Today we’re coming at you with a two-part series, where we take a much deeper dive into the topic of short-term rentals. For the second part of this series, click here.
To discuss how short-term rentals can make a wise real estate investment strategy, we’ve brought in Rees, a client of ours who’s recently found success investing in short-term rentals.
Rees had a few goals in mind when she got into real estate investing. Though she wasn’t initially thrilled about the idea, after a few conversations with us, it became clear to her that it was a great option to add to the current investments she has from a diversification standpoint. She also considered it important to gain some passive income in addition to her job. On a more personal note, it was important for her to have an investment dedicated to the medical needs of her son.
To clarify, whereas “active income” is whatever comes from your primary occupation, “passive income” is typically the category where real estate investing falls, and that’s the way the IRS categorizes it as well.
Rees was initially looking for multi-unit properties (specifically three-unit) with long-term renters, and she was identifying them specifically based on whether they would be a good investment numbers-wise and make sense from their return perspective.
One property in particular came up that was significantly higher in return. That property had one of its three units as a short-term rental. She then realized that short-term rentals could be applied to other three-unit properties with long-term renters. Once she was able to take that idea and apply it to other properties, several more options became available.
Initially, returns were in the single digits. From a percentage standpoint, though, short-term rentals produced a 50% higher return than long-term rentals. Her family also decided to outsource the management of these properties, so they hired a company who handles the management of similar internal units, and that 50% was after that management company’s fees.
We want to thank Rees for joining us today to help us explore the topic of short-term rentals! If you’re considering investing in short term real estate, we encourage you to watch the second part of this series, where we discuss what it takes to manage an investment property, and give advice to those looking to diversify their investments with real estate.
If you have any more questions about investing in short-term rentals, don’t hesitate to reach out to us. We’d be happy to help you.