscaping and upkeep?
Most short-term rental hosts work with housekeepers and laundry services to keep up with the day-to-day maintenance of their rental space but you will want to decide if this is something you will want to do yourself or outsource.
Review your personal finances before you decide
Just like starting any other business, you will want to be sure you can weather any unexpected costs associated with your rental property. Be sure to carefully review your personal finances and create a plan for saving and financing your investment property.
Consider how much debt you’re willing to take on should your investment property need a major repair like a new roof, plumping or HVAC. Many real estate professionals and consumer finance experts advise paying down as much personal debt as possible before investing in a second property to help manage these kinds of emergency costs when, not if, they come your way.
Starting a vacation rental business offers great opportunity to diversity your income but it’s not passive income. In most cases, you will need to be a very active participant in managing the business of your short-term rental. From marketing your property, to servicing your clients, home maintenance to major repairs, you’re responsible for it all. Be sure you’re ready to take on the challenge before you’re confident you can reap the benefits.
Rely on your network to help you get started
If you’re planning to purchase a second home to rent, lean on your existing network for assistance. Make calls to real estate professionals living in the areas you want to rent in. Ask them who their trusted home inspector, security or contractors might be. These connections will be invaluable as you navigate the new terrain of short-term rental owner.
Once you’re ready to make a purchase, be sure to work with a reputable lender like Mutual of Omaha Mortgage. Lending requirements vary slightly for second properties but many of the factors that are assessed before being approved for a home mortgage are the same as when you bought your first home.
You will want to be sure you have good credit, a healthy down-payment and low debt-to-income ratio. You’ll also want to consider how you will manage the business-side of your investment property. You’ll also want to be sure your broker is well versed in the nuance of financing a second property so you close on your property without any hassle and you’re able to list your rental with ease.
Market and manage your property with top notch service and amenities
Once you’ve decided what kind of property you plan to rent out, look at your property and promote what makes it stand out as a listing. Is it located near the local downtown area or in a quiet and secluded spot? Does it have loads of natural light streaming in through the windows or spectacular sunset views? Be sure to market these details once you’re ready to list.
In addition, make it easy for your guests to feel right at home. Create a coffee table book that lists all the details a short-term renter would need to get settled in like the Wi-Fi password, how to work the smart TV, any security codes or locks and how to reach if they need your help. Consider offering guests extra blankets, sheets and pillows as well as any kid-friendly amenities like strollers, high-chairs, baby gates or portable play yards.
Airbnb Superhosts Joel and Val Monahan rent their two-bedroom property dubbed Desert Haven in Joshua Tree, California and advise new hosts to be as communicative as possible and give guests exceptional service to earn the coveted five-star rating.
“Give your guests the comforts of home, while creating an environment that feels unique and inviting. Consider your daily comforts like a warm cup of coffee or a glass of wine on the patio,” shared Val. "It's with these details in mind we curated the perfect coffee corner and give every guest a bottle of wine with their stay."
Joel said he stays on top of guest communications and it doesn't go unnoticed. "To get things started on the right track, we like find out about our guests; the reason for visiting, who they're traveling with. If they're celebrating a special occasion like an anniversary or birthday, we can personalize their welcome card along with their favorite wine or champagne upon arrival."
Once you’re ready, take the next step!
Budgeting for a short-term rental is an exciting step toward becoming a real estate investor but it doesn’t have to be complicated or overwhelming. Many short-term rental investors find themselves excited enough about the prospect of becoming a real estate investor, they purchase several properties and manage multiple listings. It can be a fun and fulfilling way to make diversify your income stream or make a move in a different direction.
If you’re ready to purchase an investment property, now could be a great time to make an offer and Mutual of Omaha Mortgage is here to help. If you’re ready to buy, contact a Mutual of Omaha Mortgage Loan Specialist today and learn how you could be paving yourself a path from homeowner to real estate investor.