Short-term rentals are the new, exciting way to earn money with real estate–but that doesn’t mean that renting out multifamily properties for short stays is an ideal business model.
Before you jump into multifamily short-term rentals, using Airbnb, VRBO, or other websites, consider these risks:
Downturns are possible and unpredictable: We’re seeing our first downturn since Airbnb started now and it is not pretty. With travel restricted and the Covid pandemic contagiousness, these short-term rentals are suffering.
More competitors will dilute the market: There are a few big names currently and competition is already stiff. There will surely be more new businesses in this industry coming online. Will you need to list all of them to make money? Coordinating among these vendors will be tough. New sites will come online that make the short-term rental process even simpler.
Likelihood of more rules, licensure, taxation, and regulation: Fulfilling state or local regulations for anything is never cheap or easy. The red tape and fees involved in running short-term or vacation rentals are sure to increase. Look at the rideshare apps as a recent example. They were considered welcome, up-to-date disruptors to the taxi industry. Then, accidents, injuries, robberies, worker mistreatment developed, and more were uncovered. New rules and fees are being added in many communities against short-term rentals due to neighbor complaints, crime, cities wanting more tax revenue, etc.
Upkeep is more labor-intensive: In many cases, property owners are doing their own cleaning between guest stays. Many owners have to fight for reimbursement for property damage done by guests. Unlike large hotels or even motels, many short-term rental property owners don’t have the financial reserves to absorb incidental losses like this.
All of these complications suddenly make renting your multifamily property to standard, long-term renters sound great, right? Long-term rental owners are feeling the strain as well, but they haven’t lost revenue or tenants permanently as of yet. Like any other relatively new industry, you must consider carefully before getting into the short-term rental business.
Get the funding you need for multifamily property investment quickly. Learn about all your options by contacting Spearing Capital & Consulting, Inc., today!