Guide to Short-Term Rental Investment

Short-Term Rental Investment

The American Community Survey conducted in 2019 found that more than 44 million families in the United States are renters.

It goes without saying that the short-term rental investment market is booming right now. Even while there is a greater than ever desire for travel, many people today are seeking different kinds of experiences than they were only a few years ago.

Visitors can stay a little longer and go on a little bit more of an adventure with more freedom to work from home. Travelers of today are enthusiastic about secluded retreats with a home-away-from-home atmosphere in less inhabited locations.

The travel sector has undergone a modest change as a result of well-known travel websites like Airbnb and VRBO. Large businesses and opulent resorts are no longer the dominant forces in the area.

What is a short-term rental property?

A short-term rental is a rental with a lease that is for a shorter duration than one year. It could be a house with one or more families living in it, or it could be a townhouse or condo complex.

Short-term VS long-term rentals

The most common strategy for investing in real estate is to buy and manage a rental property, such as a single-family home or a complex housing multiple families. Long-term or short-term rentals are frequently distinguished in residential real estate.

Short Term Rental

The typical rental terms are daily, weekly, or monthly. A single-family rental home with a monthly lease, a home hacker renting out an extra room, and vacation rental homes are all instances of short-term rentals.

Long Term rental

The typical rental agreement is for a one-year period with a fixed annual rent. While most residential leases last for a year, some local landlord-tenant laws may allow for longer lease terms.

Although long-term rentals are simpler to manage and generate more consistent rental revenue, there are several unique reasons why an investor would wish to think about providing a short-term rental.

Short-term rental investment is profitable?

If managed properly, a rental property can be profitable. But don’t expect it to produce passive revenue without any work on your part. You must consider a number of factors before investing your money in order to know whether your property will turn a profit or not.

Vacation spots are thought to be the greatest for these kinds of properties because tourists frequently prefer them due to their affordable rates over pricey hotels and five-star resorts.

– Local rules and ordinances create the necessary framework for the real estate market. For instance, New York and other cities have tight rules about how long a property can be occupied. These kinds of limitations could make it harder for you to earn a consistent income.

Make sure to familiarize yourself with local laws and regulations controlling the real estate market if you intend to purchase a home in a location that is conducive to short-term rentals. Additionally, you want to research the policies of a platform like HomeAway or Airbnb.

– A strong marketing plan can make your venture profitable, while a weak one can cause it to fail. When you purchase a vacation rental in a popular tourist destination, it’s simple to overlook a marketing plan. However, you shouldn’t enter the real estate market without having a clear idea of how you’ll attract clients to your short-term rental.

Clear pictures and maybe videos, thorough property descriptions, and effective visitor communication are all fundamental components of an effective marketing strategy. Additionally, you should provide a list of all the local conveniences, including restaurants, shops, and historic and cultural sites that would be of interest to your visitors.

Social networking is a further kind of advertising that you shouldn’t ignore. Some highly effective short-term rentals even go as far as to open a specialized Instagram account and ask influencers to post content about them on the platform.

People will be aware of your efforts and tell their friends and family about your property. In the long term, your efforts could provide fantastic word-of-mouth advertising.

Is Buying a Property for Short-Term Rental a Smart Investment?

Real estate investing has shown to be among the most profitable investments you can make. Investors prefer real estate generally because it offers a variety of tax advantages and can generate consistent cash flow.

Due to their many advantages, short-term rentals make excellent investments. Just a few of them are as follows:

1. Increased Income

Long-term rentals never outperform well-marketed short-term rentals in a desirable location in terms of earnings. There’s no denying that holiday rentals generate more income than year-round leases, but before you jump in, you should learn as much as possible about the local rental market.

2. More reliable upkeep

You can better look after your investment by renting out short-term properties. More brief stays will allow you to visit the home more frequently, have it cleaned, and identify any maintenance issues before they become serious. You don’t even have to pay for some of the maintenance yourself because the majority of holiday rentals charge a cleaning fee.

3. Adaptability

The calendar and the times you choose to make your rental available are entirely in your hands. If you choose to renovate your kitchen, you can schedule a month for the work and finish it whenever it suits you.

Additionally, you are free to change the prices as you see fit. You can increase the nightly rate once your kitchen makeover is finished if you choose. You can change your pricing to make it more appealing to guests who want to stay for an entire month. Most individuals prefer working with a homeowner rather a hotel manager because it gives them more options.

4. Recognition

In addition to the monthly cash flow, your home will continue to gain value over time. Your rental property will be worth more when you decide to sell it if you keep it for a longer period of time. Real estate does not lose value, but the rate is never guaranteed.

5. Accessibility

In contrast to other investments, you can borrow money to pay for the property and then use it to increase your income. This is especially beneficial for new investors who don’t have easy access to large sums of money. When you know how to profitably leverage debt, you can accumulate money much more quickly.

6. Tax advantages

Numerous tax benefits for short-term rentals make them particularly alluring. One is that you can deduct the interest you paid on the loan we just mentioned from your taxes, in addition to all the other deductions you can make for things like upkeep, administration, marketing, insurance, and so forth. Depreciation on the asset is another expense you can deduct.

How to Pick a Location for Your Short Term Rental

The finest site must be chosen for your Airbnb business. When searching for a home to purchase, the same standards you would use for a long-term rental might not always apply. Locations away from large cities are becoming more and more appealing. Additionally, homes close to natural attractions like mountains, beaches, and national parks perform very well.

For choosing a profitable investment, the following elements are crucial:

  • nearby points of interest
  • airports and main roads are reachable
  • Interest in vacation rentals
  • Local economics

Options for financing the purchase of short-term rental properties

It’s likely that you will need to locate sources of funding for your home buying short-term rental pursuits unless you hit the lotto and are now independently affluent. The most typical loan types are listed below.

Hard money loan

Because the lender isn’t continually checking your credit, a hard money rental loan could be simpler to qualify for. They may pull it in order to assess your debt-to-income (DTI) ratio; but, the score itself is not being examined. You might require a larger down payment depending on how much equity you have in your home.

Because there is less underwriting necessary for hard money loans from private lenders like 14th Street Capital, approval times may be speedier and you may be able to get one even with bad credit. The drawback is that origination costs and interest rates could be significantly higher than they would be with a more conventional mortgage.

Conventional loan

This sort of conventional financing is typically provided by banks or credit unions. They require average to good credit and have consistent interest rates and flexible down payment requirements. To make sure you have enough money to repay the loan, lenders will look at your assets, debt, cash reserves, tax returns, and other qualifying criteria. After evaluating your financial situation, the lender will either accept you or refuse you.

Personal Loan

Personal loans have the advantage of not requiring collateral. In addition, you can find out right away if you qualify and get your money in as soon as a day or two. The interest rate is higher than it may be for a mortgage, which is the sole drawback to this situation.

Home equity line of credit (HELOC)

A home equity line of credit (HELOC) is a type of secured loan that can be utilized for both cash-out refinancing and the purchase of property. This loan operates similarly to a home equity line of credit in that both allow you to take out a loan against the equity in your house and make interest-based payments on a monthly basis; however, the interest rates are variable and will go up and down with the prime lending rate. In the instance of a cash-out refinance, you use the equity in your property as collateral to pay off your existing mortgage in full without taking on a second mortgage.

Private Loans

Private loans may be a fantastic choice, but they frequently need for existing financial relationships. The longer you have been a customer of theirs and possibly even the quantity of money you have in their custody will reduce your riskiness in their eyes.

Utilizing a private lender has the benefit of perhaps offering more lenient loan terms.

5 Best Markets for Short-Term Rentals

For first-time investors with little resources, the cities in this class are great because they are moderately popular tourist destinations. You can further diversify your portfolio by investing in top short-term rental markets, which will provide a cash on cash return of at least 8%.

1. Monroeville, PA

  • Rental income from Airbnb per month: $1,719
  • Daily Price for Airbnb: $174
  • occupancy rate on Airbnb: 63%
  • Airbnb Return on Cash: 9.97%
  • Days on Market: 22
  • Median Property Price: $99,563
  • Average Property Price per Square Foot: —
  • Walk Score: 20

2. Corydon, Indiana

  • Rental income from Airbnb each month: $1,795
  • Daily Price for Airbnb: $100
  • 60% of Airbnb’s are occupied.
  • Return on Cash in Airbnb: 9.28%
  • Days on Market: 59
  • Walk Score: 60
  • Median Property Price: $281,860
  • Average Property Price per Square Foot: $176

3. New Castle, PA

  • Airbnb rental income per month: $4,586
  • Daily Cost of Airbnb: $164
  • Bookings on Airbnb: 41%
  • Return on Cash in Airbnb: 8.99%
  • Property median cost: $262,850
  • Days on Market: 43
  • Average Property Price per Square Foot: $175
  • Walk Score: 41

4. Inkster, MI

  • Airbnb rental revenue per month: $1,939
  • Daily Cost of Airbnb: $146
  • occupancy rate on Airbnb: 58%
  • Return on Cash in Airbnb: 8.96%
  • Days on Market: 39
  • Walk Score: 42
  • Median Property Price: $113,267
  • Average Property Price per Square Foot: $110

5. Norwalk, Ohio:

  • $2,594 in monthly Airbnb rental income
  • $189 per night on Airbnb, with a 57% occupancy rate.
  • Return on Airbnb Cash: 8.68%
  • Property median price: $177,100
  • Days on Market: 27
  • Average Property Price per Square Foot: $121
  • Walk Score: 85


Are you considering making a short-term rental investment? The good news is that investors in vacation rental properties will have lots of chances in 2022 due of the growing demand for Airbnb. However, you must weigh both their benefits and drawbacks to decide if short-term rentals are a safe investment for you.

In order to invest in short-term rentals, the first step is to choose the right area. To prevent losses, it is essential to research the rental market before investing in a property.

Working together with 14th Street Capital will give you preferred access as a hard money lender to the thriving Montana real estate market. We provide you with the honesty and information required to succeed as an experienced hard money lender in Montana.