Short Term Rentals – A Great Way To Own NOW and Help Pay The Bills
There are lots of reasons to purchase something in Florida these days, but a lot of my NY friends are not ready to move down to FL full time just yet. The future may lead to more opportunities to split time between NY and FL to varying degrees, but it may not make sense to buy something for the few weeks you may be using it each year. One way that has been exploding in popularity among us NYers is to purchase Short Term Rental properties. A Short Term Rental (STR) property is one where travelers rent a home from anywhere from 1 day to 1 month; although this can vary in markets. You can usually charge more per night, but there are certain things that you give up with an STR. I own a STR in Florida, near the theme parks where I can change the rates depending on the demand. I know that there are certain PEAK times when demand is high for the parks. It usually coincides with school holidays in the northeast. When I was charging a flat rate, I realized that these dates would go fast and I was leaving more on the table. There were other times when you couldn’t give the place away and needed to lower the rates accordingly in order to maximize your occupancy rates. Many times, you can discuss with your management company which times are most popular and create your rate sheet.
There are lots of reasons to purchase something in Florida these days, but a lot of my NY friends are not ready to move down to FL full time just yet. The future may lead to more opportunities to split time between NY and FL to varying degrees, but it may not make sense to buy something for the few weeks you may be using it each year. One way that has been exploding in popularity among us NYers is to purchase Short Term Rental properties. A Short Term Rental (STR) property is one where travelers rent a home from anywhere from 1 day to 1 month; although this can vary in markets. You can usually charge more per night, but there are certain things that you give up with an STR. I own a STR in Florida, near the theme parks where I can change the rates depending on the demand. I know that there are certain PEAK times when demand is high for the parks. It usually coincides with school holidays in the northeast. When I was charging a flat rate, I realized that these dates would go fast and I was leaving more on the table. There were other times when you couldn’t give the place away and needed to lower the rates accordingly in order to maximize your occupancy rates. Many times, you can discuss with your management company which times are most popular and create your rate sheet.
There may be special events like biker’s weeks or national volleyball or dance competitions that also can add a boost to your income if you’re paying attention. Another great way to see if you’re maximizing your income is to go online to major vacation rental sites like AIRBNB or VRBO and see what the consumer is seeing for the different time periods. I like to put myself in the consumer’s shoes to see if my property is a good value and adjust the pricing accordingly. It’s much better to keep the place occupied at a slightly lower rate then to have it vacant and collecting no income at all. This is not an easy task to accomplish, but if you track properly and pivot as needed, you’ll find that you can raise your revenue enough to make the property more profitable.
If you’re looking to purchase a new Short Term Rental, then I would suggest doing this type of research before you buy to make sure you can actually realize the rental income that you need to make the property carry itself.
Long Term Goals of STR’s – Potential Appreciation in Value is a HUGE Consideration
In addition to the break even or profit goal of short term rentals, people that have purchased STR’s have enjoyed a tremendous windfall of profit in the form of equity in their investments. Property values have gone up over time and owners are befitting from the appreciated value. Even if there are some tight years with break even, in the long term I’m grateful for my investment. My home was 300,000 ten years ago and is now worth over 540,000 today. This 80% increase in value or 240,000 over ten years comes out to $24,000 gain each year. So even if I was not able to create a positive cash flow some years, I still enjoyed a major gain and I feel that this is a great investment in the long term. Many friends have leveraged their buying power and have purchased a few STR’s over the years and are now enjoying the tremendous benefit of financial independence as they have over a million dollars in equity now. The Short Term Rental game might be just the vehicle that you’ve been looking for for a long term financial plan.
In addition to the break even or profit goal of short term rentals, people that have purchased STR’s have enjoyed a tremendous windfall of profit in the form of equity in their investments. Property values have gone up over time and owners are befitting from the appreciated value. Even if there are some tight years with break even, in the long term I’m grateful for my investment. My home was 300,000 ten years ago and is now worth over 540,000 today. This 80% increase in value or 240,000 over ten years comes out to $24,000 gain each year. So even if I was not able to create a positive cash flow some years, I still enjoyed a major gain and I feel that this is a great investment in the long term. Many friends have leveraged their buying power and have purchased a few STR’s over the years and are now enjoying the tremendous benefit of financial independence as they have over a million dollars in equity now. The Short Term Rental game might be just the vehicle that you’ve been looking for for a long term financial plan.
Now, this type of plan is simple but it’s not necessarily easy. You either have to do a lot of the heavy lifting yourself or you can choose to have a management company handle it all for you. I have a management company that does most of my renting and all of my maintenance issues. The more you get involved in the process, the more you’ll realize in profits. My first STR I handled all the aspects myself. It was very successful as I had the person next door responsible for everything from greeting the new guests to cleaning the place and repairing items where necessary. I put the home on all the major STR sites and handled all inquiries myself. This exercise gave me hands on control over all aspects and allowed me to be in touch with the travelers directly and receive some amazing feedback that I took seriously to improve the experience and recommendations of guests.
Do it Yourself or Hire a Management Company?
When I was able to do this all myself, I had an amazing positive cash flow and was able to put that money into improving the property and keeping it as one of the most desirable places in the area. The downside here was that it was very time consuming and I decided to trade off that time and pay a management company to do most of the heavy lifting. I found a management company that would take care of the issues while still allowing me to rent the property out myself. This was the right choice for me. I got rid of the headaches, and was still able to benefit from assisting with the rentals if I felt like doing that from time to time. When I was busy at my regular job, I allowed the management company to do it all and I just sat back and collected the rent minus their fees. Although my cash flow wasn’t always positive, this was the most painless way and it’s easy for anyone to do. The saying no pain, no gain is true here though no pain and you could end up just breaking even. But, when you once again look at the increased equity over time, you are way ahead of the game. In history, homes have appreciated more than inflation over any 7 year period of time. If you look at the likelihood of the home being worth a lot more in a few years, it kind of makes it all make sense. Of course, we can’t guarantee that homes in every area will be worth more in a few years, but I’m going to bet that the way things are going with demand and migration patterns, that areas like Florida are positioned to enjoy a tremendous upside in the next ten years. The momentum of NYers leaving to go to Florida either part time or full time has been not only growing, but it has become almost a foregone conclusion for many NYers. We seem to think that it is our right to head down south in our later years to enjoy the simpler life and better climate. I know I’m one of those who are excited about spending more time in FL in the next few years.
When I was able to do this all myself, I had an amazing positive cash flow and was able to put that money into improving the property and keeping it as one of the most desirable places in the area. The downside here was that it was very time consuming and I decided to trade off that time and pay a management company to do most of the heavy lifting. I found a management company that would take care of the issues while still allowing me to rent the property out myself. This was the right choice for me. I got rid of the headaches, and was still able to benefit from assisting with the rentals if I felt like doing that from time to time. When I was busy at my regular job, I allowed the management company to do it all and I just sat back and collected the rent minus their fees. Although my cash flow wasn’t always positive, this was the most painless way and it’s easy for anyone to do. The saying no pain, no gain is true here though no pain and you could end up just breaking even. But, when you once again look at the increased equity over time, you are way ahead of the game. In history, homes have appreciated more than inflation over any 7 year period of time. If you look at the likelihood of the home being worth a lot more in a few years, it kind of makes it all make sense. Of course, we can’t guarantee that homes in every area will be worth more in a few years, but I’m going to bet that the way things are going with demand and migration patterns, that areas like Florida are positioned to enjoy a tremendous upside in the next ten years. The momentum of NYers leaving to go to Florida either part time or full time has been not only growing, but it has become almost a foregone conclusion for many NYers. We seem to think that it is our right to head down south in our later years to enjoy the simpler life and better climate. I know I’m one of those who are excited about spending more time in FL in the next few years.
When deciding between STR’s and Long Term Rentals, you also can benefit from the flexibility of STR’s to chart out your vacations and times that you want to use the home. If you want to go for a week over the holidays, you block out that time and leave the rest of the month available for rentals. In long term rentals, it’s usually month to month or longer and you may face challenges that the home is being used by other guests when you want to use it.
The tax advantages of STR’s are also impressive as most of your expenses and management fees are written off against any income that you receive.
Make Sure You Know the Rules and Restrictions Before You Fall in Love
It is very important that you understand the rules of the community where the property is located. You should make sure that they allow short term rentals. Some resort areas require special permits or transient licenses to rent for less than one month and some communities and condo associations restrict rentals to minimum lengths of 30, 60 or 90 days. When you are looking for your investment or second home, you want to make sure that your agent knows about these important details.
If you are unsure, you can always contact me and I’ll connect with Sunshine Johnny and I’ll be sure to point you in the right direction. I have over 50 Sunshine Agents throughout Florida that can help you to find the right place to meet your Florida goals. We’re happy to guide our friends home.
