Starting your own STR business is not a decision you should take lightly. But you know that.
You absolutely need to do your homework first.
This one blog post won’t be enough, obviously, but it will get you started off on the right foot.
Here are 10 simple, basic, common sense questions you should ask yourself (and find the answers for) before you start your STR business.
In no particular order:
#1: Where is the best location for your first STR?
The easiest answer to this one might be: in my own neighborhood/town/city. That makes it convenient to maintain your rental and troubleshoot any problems your guests might have.
But where you live might not be the best place for renters.
People rent short-term housing in all kinds of places for all kinds of reasons for all lengths of time.
Is there a high demand for STRs in the area where you’re looking? Will you have a lot of competition from people already offering places for people to stay?
Is it a tourist destination? Is it near a big city? What’s the draw? Why would people leave their homes to stay in this location?
Do some market research, talk to a real estate agent, and find the best place for YOU and what you want to do with your STR business.
#2: How will you be paying for it upfront?
Have you been saving money? Will you be taking out a loan? Did your great-great-aunt just pass away and leave you a small fortune?
Besides knowing how you’ll pay for it, you’ll also want to figure out how quickly you’re going to be making money on your investment.
You want that cash flowing as soon as possible!
#3: Who is your target customer?
Are you looking to attract business travelers or tourists? Singles or families? Or some other demographic entirely?
You’ll want to nail down who your ideal customer is so you can make sure that your location and amenities are exactly what they’re looking for.
You won’t be able to please everyone. You’ll need to narrow it down.
#4: Will you be staying in the rental yourself at any point?
One of the perks of buying an STR is that you can stay in it yourself whenever you like. For “free.”
Now, obviously, if you’re buying and renting out a home or apartment in your own city, there’s no reason you’d leave your own home to stay in your rental.
Unless you just need a quiet spot to get away from the wonderful people you live with.
But, if your STR is in a different location—and close to the beach or some other tourist attraction—it’s a great option for your own personal or family vacation destination.
#5: What are the local laws and regulations in the area?
You have to be uber-aware of the rules in your area regarding the allowability of running STRs. Every state, city, and town has their own set of rules - and they’re constantly changing.
Some cities regulate minimum stays. Some require you to have your STR as your primary residence. Some areas have banned STRs altogether.
This is a really important thing to figure out before you buy an STR. A local real estate agent should be able to help you out with this, and there are several helpful websites you can check out as well.
Don’t wait until after you’ve already bought a property to figure out what the rules are. That’s a disaster waiting to happen.
#6: What dates and/or seasons will you be making it available?
Are you offering your STR year-round, or will you be sticking to tourist seasons?
Obviously, the more days your rental is available the more money you’re going to make.
#7: How will you keep it maintained?
If you’ve only got one STR, and a whole lot of time on your hands, you might be able to maintain it on your own.
But I don’t recommend this.
Finding someone—or a company—you trust to clean and maintain your STR for you at an affordable price is the way to go.
#8: How will you set your pricing structure?
As a short term rental business owner, your pricing strategy is incredibly important and changes with the seasons.
With all that’s going on in the world right now, more is changing than just the seasons. Check out this blog post for some helpful tips about pricing strategies.
#9: What software and systems do you need to set in place?
If you’re not big on technology, now is the time to get big on technology. Period.
You’ll need software and apps and all kinds of good stuff to help you stay on top of things and keep yourself, your time, and your money organized.
You’ll need to list your properties, manage reservations, communicate with guests, etc.
Setting up good systems means you can put your STR business on the rinse-and-repeat mode.
#10: Who do you need on your team?
At the very beginning, you might be going it alone, but you can’t do it alone for long. Trust me.
The first person you need is someone who can take care of your scheduling, your calendar, your appointments, your time.
The next thing you need is your financial team. You’ll need a bookkeeper and a tax preparer. As you grow, you’ll need a CFO.
The next pieces of your puzzle: team members in an operational capacity who help you deliver your day-to-day service. This is the exciting part. Customer experience, direct liaisons with all your guests and direct connections to maintenance and other vendors (like pest control), landlords. All of these people make your business run every single day.
Then you’ll build people in a sales capacity. You need someone to manage relationships with Airbnbs, etc.—a channel manager.
The last two? A legal team and a human resources team.
Check out this blog post for some great tips about building the perfect STR team:
These obviously aren’t the ONLY questions to ask, but they’re a good start.
You want to make sure you do this thing right.