Top 3 Tools For Profitable Short Term Rentals and Vacation Properties

Three things to know before buying a short-term rental property or a vacation rental property. So number one, there are companies such as pricing labs, okay. So let's say you end up buying that short-term rental property. What's one of the first things that you want to look into? Well, you want to make sure that you price your properties right.

Some people have the philosophy of pricing it out as low as possible to get the highest occupancy rate so that there's constantly churning, you know, the property's constantly working. However, what does that do to your property? It gives it a lot of wear and tear guys. So, that may not be the best strategy.

The second thing is some people may price it so high because they don't have any idea of where the market is. And guess what happens there? They don't get a high occupancy rate and they hate short-term rentals. However short-term rentals are great. So pricing labs, guys, pricing labs helps you price the properties.

It's an analytically driven software who kind of goes in and they look at the different areas and they look at how much availability is when the most popular times of the year are. And it tells you, or it suggest to you what you should price your properties at.

Secondly, if you've made a lot of money on your rental property at the end of the year, you're super happy or super excited like I get sometimes. And guess what, the excitement wears off on April 15th. Do you know why? It's tax time! Who wants to pay taxes on the gains that you've made on the short term rental property? So that's why this next tip is really important and it's a cost segregation study.

So there's a lot of companies out there that specialize in cost segregation. And basically what they do is they kind of front-load all the depreciation on a property. And at that time, you're taking higher depreciation rates on your property. And with that being said, you're getting a right off the property in the faster period of time instead of it being stressed out over the long period of time while you have the mortgage. So cost segregation study is extremely important.

And the beauty of it is is that once you have cost segregated and you depreciate most of the property, you can do a 1031 exchange and you can buy a light kind of property. The third thing is, is AirDNA. Why is Air DNA important? Well, Air DNA lets you identify different areas that you are considering investing in.

It gives you the stats of the general area so that you see how much competition you have in certain areas, where the most popular rental spots are, where the hotspots, are and where the cold spots are so that you can kind of avoid those. It also tells you like specific to your property. What type of revenues you should be able to generate based on the composition of the house based on however many rooms you have, however many bathrooms you have and things like that.

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And the biggest thing is is that you can scout out your competition because they look at some of the biggest short term rental sites, and they look at all the top producing properties, the highest occupancy rates, the highest rate of return over years. And then you can kind of scope out your competition to see what type of amenities they offer.

You know, maybe some of the color schemes and some of the type of properties that people are looking for. Sometimes beachfront may be the best. However, a property that's like maybe three blocks off the beach may perform better because they have way better amenities. Maybe something like a golf cart, maybe an in-ground pool, outdoor sitting area.

And then finally, this is the bonus because I told you I was only going to give you three tips. The bonus tip is finding something that's off the beaten path. Don't follow the herd. You follow the herd, it's great. All the time when things are producing well, everyone's making money. What happens when things turn sour?

Everyone starts dropping their price. It's called margin compression, okay. So if you're in a very highly populated area with a ton of vacation rentals and let's say the economy starts turning, everyone in that area is going to start throwing their houses up on the market for sale. Everyone's going to start dropping their price per night, and you're going to start losing money.

So finding something in an area that has very few vacation rentals. However, it has have really good draws or attractions. So if you have any questions on one of my favorite topics in the world, investing in long-term and short-term rentals, please feel free to give me a call at (757)-478-8493.

Be sure to like the video below, be sure to click on the application link if you'd like to apply and find out more about some of the products that we have to offer, or if you just want to talk to me about short-term rentals. I'll put my Calendly link below so that you can schedule a time to talk to me directly and be sure to like this video and subscribe to Find My Way Home above. And this is David Xie with the Xie Mortgage Team.