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If you work with real estate investors or you’re an investor yourself, you may have some questions surrounding the pros and cons of short-term rentals. I recently sat down with short-term rental coach Victor Zeledon who works with beginner investors who are looking to leverage Airbnb as part of their short-term rental process.
As a young Latin-X real estate investor and family man himself, Zeledon is passionate about helping people understand the importance of building generational wealth and the power of leveraging social media to amplify your long-term goals. When I interviewed Zeledon, I asked him questions based on the most commonly asked questions I hear over and over again when attending events across the country.
How do you see most people getting started with short-term rentals?
People can leverage short-term rentals either with a stand-alone house, renting out a room in their primary residence, or offering a shared space. Renting out a spare bedroom in your house is really the easiest way to get started with short-term rentals.
Is it typically younger people you see getting started? Also what areas do you see new investors coming from?
It’s a wide range of ages. It seems that younger people are drawn to Airbnb at a higher percentage because of the sharing economy. According to The Balance, “The sharing economy is an economic model that allows consumers to share in the creation or use of products, goods, and services. This sharing often takes place across digital platforms, such as online communities or apps.”
Since short-term rentals (STRs) are mostly rented out using technology it may be easier for younger people to learn. However, older people are also hosting on AirBnB a lot because they have multiple homes. We’re seeing lots of new investors from California, but honestly it’s people from all over the world and all ages that are paying closer attention to STRs as a business model.
How long does it take for STRs to become profitable?
There are lots of factors that determine this. From the purchase price to the amount of money spent on furnishing. However, on average I would say 1 to 2 years, sometimes even less.
How much do you recommend people save up first before getting started?
First of all, it depends on the type of loan you choose and qualify for purchasing. As for furnishing, it depends on the size of the property. To be safe, plan on saving $3,000 to $5,000 per room.
What are some of the hidden costs?
Down payment/closing costs and cost of furnishing are really the most expensive part of the Airbnb setup. There’s also the permitting expenses with each respective city. Another thing that most people don’t realize is that depending on the city, as an Airbnb host you’ll have to pay the city a Hotel Occupancy Tax which can range from 3 percent to 10 percent of each reservation.
What is the difference between short term rental and vacation rental?
They are really both the same term. Short-term rental is anything less than 30 nights.
Is Airbnb the same as short-term rental?
Yes. Airbnb is a platform where a person can list/market their own short-term rental. However, someone can actually rent a 30+ day rental through Airbnb also.
Lastly, what are your top tips for effective short-term rental management?
Self-managing a short-term rental is totally doable. Yes, it’s more work than a traditional long-term rental, but there are ways to set it up to minimize the overall time spent. First of all, automate your listing, set up electronic locks that will send out pings automatically when a guest books. You can set up automatic messages to guests with all the check-in instructions.
You can also put your listing on a dynamic pricing software. You’ll want to secure a great team to help you run your STR. That team should include a house cleaner, a handyman, a plumber and even an HVAC tech. Your team will be your eyes and ears, especially if you live out of state and not within driving distance of your rental.
Also, don’t forget to create a guide for your guests with instructions on how to use everything around the house. This helps limit the overflow of common questions that guests may end up pinging you about as the host. Last but not least, have a hospitality mindset. Make sure that as a host you are kind, and empathetic but also remember, you’re running a business.
Author Stacey Soleil is the Head of Community & Industry Relations for www.followupboss.com as well as Inman contributing writer, national speaker, RRC Adjunct Instructor & WomanUP! Wavemaker.