If you’re a homeowner ready to make a move, you may be thinking about using your current house as a rental property instead of selling it. A short-term rental (STR) is typically offered as an alternative to a hotel, and they’re an investment that’s gained popularity in recent years with easy-to-use platforms such as Airbnb or Vrbo. According to a Harris Poll survey, 28% of homeowners have considered using a rental service to temporarily rent out their home for additional income.
Owning a short -term rental, or any type of rental, can be a tempting idea. However, you may find the reality of being responsible for one difficult to take on. Here are some of the challenges you could face if you rent out your house instead of selling it.
A Rental Property Comes with Responsibilities
Successfully owning and renting a house takes work. Think through your ability to make that commitment, especially if you plan to use a platform that advertises your rental listing. Most of them have specific requirements hosts must meet, and it takes a lot of work.
Not only is there the upfront time and cost of owning a rental, but there are also risks that could come up for you down the road.
Your House May Not Be Ideal for Your Rental Goals
Not every house ends up being a profitable short-term rental either. One of the biggest factors is where your home is located. The less likely your neighborhood is to be a travel destination, the fewer requests you should expect from potential renters—and that impacts your bottom line.
It’s smart to do your homework and learn how much rentals in your area go for, how much business they get throughout the year, and how this compares to your goals.
You Need to Know Your Numbers
While some may think it’s simple to determine what’s going to give you a good return on investment (ROI), the equation is more complex than “rental rate > mortgage rate”. You’ll need to budget for expenses such as repairs to the property, state taxes, and turnover costs. While you may be profiting per month, you could be a hot water heater away from breaking even or even worse. You’ll also need to factor in turn-over costs. As much as we would hope our tenants will love and care for your home as much as you do, the reality is, it’s simply not the case. You will need to budget for a fresh coat of paint with every new tenant you sign with and possibly even more if they were unkind to your floors, drywall, or appliances. Keep in mind while your property is empty, you’ll be losing money per month while the property is vacant- just another cost and risk to you, the homeowner. Factor these items in when deciding if a rental property will be lucrative for you situation.