Investing in short-term rentals is one best side hustles for modern entrepreneurs. These types of investment properties can be more lucrative than long-term rental units.
Of course, your success as a rental property owner depends on your strategy. There are a number of costly mistakes amateur investors make, particularly in this niche of property investing.
We would rather not see you go down that path. Keep reading to learn about the top five mistakes new investors make when purchasing short-term rentals.
1. Not Knowing Your Budget
Assessing your finances is one of the most important steps when investing in short-term rentals. Don’t make the mistake of biting off more than you can chew.
Make sure the property you invest in is something you can comfortably afford. For rental properties in seasonal vacation areas, this includes the off-season. How will your investment budget fair when you don’t have vacationers lining up for your rental unit?
If you’re looking at rental properties that need work, calculate how much money you’ll need to invest in updates and renovations. We recommend working with a professional contractor for the most accurate projections.
2. Not Choosing the Right Location
Before investing in short-term rentals, don’t skip the market research. Find out more about the neighborhoods and general area before purchasing a home there.
Finding the right location is essential to your success. Conduct a comparative market analysis to see what other homes in the area are selling for and renting for. This should give you an accurate idea of what you’ll be able to charge your guests.
3. Failing to Calculate Your ROI
Knowing your potential rental income is vital to buying the best property for your budget and your long-term goals as an investor. After conducting comps and researching the market, you should have a pretty good idea of how much money you can make.
You also need to figure out how many days of the year you can expect to have guests in your rental properties. This will affect your long-term ROI, how long it will take to break even, and how quickly you’ll be able to build wealth.
4. Not Planning Ahead
Failing to plan for the future is one of the worst mistakes you can make while investing in short-term rentals. As noted earlier, this means thinking about the off-season.
For example, if you buy a rental property on a lake, you can reasonably assume that it will be full all summer long. But what about in the fall and in the winter? There are much fewer people vacationing at this time, and fewer yet that would want to stay on a frozen lake.
You must prepare your budget and plan ahead for issues like these.
5. Not Accommodating Your Guests Needs
Finally, when establishing short-term rentals, your goal is to create the best experience for your guests. This leads to positive reviews, which will result in more guests in the future.
To secure your rental income and provide a good experience, you need to anticipate your guests’ needs. What accommodations and amenities can you provide that will maximize the quality of their stay?
This includes things like entertainment, updated kitchens, internet and wifi, outdoor activities, and more.
Are You Thinking About Investing in Short-Term Rentals?
If you want to become a successful entrepreneur and build up your passive income, investing in short-term rentals is an obvious choice. Follow our guide and avoid making the mistakes listed above.
For more helpful information, read through some of our other blog articles. And if you want to maximize your chances of success look into our Real Estate Investing Accelerator Program.