Short-term rental property investment tips for beginners

  • Michael Elefante and his wife have built a portfolio of six vacation rental properties in Tennessee and Florida.
  • They bought their first short-term rental property in 2019 and have grown while working full time.
  • Here are Elephante’s top tips to help you get started with short-term rental investing.

This essay is based on a conversation with Michael Elefante (a real estate investor who is also an Airbnb Superhost). It has been edited for clarity and length.

Jill, my wife and I bought a house together. our first short-term rental propertyAfter moving to Nashville, in November 2019 we moved to Nashville. It was a worthwhile investment since we lived in a tourist hotspot.

Three months after listing our property on Airbnb, we had already made $7,000 in profit. That was just March 2020. Despite COVID-19 cancellations hampering our focus, the income potential of investing in STR properties was clear.

While growing our short-term rental portfolio, we continued to work full-time. We sold our retirement savings to buy our second property in Nashville in May 2020. Three months later, we used our salary savings along with cash flow from our properties to make a deposit on a cabin in Gatlinburg.

We currently own and manage six Airbnb properties, which generate an average of $118,000 per month. I also run a successful online coaching business for STR. Our bookings have reached $740,000 so far this year.

We are able to provide an experience, not just a bed and breakfast. I believe that is why we have been so successful. These are my top tips for beginners to avoid common pitfalls of investing in short-term rental properties.

1. Do some basic market research in the area you are looking to rent or buy

Potential investors should first examine travel trends in the region where they wish to invest. Then research the local laws and regulations in the area regarding short-term rentals – local government sites usually contain these details.

I call the county or city zoning offices if I have questions about a property.

2. Contact local experts in your industry to gain as much knowledge as possible

It’s different from traditional real estate hunting to find a profitable short-term rental.

You can avoid investing in an area that is not profitable. Instead, look for a real estate agent who has experience dealing with investors or with short-term vacation rentals. They will be able to tell you which areas are best for STRs and why people are willing to pay more to live in a particular zip code.

3. Before investing in a property, do a thorough investment analysis

Perform a thorough investment analysis before considering investing in an STR. An Excel spreadsheet is what I use to visualize where my money will go and the potential results of any new short-term rental investment.

When I first started considering investing in real estate, I researched online and used investment calculators such as Bigger Pockets to determine potential earnings, purchase costs, and cost of living. adding decorations or furniture.

I did market research on similar properties in the area of ​​my property and compared their features and prices. AirDNA would be a good option to check daily rates and occupancy in a given market or zip code.

All of this information was used to create my investment analysis template on Google Sheets. This model is still used to analyze properties today.

4. Always prepare for the worst.

When evaluating potential properties, I use conservative numbers in my Google Sheet template. I enter daily rates, occupancy, and operating expenses that are slightly lower than expected.

Once I find a subject property that meets my ROI criteria, I test the investment. I run the numbers to find the break-even point and the best possible profit. These figures give me a lot of confidence when buying a property.

I only had one major unforeseen expense. One of our properties in Florida has a pool heater. Electricity and other maintenance costs cost more than expected. Our monthly cash flow is lower but has not hurt the overall investment.

5. Invest in property management software

Guesty is currently my favorite software and I pay $31 per month. Property management software allows for the management of multiple properties on sites like Airbnb, VRBO, and A synchronized calendar can be used to manage incoming and outgoing messages.

This software can help you avoid making rookie mistakes that can negatively impact your grades, such as double-booked pitches.

6. Use dynamic smart pricing software

Everyone should use smart pricing software, such as Price Labs or Wheelhouse. This software automatically adjusts overnight rental rates to match market conditions. Software can help you increase occupancy or find the best rate for your property faster if you don’t know much about the market.

7. Automate and outsource cleaning maintenance

Cleaning your own property is one of the most common mistakes people make. Although it may seem profitable in the short term, it is not sustainable.

You need to learn how to outsource if you want to grow your portfolio. Hire cleaners to increase the efficiency of your business. TurnoverBnB or ResortCleaning allow you to automate the synchronization of your calendar.

8. Find out what your competition is offering, then take a leap of faith.

AirDNA can help you find the best performing properties in your area. It will also help you understand why people book these places. What are their design features? Are there hot tubs, game rooms or swimming pools? Are they equipped with accent walls? This knowledge can be used to help you choose and build the vision for your property.

Our first property was in Nashville. There are many murals throughout the city. We hired an artist to have a mural created on our property. It attracted many guests and set us apart from others.

9. Don’t underestimate how powerful good design can be in generating revenue

Many people fail to focus on design due to a lack of understanding of design ROI and STRs.

If you can’t afford furniture or design, it’s a good idea to find a smaller property that costs less to furnish. You can bargain shop for furniture and decor. Although it may take longer than shopping online, it will save you time and make your property stand out.

Once you make a profit, you can spend more on interior design and hire an interior designer. This will increase your future income as well as your cash flow.

10. Hire a professional photographer

Photos are everything. Poor quality photos can prevent thousands of potential customers from seeing your property.

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