No man is an island. I don’t recommend buying a short term rental on your own without any outside advice or help. There are a lot of factors involved when it comes to deciding whether an STR is a good investment for you or not, and you’ll need several people on your team to help you see the decision from all possible angles.
At the very least, you’ll want to talk to your financial advisor, a real estate agent, and an attorney.
Let’s walk through what each of these people can do for you.
Your financial advisor.
Can you afford to purchase an STR right now? If so, what’s your budget? How quickly do you need to start turning a profit? How much wiggle room do you have for taking an investment risk right now? What other financial needs/obligations do you have in the coming months/years?
Sit down with your financial advisor to get a good sense of where you stand financially, and what you need to do to make this STR thing happen.
If you don’t have a financial advisor, you need to find one. Ask around in the STR community and in your local area. See which names come up as someone people trust.
Owning an STR comes with a lot of responsibility, and you’ll have to start delegating tasks as you’re financially able to. Handling all of your own finances isn’t going to cut it.
Your financial advisor, if they aren’t already, will become a key player on your team as you build your STR business.
A local real estate agent.
No one knows better than real estate agents whether a property is going to be a good investment or not. They know the area inside and out, and it’s their job to stay on top of property values and trends in the market.
If you already have a favorite real estate agent, great. If not, again, ask around and find someone who is trusted by the people you trust. Preferably someone who’s been in the industry—and the area—for a while and has a lot of experience.
You know that in real estate, it’s all about location, location, location. Finding the perfect STR isn’t quite the same as finding the perfect home. For example, you don’t need to worry about the school district or your commute to work or whether or not you’ll get along with your neighbors.
But you still need to be mindful of things like:
- How close is the property to major highways?
- Is there easy access to food and other necessities?
- Is the neighborhood welcoming to short term renters?
- What is nearby that would attract customers—a tourist destination, a national landmark, a city where people might travel for business, a beach or lake?
- What’s the cost of living in this particular area?
And so many more questions—ones you wouldn’t even think of on your own.
You also need to decide what type of property you’re looking for. An apartment or condo? Single-family home? Multi-family dwelling? Do your research with the help of an agent and try your best to figure out which one would work best for the guests you’re hoping to attract.
Other things you’ll need to be cognizant of: property taxes, rental taxes, HOA restrictions, insurance, etc.
A good real estate agent can help you with all of this and more.
Laws and regulations about short term rentals very widely state to state, city to city, municipality to municipality.
Some cities and towns limit rentals to weekdays only or put minimum requirements on how long someone can rent (like 30 days). In some places, it’s illegal to buy a property for the sole purpose of renting it out to others. Some cities require you to have a business license before you can use your property as an STR.
You can face serious penalties if you break local laws—even unintentionally—with your STR.
I recommend doing a lot of this research on your own online before you even contact an attorney. You’ll be able to quickly assess whether a particular area is STR-friendly or not.
And, unfortunately, these laws and regulations are constantly changing. The STR industry is fairly young, and it will take a while for rules to be established and working well. You’ll have to stay on top of this, and an attorney can help.
You need to establish your STR in a place where the local laws aren’t going to cut into your profits, or make it impossible to profit at all.
So, there you have it. Talk to your financial advisor, a real estate agent, and an attorney before you buy. They’ll help you make the best decision and get you started down the right path.
Don’t forget—I’m here for you, too.