It’s no secret that AirBnB has quickly transformed the vacation rental market and made short term rentals one of the most enticing choices for property investors. Compared to long term investments, the extra income a vacation rental can provide is exponential. Savvy investors understand that diversification of their portfolio with short term rentals is a must, but the investment of time required for the day-to-day operation is beyond reasonable.
When it comes to real estate investments there are various ways to create opportunities. Due to this, the term “Real Estate Investor” will mean various things to different people. HGTV style fix and flip is an exciting journey of demolition and beautification for a higher sale price. The buy-hold style investors will buy a property and wait for appreciation to increase their assets value over time. BRRR investors are a mix of the two; They buy a property to renovate, refinance the new value to have a higher valued asset and rent it so the tenant is paying the mortgage (BRRR standing for Buy, Rehab, Rent, Repeat). While long term rental rates are at the highest they have been, the price of property has also risen exponentially. Higher property prices mean higher mortgage costs, which translate into less immediate cash-flow for the property. A property purchased now has the potential to have better cash flow in ten years and much better cash flow once the mortgage is paid off, but an investor might be breaking even for the first few years of the investments’ lifespan.
Let’s dig deeper into the numbers. The average rent in the United States for 2020 was $1,468., which means a tenant pays roughly $48.93 per day. A “lower-priced” night for a vacation rental is $75., which would provide $2,250. if it were booked every day. Let us be realistic and say that the unit is booked for just 20 nights, you would still see a $1500. month that still outpaces the average. Bump your average nightly rate to $85. for 20 nights and you are at $1700. If your mortgage were $1300 on the home, you would go from just $148. per month in cash flow, to $400. per month in cash flow simply by adjusting your rental strategy for the unit to the short term market. Apply that concept to a portfolio and the difference can be even greater.
You want in! While re-structuring your rental strategy sounds like a great way to increase your cash-flow, vacation rentals have an entirely different set of operational needs. They require a vastly more hands-on approach to hospitality and guest management. Long term tenants usually only require 60 days of marketing and only reach out when the unit needs a repair, otherwise the consistent check comes to you on the first. The potential impact to your occupancy rate is only between leases, maybe once a year.
Short term rentals, while profitable, are constantly marketing to prospective guests, answering their questions to close bookings, guiding guests throughout their experience, coordinating with the cleaning team on a regular basis and much more. The process does not end for you to maintain your occupancy rate and return. The various tasks are detailed and time consuming; If the moving parts are not properly managed, your rental performance and cash flow will suffer regardless of the time and effort spent.
Successful vacation rentals require a more hospitality-geared approach and inherently have many moving parts to pull off a marketable guest experience. Marketable guests experiences are everything in today’s travel world. Today’s travelers are choosy and rely heavily on reviews to make their vacation arrangements, dropping this ball will drop your return on investment.
You do not want to allow these added complexities to prevent you from joining the Vacation Rental Bandwagon! The cash flow a vacation rental investor will experience over a long term investment is outstanding. It is very clear that investors, large and small, should be adding vacation rentals to their portfolios for a diverse addition of cash flow.
In search of an operational solution, investors may reach out to traditional, full-service property managers but quickly realize that 30-50% of their investment’s profit will severely impact their cash flow and they are not interested in the broad-scale marketing required in today’s fast-paced world of travel. Self-management seems like an option, but also requires more time and attention than most investors are willing to sacrifice.
AIR MGMT gives investors back their time and eliminates the most time-consuming or expensive parts of vacation rental investment. By unbundling vacation rental management functions, AIR MGMT can offer portfolio-consistent guest experiences, professional marketing and vendor coordination for a low 15% fee.
By designating the on-location team, investors can maintain a hand in their investment operation while enjoying the transparency of using direct vendors. This takes the intensity of owning a vacation rental property and brings it to a level more similar to a long-term tenant situation. No more vague and expensive repair costs because AIR MGMT will only inform you of repairs when needed. You will authorize all work to be done in the home and we will arrange with the impacted guests.
Jumping on the vacation rental bandwagon is a must for your portfolio and AIR MGMT is your hospitality partner to make it happen. Contact AIR MGMT today to start your vacation rental on a path to success!