The real estate industry slumped during the health crises due to travel restrictions and extensive lockdowns. But the short-term rental sector has recorded unprecedented growth post-Covid due to flexible work arrangements, business travelers, vacationers, and much more.
Companies like Airbnb are profiting from this explosion.
Airbnb data shows that the demand for short-term rentals has grown. Every length of stay increased as many international tourist arrivals grew, and fewer people opted for hotel alternatives than permanent residences.
The peak season for the short-term markets is here. Many investors want to become hosts, and their rental property investments are paying off.
This article will highlight how the short-term rental market trends and lucrative opportunities drive investors. Let’s delve in.
Recovery of Vacation Rental Industry
The Covid-19 pandemic affected the short-term rental industry significantly. But the slowdown was short-lived because the markets started recovering and growing. Short-term rentals are more profitable than traditional, long-term rental properties.
Traveling and tourism have a huge impact on short-term rentals. Due to these two sectors, many people are now generating $250k annual wealth created per property. As a result, the demand for Airbnb and vacation homes increases when more people travel. This increases the daily rates and returns on investment (ROI).
So, if you are asking how to make money on rental properties, you should focus on new marketplaces with a strong Airbnb demand.
Increased Growth in Secondary Markets
The small, rural markets have recorded consistent growth, thanks to remote working and increased domestic travelers. As a result of this change, investors are abandoning primary markets like Chicago, Los Angeles, New York, and others to tertiary markets.
Smaller markets will experience steady growth even as many organizations retain their work-from-home policies. Indeed, many families and professionals prefer small towns or rural areas because they’re secure, comfortable, and peaceful.
At the same time, short-term rental properties in smaller markets are less costly and affordable to new investors. Similarly, the increased demand offers a higher return. The cities with the highest Airbnb occupancy rates are Portland, Oregon, San Francisco, California, Seattle, Washington, and Tucson, Arizona.
Technology plays a massive role in short-term rental investing. High technology is the main driving force in each stage of the investor journey and different aspects of the industry.
It helps investors choose between short-term and long-term rental properties, develop an effective rental properties investment strategy, identify a profitable investment opportunity, and much more.
Technological advancements will help investors identify new marketplaces and grow existing vacation property businesses to meet all investors’ needs. This will provide a seamless and profitable real estate investing process.
Rental cash flow can be identified much easier.
Provision of Pet-Friendly Vacation Homes
The demand for pet-friendly short-term rentals has grown because a reasonable number of vacationers are pet parents. These individuals want to travel and live with their pets because they are part of their families.
As mentioned, there is an increased investment in secondary and tertiary markets because many travelers opt for remote areas. These guests want to travel with their entire family, including their pets because these vacation homes are more spacious. Thus, their dog or cat will have a vast space to run around.
Guests Prioritize Family Fun
Individuals and couples have been taking advantage of vacation homes for decades. The new trend of investing in family-friendly short-term rental properties is because it continues to record steady growth even before the pandemic.
The new wave of vacationers and travelers adding their families to the digital nomad movement has created lucrative opportunities for investors.
Further, the virtual class options enable families to travel during the school year and take advantage of seasonal offers and discounts.
Factors That Affect the Vacation Rental Property Investments
A property in the best vacation rental markets is likely to produce a steady stream of rental income. But some markets are unconducive to generating passive income from a rental property because of high expenses.
Therefore, it helps to evaluate your primary objective of investing in a vacation rental property. The motivation will help you choose between investing in a traditional rental property and the top short-term rental markets.
Some real estate costs include utilities, mortgages, repairs, maintenance, and emergencies. To be profitable, your cash flow should always be above the expenses. Experienced short-term property investors recommend the creation of cash reserves to cover unplanned incidents.
Taxes are both advantageous and disadvantageous. But you should evaluate yourself before committing your money to vacation rentals. You can consider local, state, and federal taxes on property investments. The good news is that you can get some relief through tax write-offs.
Managing a short-term rental property can be a demanding job. Because of that, some investors prefer to hire a property management company to manage the day-to-day operations. Although the property manager makes your life much easier, this is an added expense. However, the professional can improve the occupation rates through marketing, hence increasing the returns.
Most lucrative vacation investment properties on the beach are subject to certain risks, including financial loss, adverse weather, etc. Therefore it’s crucial to evaluate the potential downsides of investing in vacation properties compared to long-term properties.
Most property investors focus more on rental income. Usually, appreciation is essential when evaluating rental property investments.
The real estate industry relies on speculation, and every investor should understand the big price swings that some markets portray when compared with the present economic landscape. Careful market research can help you identify new marketplaces that offer conducive property appreciation in the future.
Great rental property investments don’t guarantee high returns. The goal of every investor is to identify locations with a positive outlook. Today, new and experienced investors consider the recent rental property trends and factors that affect real estate investments before committing their funds.
Every investor wants to put their money in a bustling real estate market. They are keen to identify profitable short-term rental investments.
So, if you’re considering purchasing an investment property, the trends and factors mentioned earlier will guide you in identifying valuable vacation properties. The rental market remains dynamic, but there are many lucrative opportunities that you can invest in to generate passive real estate income.
Hence, go ahead and purchase that new home, list it on the STR marketplace, such as Airbnb, and start attracting vacationers and travelers.
About the author. Daniel Martin wrote the above article on short-term rentals and real estate investors. Dan has had hands-on experience in digital marketing since 2007. He has built teams and coached others to foster innovation and solve real-time problems. Dan also enjoys photography and traveling.