We are big believers in taking advantage of the recent trends in the short-term rental market (pretty obvious, since we crafted our business model in this space!). Here are a few of our favorite reasons why we offer our properties for short-term rental.
1. Higher Earning Potential than Long-Term Rentals
This will be dependent on the occupancy and going nightly rate of your short-term rental compared with what you could charge when renting monthly. In our experience, with multiple units in Minneapolis, we have been able to make higher earnings renting on a short-term basis. I will use our 2-bed, 1-bath duplex unit, located in a prime area in Minneapolis, as an example. Doing some research on comparable rentals, I estimate that I could rent the unit for approximately $1600/mo. The long-term renter would also pay heat, electricity and internet, adding about $250/mo toward the total expenses. In order to make the same income ($1850) by renting on a short-term basis, I calculated how many nights we would need to book per month on a low ($85/night), medium ($125/night) and high price point ($165/night). I also factored in Airbnb’s 3% booking fee that is charged to hosts for each stay. If we priced on the low end, we would need to book 23 nights per month; priced on the high end, only 12 nights per month. Realistically, it is somewhere in between for most months, around 16-18 nights/month are needed to match the long-term rental income. Any bookings beyond that are gravy! 🙂
2. Make Your Primary or Second Home Self-Sustaining
For most of us, housing expenses make up the largest portion of our household budget. Unless you have the means to pay off your mortgage completely, it’s typically a pretty fixed cost. Not much you can do to reduce this expense short of selling and/or moving to a less expensive place to own or rent. The same applies to a second home or vacation home. With the rising popularity of short-term or vacation rental through sites like Airbnb, the everyday homeowner now has expanded and easier access to people looking for short-term rental spaces. Hosts are getting so creative in finding spaces available in their existing homes to offer for short-term rental, many times with the goal of offsetting a portion of their housing expenses. Here is just a sample of the types of scenarios you could pursue to move toward making your home(s) “self-sustaining”.
- Live in one unit of a multi-unit home and rent the remaining units
- Rent one or more spare bedrooms in your primary home
- Rent out the basement or above garage studio in your primary home
- Rent out your entire primary home a certain number of days or weeks per month and stay with friends/relatives while it is being rented
- Rent out your entire primary home while out of town for work, travel or other reason
- Add a tiny home, RV, trailer, guest cottage, yurt or treehouse on your property for short-term rental
- Rent your second/vacation home or cabin while you are not using
3. Leverage a Temporary Vacant Home
There may be times in life when you own a vacant home... Maybe you recently moved and are not ready or planning to sell your previous home; Maybe you inherited a home from or are taking care of a home for a family member who is ill or passed away; Maybe you’ve decided to travel the world for a year and your home will be vacant during this period. Whatever the case may be, this is a great opportunity to use the asset of your home to generate income for you! This is actually one of the reasons I (Selena) got into the Airbnb business… I was spending more and more time at my significant other’s (Scott 🙂 ) home and decided to give Airbnb a try for the times I wasn’t at my house. Eventually it transitioned to a full-time rental when I moved out of the house permanently.
4. Generate Income and Equity Until You Sell
If you have a home that you know you are planning to sell, but perhaps aren’t planning to list until next year or next season, why not rent it on Airbnb in the meantime? The property will remain staged and clean in preparation for selling (since you will need to keep it in nice shape and clean for your guests). It is a great way to build more equity in the home and generate some income from the property while you wait to list for sale. Unlike long-term rentals, you won’t be tied to a year-long lease and can offer it for short-term stays for as many or few months that fit your timeline.
5. Capitalize on Local Events/Tourists
Many people are intrigued by the idea of offering their home for short-term rental during big events in their area. Think Super Bowl, Olympics, political conventions, golf events, large conferences, etc. Here in the Minneapolis area, the Ryder cup golf tournament sparked the interest of “one-time” Airbnb-ers in 2016 and the upcoming Super Bowl in 2018 has people considering listing their home to make some extra cash. It’s an interesting concept, but not without risks and some level of work involved. If you don’t regularly rent your home, there is a bit of prep work involved, including making sure you secure your personal records, belongings or other “off-limits” items or parts of the house. The other consideration is the type of event and likelihood that people will be less than perfect guests in your home (excessive parties or celebrations, bringing extra guests, etc.). It’s worth considering the opportunity but we recommend you do your research and be prepared before committing.
Obviously, this is only representing one side of the story. There are pros and cons associated with short-term rentals compared with other real estate endeavors. We encourage you to consider your specific situation and do research to understand the best option given your financial and lifestyle goals!