7 Pros and Cons of Owning a Short Term Rental
Written by Nick Holevas on November 28, 2018
Some of the advantages are:
1. Flexibility - We get to choose the days, weeks or months to rent. Michael and I tend to travel quite a bit, both for our business and leisure, so being able to rent our personal residence at the drop of a hat is a major plus.

2. More Space - Our guests get more space than traditional hotels. Short-term rentals are perfect for families and people who want to travel together and make it an affordable vacation, by splitting the costs. In a hotel environment, it is a bit difficult to do that.

3. More Money - If we were to rent our first home (pictured above) on a long-term rental basis, we would only be able to get about $1,200 per month. Through the short-term rental program, we are able to get $1,200 to $1,500 per week during the peak season. During the off season we get the $1,000- $1,200 per month, making cash flow positive for the entire year.

4. Deductions - Cleaning and maintenance, repairs, insurance, management fees, cable TV, and utilities are just a few of the expenses we get to write off during the year. Along with depreciation, we could even record a loss (even though we had positive cash flow during the year) and avoid taxes altogether. Please keep in mind that depreciation will need to be recaptured once we sell the property.

5. Constant Upkeep - With renters going in and out frequently, we are able to keep up on small repairs before they turn into big problems!

6. Meeting People - From people attending a wedding, to girls' weekends and bachelorette parties, to people coming for their summer vacation, we have met some of the most interesting people from all over the world.

7. Ratings - Ratings are a key deterrent from tenants breaking things and trashing our place. Since we are rating them, as well as they rating us, we tend to get great people coming through our doors.

Some disadvantages include:

1. Payment Consistency - The fact is that during the winter months, we might have vacancies that last for two to three months. Sure we still might get the occasional renter during the winter, but most people want to go somewhere warm during that time. So you definitely need to have some cash management skills.

2. Utilities & Cable - Since we are competing with hotels, we definitely need to provide utilities and cable television for our guests. During the winter months with no money coming in, these expenses can add up.

3. Tenant Risk - Although the ratings system deters bad tenants, there still is a higher chance of theft and breakage of items, due to the sheer number of people coming through our doors.

4. More Interaction with Tenants - On our long-term rentals, we hardly ever talk to our tenants, unless a lease renewal is coming up, or they called about a repair. Since we are now the general managers of our own small hotel, we need to keep the communication at a much higher standard with our guests, making sure everything is going well with their stays. We do not want a bad review, and we want them to enjoy our home as much as possible!!!

5. More Maintenance - We must make sure our housekeepers and landscapers are doing their job. The homes need to be maintained the same as a hotel. That gets very expensive, very fast, as you need to hire more professional housekeepers with hotel experience, rather than your regular cleaning person.

6. Bureaucracy - Some cities do not allow short-term rentals; or they have stringent rules about how to manage them. Please check with your local government for rules and regulations.

7. Taxes - You must keep a record of all your expenses, rehab costs, etc. You might need to hire an accountant to figure out what should be capitalized and what should be expensed. Depending on the way you operate your short-term rental, you might need to form an entity, which requires more annual filings, and making sure you are complying with State and Federal tax requirements. 

Michael Davis & Nick Holevas

Michael Davis helps real estate investors attract high-paying guests for their vacation rentals by designing ideal spaces. Nick Holevas helps real estate investors increase sales by pricing their rentals at an optimum price while being compliant with local and federal requirements. If you are a real estate investor interested in increasing the return on investment on your single family home, then definitely reach out and request a free strategy session today.
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