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If you’re interested in rental real estate, consider short term rentals. You’ll earn money regularly when you rent the property out and you may realize many tax benefits from the investment strategy.
Not sure how to get started in short term rentals? Keep reading to learn the steps below.
Determine What you can Afford
First, you need to know how much you can afford. Usually, you can leverage your investment by taking out a mortgage, but mortgage loans on investment properties require at least 20% – 30% or more down on the home.
In addition to the home’s price, consider maintenance, taxes, insurance, and the overall cost of running the property when considering what you can afford.
Your rental income will offset some of the costs, but the upfront costs are on your shoulders, so make sure they are something you can afford.
Where Should you Invest?
Once you know how much you can afford, think about where you should invest. Convenience plays a role since you’ll need to actively maintain the property, but the market demand should play a role too.
Look at the demand for short term rentals, how much other investors make, and how saturated the market may be.
You can invest outside of your area if you plan to hire a property management company to handle the property’s day-to-day operations and even collecting rent or listing the property’s availability.
If your market is saturated or there isn’t a high demand for short term rentals there, don’t be afraid to look elsewhere, just make sure to include property management costs in your budget and profit calculations.
Partner with a Real Estate Agent
Don’t try to find a short term rental investment property yourself. Hook up with a reputable real estate agent that specializes in short term rentals.
An experienced real estate agent will know where you should look, what you should look for and can even help you with local comparable sales, so you know the true market value of a home before you bid on it.
Real estate agents also have easier access to market rental rates to help you make an informed decision. Just because a property is available doesn’t mean you can charge enough rent to make it profitable.
Having all the data at your fingertips will help you make a more informed decision.
Put together a team of Professionals
You need a large network of professionals when you own short term rentals. Besides the real estate agent and mortgage lender, you’ll need a property management company, contractors, cleaning crews, a bookkeeper, lawyer, and of course a tax advisor.
Get your network of professionals set up before you invest in short term real estate investments, so you make the investment as seamless as possible.
If you have any questions about buying short term rentals, how they affect your tax liabilities, or what you need to know for your budget, contact us today!