So, you’ve made the decision to try short-term rentals. Congratulations! This is a decision you won’t regret! But before you run off ordering balloons and champagne, let’s set the foundation for success. That foundation is built upon leasing properties as a corporation instead of a personal lease AND finding just the right property. When you take the time to do these two things properly, you will see success!
The first step in this process is registering your business. It’s a must! Registering your business as an LLC or Corporation will protect your personal assets in the event any debt occurs and legally separates you from your company. This step is how you will be able to rent properties without owning them. It is called Rental Arbitrage. Rental Arbitrage refers to the act of getting a rental property under a business name then subleasing it out. Your LLC or Corporation keeps you safe, protects your business, and gives you access to multiple units.
Now that you’ve registered your business, you will be looking for Corporate Leases rather than personal leases. A Corporate lease is used when a company or business signs a lease to rent multiple units from landlords with the agreement that they’ll be subleasing to business clients. This is an agreement between the apartment complex and your company. It’s simply telling landlords, “I want to utilize some of your units for my clients.” Once this is in place you are free to list your property for rent and keep it steadily booked.
Find the RIGHT Property
The next step is finding the right property. This is key to determining how profitable your business will be, so DON’T SKIMP ON YOUR RESEARCH. For you to optimize and make the most of your time and investment, your goal is to keep these properties booked as much as possible for the best rate possible. To do this, you must pick properties that fit the needs of renters.
Shared vs. Entire Unit
Start with shared units vs. entire units. Shared units are ok if you own the property. This can be a room inside of a home. For most renters, though, they are going to want their privacy. Keep this in mind when doing your searches.
Location, Location, Location
Now, let’s talk location, location, location. Start with a Google search for popular travel destinations for fun and business. You will want to select towns that people are already traveling to. This gives you a great starting point. Once you know popular destinations you can narrow your search. Keep good notes and keep your options open. Think of popular attractions within that town and consider the activities or things to do for visitors.
Then you might consider what is available within your own town. Properties can be found on Craigslist, newspapers, or apartments.com. Look for properties that are individually or privately owned. These landlords may be more open to your business model.
Amenities, Size, and Condition
Some other things to consider when you are narrowing your search are amenities, size, and condition. Look for properties that are in good condition and will not require much fixing. Look for properties that offer special amenities such as a pool, hot tub, nice views, or even a park or walking trail nearby. These can set your property apart from the competition. The size of the property can make a significant difference as well. The more a property is able to sleep the more you can charge.
Not a Guess, An Educated Decision
Once you’ve done your research into where there are potential properties, it’s time to put the numbers to it. This investment into short-term rentals is not a guessing game. With the tools that are now available, you don’t have to make wishful guesses and hopeful predictions. You can know before you ever reach out to a landlord what the real potential revenue is. Based on location and size, AirDNA will determine the daily rate and occupancy rate for each of the properties you are looking at. This will help determine which properties to lease and which ones to let go of. You want as close to 100% occupancy as possible.
With the proper research in place and protection of an LLC or Corporation, the earning potential for short-term rentals is really endless. Give me a shoutout on Instagram or download my Short-Term Rentals E-Book. Congratulations again for making the decision to take your future into your own hands, cheers!