The Vacation Rental Industry is booming. All over the world, homeowners are using services such as AirBnB to market transient rentals. Often this is merely a room or an apartment in their primary home. Unfortunately, frequently it is not a legal rental, which has become a real bone of contention with local code enforcement authorities! But assuming that you have a legal short-term rental property, what is the accelerated potential of paying off your purchase price on a vacation rental versus a long-term rental?
Nested, an online London-based real estate company reviewed sales in the last six months of 75 cities from all over the world. They then looked at the same city’s average Air BNB daily rate versus the market monthly long-term rate. They used a 3 bedroom home as their constant. For five U.S. cities the data was astounding:
- Washington, D.C. (64 months via Airbnb vs 219 months traditional
- Los Angeles (122 months via Airbnb vs 278 months traditional)
- Chicago (126 months via Airbnb vs 173 months traditional)
- Miami (137 months via Airbnb vs 312 months traditional)
- New York City (181 months via Airbnb vs 317 months traditional)
What does this mean for the real estate market? It means that there is an opportunity for investors, especially in our market place to earn a great return on their investment via vacation rentals. However, there are pitfalls aplenty! First and foremost, you need to make sure of the legality of your rental. Secondly, you need to know the market and be able to accurately assess the desirability of the considered purchase of a vacation rental. Not all properties are created equally; and, as I am fond of saying neither are all Realtors! Most Realtors® do not understand this niche market.
A few things to consider:
- Past Rental History
- HOA regulations regarding rentals
- Approval of tenants required? What is the fee if it is required?
- Pet Friendly
If there is a long and well-documented rental history, then your due diligence is much easier to complete. However of an occasion, even a property that has been successfully rented short-term for some period of time may turn out to be illegal due to zoning changes; or maybe just a change of heart with Code Enforcement!
Nested Property ROI Index 2017: https://nested.com/index/2017/global?currency=usd