In this podcast, Peter will give you a primer on Short-Term Rentals. He will discuss STR as an asset class, the benefits and tax breaks.
Over the past few years, short-term vacation rental platforms like Airbnb and Vrbo have gained immense popularity.
STRs are great for the consumer, but are they great for the investor? This is the focus of this podcast: An Intro To Short-Term Rentals.
By The Way… Peter recently opened up his first short-term rental. You can catch his story in a recent blog post entitled, 7 Things I Learned From A Short-Term Rental.
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Now, let’s look at what we discussed in this episode:
- Why you should consider investing in a Short-Term Rental
- STRs could bring in more profit than traditional rent
- Cash on Cash Return
- Value of having control of your rental property
- IRC section 469 explained
- There is risk, so choose a smart location
Here’s a breakdown of how this episode unfolds…
While traditional, long-term rentals (like single-family homes) provide consistent monthly cash flow, deciding how much to charge in rent is based on many factors, including the local market average.
With a short-term rental, though, most people understand and will pay a premium price for a shorter stay. This means that, potentially, one or two tenants a month could bring in more profit than a traditional monthly rent payment.
Cash on Cash Return is how much money you are getting based on the amount of cash you invested in the deal. STRs tend to be higher than traditional rent.
With a long-term rental, most tenants are allowed to make small, but impactful, changes to the property. With a short-term rental, you are in complete control of the property–including its appearance. Tenants won’t be making any changes.
With an STR, you can deduct rental losses as non-passive, allowing you to offset income from your day job without attaining real estate professional status. IRC section 469 states that an activity isn’t considered “rental activity” if the average length of the stay is seven days or less.
As with any investment, short-term rental properties are not without risk. The biggest one has to do with the economy. After all, most people seek STRs for vacations, and if people are losing jobs or are otherwise strapped for cash, vacations are usually the first thing to be cut from the budget.
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