Investing in Short Term Rental Properties the Online Owner Way

06/05/2017 04:04 pm ET

If you’ve watched the meteoric rise of Uber and now other dispersed taxi services, it’s clear that there are major changes afoot in consumer-to-vendor direct contact business. The Uber driver uses a smartphone app to place themselves on and off duty, and those who want a ride can connect with them.

The same type of direct contact, though with a couple of wrinkles, is happening with sites like Airbnb.com, HomeAway.com and HometoGo.com. It’s a bit more complicated, simply because there is a security concern when a homeowner is renting all or a portion of their home to a stranger. However, using technology to verify identity, these sites are doing big business and growing rapidly.

The Advantages of Online Direct Booking

The first and most obvious advantage for the guest is that it’s usually much less expensive than hotels and other accommodations. The owner(s) handle their own guest check-in and checkout, and they handle cleaning and ready for new guests. There are no management costs other than the fees paid to the site where the property is listed. This means that the same amount of space that may run $100/night or more in a hotel could cost as little as half or less through these sites.

For this listing and processing fee, the homeowner(s) simply take the photos and post the description, with payment and credit card processing done through the website. Many list on more than one site. The process, after security issues are resolved, connect the owners with the guests via secure email for coordination of guest arrival and other communications.

The owner or investor in our discussion, can hire out the cleaning, and they can also use lockboxes for access. Extra cleaning fees are often added to the cost of the room or house.

In areas with tourism, colleges with visiting parents and other transient rental traffic, this can be a highly profitable investment niche. One actual example near the college in Tucson, AZ is a great tool for analyzing this type of investment.

The home has a courtyard and two small guest rooms with kitchenettes and baths. Guests can bring pets, and the courtyard is a plus, allowing higher rentals. The owners in this case live in the home and do their own management and cleaning. They maintain a busy and largely booked traffic flow for the two units, at around $70/night each. While these could be rented to students on a monthly basis, rents would be in the $500/month range, far less than even a reasonable occupancy on a nightly basis. In this case, the actual income is probably more like triple doing the nightly rentals.

In this example, an investor could purchase the property and place a monthly tenant into the main house with reduced rent for managing the guest traffic. That’s three rental incomes from one property, with most of your management hassles handled by a combination of the website and your entrenched tenant. It’s worth a look.

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