Short-term rentals have become popular among homeowners who want to make some quick and cool cash. The emergence of platforms like VRBO and Airbnb has made it easier for homeowners to rent out their homes for a few weeks or days.
Short-term rental (STR) is seen as a passive income real estate business. This new business strategy offers many benefits besides the extra income. However, it also has its downsides. In this article, we will explore some of the pros and cons of renting out your home as a short-term rental. Read on to learn the benefits and how to adopt the best short-term rental strategy.
Pros of Renting Out Your Home as a Short-Term Rental
Here are the numerous benefits of renting your home for the short term:
1. Extra Income
Extra income is one of the most obvious reasons many people give out their homes for short-term rental. Rental property investments help generate passive income for many homeowners. Depending on where the home is and the demand for short-term rentals in that area, you could make a lot of money every month by renting it out.
This extra income can come in handy if you are looking to save for a huge expense like a down payment on a new home or a vacation. It is also helpful for people struggling to make ends meet. How much you can make on short-term rentals also goes beyond the location of your home and the demand for the service. Your STR strategy will also determine how much you will make off your short-term rental investments. Hence, you should have an effective short-term rental strategy.
Many homeowners who rent out their homes for a short period also enjoy a great deal of flexibility. Long-term rentals require a lease agreement for a minimum of six months. However, that is not the case for short-term rentals. With a short-term rental, you can rent your home for as little as one night.
This gives you the freedom and flexibility to choose when and for how long you want to rent out your home. It allows homeowners to make money when they need it without committing to a long-term lease agreement. This applies more to people who often travel, leaving their homes empty for days, weeks, or months. You can rent out your home while on that business trip or vacation and make additional money without any stress.
3. Maintain Your Property
When renting out your home for the short term, you must keep it in perfect shape to attract guests and earn good ratings and reviews. This is beneficial because it will encourage you to maintain your home and keep it in better condition.
Regular maintenance and cleaning can help you detect potential issues before they become major problems. It will also help you save a lot of money on costly repairs down the lane.
4. Home Security
Another major benefit of renting your home for the short term is home security. When you rent out your home for the short term, you will likely have guests moving in and out regularly. The property’s constant usage can help keep common thieves and burglars away. It offers home security, ensuring your properties are intact until you return.
5. Meet New People
Meeting new people is one of the rare benefits of renting out your home for the short term. It allows you to meet new people and expand your network. Many travelers worldwide use short-term rental platforms like VRBO and Airbnb to find affordable and comfortable places to stay. Renting your apartment can provide an excellent opportunity to connect with them and learn about new things and different lifestyles and cultures. For many homeowners giving their homes for short-term rental, this is one of the most rewarding parts of a short-term rental investment.
6. Tax Benefits
You can also enjoy some tax benefits when you rent out your home for the short term. Depending on your state and the specifics of your situation, you might be able to deduct expenses related to your short-term rental, such as repairs, cleaning fees, mortgage interest, and property taxes. The additional income from the rental can offset the costs of maintaining and owning your home.
The Cons of Renting Out Your Home as a Short-Term Rental
Here are some of the downsides of renting your home for the short term.
1. Wear and Tear
One of the major downsides of renting your home for the short term is the wear and tear that comes with frequent usage. Even the most careful guest can cause some wear and tear on the home, which can add up over time.
2. Risk of Damage
While short-term rentals are highly profitable, there is also a risk of damage. Minor incidents can add up over time, leaving you with damaged properties that can cost you a lot of money to fix.
3. Time Commitment
Another downside of giving your home out for short-term rentals is that it is time-consuming. Unlike long-term rentals, you can deal with multiple guests in just one week when doing short-term rentals. That means you must communicate with different guests, clean and prepare the home for the next guest, and handle issues that might arise during the rental period.
4. Interruption of Daily Life
Renting your home for the short term can also disrupt your daily life. This might be a significant drawback if you are uncomfortable with frequent visitors in your home.
Short-Term Rental Investment Tips
Here are some tips to help maximize benefits and minimize risks when renting your home for the short term:
- State clear rules and expectations before renting out the home. This will help prevent disputes or misunderstandings.
- Carefully screen all applicants. Choose only guests with good references and positive reviews.
- You can hire a property manager if you don’t want daily interruptions.
- Protect yourself with insurance. Get an adequate insurance policy for liability and property damages.
You can earn passive income from the rental property with the right STR strategy. Short-term rental investing yields huge profits, but you also need to consider the downsides before venturing into it. It is important to take the necessary steps to maximize your benefits and minimize the risks involved.