Short-term rental properties, also known as Airbnb properties, represent a relatively new investment opportunity for individual investors. Based on our experience, we have summarized some of the most common mistakes made by novice investors.
- Neglecting Pre-Investment Renovations and Decorations In the world of short-term rentals, appearance is crucial. The initial soft furnishings and decorations represent the highest return on investment. Purchasing attractive wall art and faux plants can elevate the taste of a property without costing a lot of money. Additionally, it is best to avoid expensive furniture and choose practical and clean-looking items that are more suitable for short-term rentals. Even if damaged, the replacement cost will not be as high. Lastly, professional photography is critical, so be sure to hire a reputable photographer to capture the best images of the property.
- Failure to Screen and Manage Cleaning Teams Effectively Without a reliable cleaning and management team, even the best property will fail to generate sustained profits and may create endless problems. It is important to spend time finding and selecting trustworthy short-term rental management and cleaning teams.
- Insensitivity to Investment Returns Analysis Several critical data points are essential for analyzing the profitability of a short-term rental property, including daily rental rates, occupancy rates, and expenses such as management fees, cleaning fees, HOA fees, insurance, utilities, taxes, and loan interest. The income data can be easily accessed online (e.g., AirDNA), while the expense data can be obtained through real estate brokers. Given the significant investment involved in short-term rentals, spending a day or two doing due diligence is necessary.
- Underestimating the Time and Effort Required Many investors and landlords abandon their short-term rental properties because they require more time and effort than initially anticipated. Short-term rentals typically yield 2-3 times higher returns than long-term rentals, but this also means more effort is needed to manage the property effectively.
- Blindly Following Others Copying other investors’ strategies without thorough analysis can be detrimental. Even adjacent properties built on the same day can have vastly different maintenance needs and financial performance. Others may have better management teams, networking resources, or investment experience. Therefore, it is essential to conduct thorough research and analysis before investing in a short-term rental property.
In conclusion, investing in short-term rental properties is a promising opportunity that requires careful consideration, thorough analysis, and consistent management to achieve maximum profits. By avoiding the common mistakes listed above, novice investors can establish a solid foundation for their short-term rental property investments.