The short-term rental market is one of the hottest segments in real estate and property management

Four Rewards

1. Income – It’s no secret that nightly and/or weekly rates of short-term rentals can be significantly higher than that of traditional rentals. In some cases you may be able to generate as much as 25% of your mortgage in one night. Here in Austin, for example, we have music festivals that attract thousands of visitors every year. As hotels fill up, many of these concert goers consider short-term rentals as an alternative option. Prices skyrocket during these events with nightly rates rounding off at $1,250 (depending on location and number of rooms). This increased revenue can make up for slower rental periods throughout the year.

Another unique opportunity for short-term rental owners is the corporate market. You may be able to promote your property to large corporations that have offices in your area. For example, on the outskirts of Austin there are several large office complexes occupied by Fortune 500 companies. There are few short-term accommodations available in this area. So, short-term rental owners could promote their home-away-from-home features such as a full kitchen, a backyard for pets and more, to attract these customers.

2. Preservation – This isn’t as widely discussed as other perks, but property owners wishing to preserve the historic or sentimental value of a property may have more success with short-term renters. Unlike long-term renters, they are not responsible for furnishing a property or taking care of maintenance. So, you won’t have to worry about someone forgetting to replace an air filter, putting holes in the walls with paintings, letting the lawn get out of control or causing pest problems. Sue Long, a founding member of the Austin Rental Alliance, prefers renting short-term rather than long-term for this very reason.

“I do it for the love of the house that I saved from being demolished. This house sat on a lot next door to the house my father was born in in 1914. We have such a cool neighborhood and I want people from out of town to have that experience. I don’t want someone in there for a whole year who won’t respect it or take care of it the way I do.”

3. Tax Breaks – Short-term rental owners are eligible to receive many types of tax breaks. For starters, they may be able to deduct operating, advertising and other expenses such as education costs (i.e. seminars on how to rent vacation homes) and income tax preparation. The biggest break, however, is for owners that rent their property less than 14 days a year. These owners don’t have to pay any tax on the rental income; they don’t even have to report it. If you rent the property more than 15 days a year, however, the revenue must be reported as income. Working with a tax professional is advised.

As a final tip, if you have generated more revenue than expected this year, you could offset this by making year-end, tax deductible purchases. This could include everything from replacing furnishings to hiring a professional photographer or copywriter to help with advertising to buying large-ticket items like a hot tub. HomeAway has a short tutorial about year-end tax considerations.

4. Community Rewards – While short-term rentals have community risks, they also present community rewards. For example, proponents believe short-term rentals promote tourism in a community. Most short-term property advertisements will publicize the features of the property, but also the unique events and attractions of the community. Additionally, short-term rentals provide more tourist capacity in areas with few hotel options or during events and peak periods.

Short-term rentals may also increase the property values in a neighborhood. Property owners managing short-term rentals must keep their properties well-manicured, attended to and make regular, beautifying improvements in order to remain competitive in their market. Some believe this leads to higher property values in neighborhoods, which is beneficial to other homeowners.

So there you have it. Short-term rentals may be a viable option for your property, but be sure to carefully weigh the risks and rewards beforehand. If you have experience renting out a short-term property, feel free to share your tips and anecdotes below.

Become a Member of SFPMA.org : https://sfpma.com/become-a-member/

 

Tags: Condo & HOA Vacation and Rental Property, Tenant Screening