How to Make More Money with Nightly Rentals

Written on May 12, 2016 by , updated on December 9, 2016

Short-Term RentalsMany property owners are earning two to five times the gross profit of traditional rental properties by converting them to nightly short-term rentals.

Have you taken the time to analyze this as a viable investment opportunity?

I’m sure, by now, that you’ve heard of the many nightly rental websites that allow property owners to advertise their homes, apartments, and even extra rooms for rent on a nightly basis.

There have been some controversies over this new industry, as it takes revenue away from the hotel industry, decreasing the amount of taxes that local cities receive from the transient tax.

But have you taken the time to analyze this as a viable investment opportunity? When you start running the numbers and seeing what others are doing, it starts looking very attractive.

2x to 5x Your Gross Profit

If you take your typical rental that rents for $1,200 to $1,500 per month and convert it to a nightly rental, you should see about double the gross income. And if you have the right property in the right location, you could easily increase your earnings to four times the long-term rental income.

This all sounds great, but you’re probably wondering about the additional costs associated with nightly rentals and the added time it takes to manage these properties.

Related: 3 Surprising Ways You Can Increase Profits with Airbnb

Additional Costs

The largest cost is the initial design and furnishing of the unit. You’ll need to fully furnish the unit to make sure it’s attractive. Furnishing doesn’t end with just the beds and living room furniture. You should ultimately have a fully stocked home. So a complete set of dishes, tableware, pots, pans, etc. will be needed.

You’ll also want to pay close attention to the details. Keep in mind that you’re competing with hotels that have on-site staff. So go the extra mile, and provide some travel toothpaste, toothbrushes, cotton swabs, shampoo, and ultimately anything else that someone could forget to pack. You also want to make sure that all the walls are decorated. This starts with a good paint scheme and extends to the artwork on the walls and knickknacks on the shelves.

  • Attractive furnishings
  • Fully stocked kitchen — dishes, tableware, pots, pans, bottle opener, etc.
  • Complimentary bathroom essentials — shampoo, toothpaste, soap, cotton swabs, etc.
  • Artwork, pillows, curtains, etc.

Themes and Design

Many successful nightly rental homes incorporate some sort of theme in their design. It can be a design that highlights the local area and attractions or something unique.

When picking out furniture, remember that you want your guests to feel comfortable and at home. So you shouldn’t go with furniture that feels cheap. But you don’t have to get expensive name-brand furniture, either. For many nightly rental investors, the step of picking out furniture or keeping an eye out for unique furniture items that they can incorporate is the most exciting part of the process.

Management Company

You’re still much more profitable, with the dramatic increase in income, compared with a long-term rental.

The other cost is cleaning. You need the unit cleaned and turned over after every visitor. If you go with a management company like mine, IRC Real Estate, then you can typically take advantage of the volume discount they get from their vendors. This expense should be in the $50 to $150 range, depending on the size of your property and what turnover services you require.

You’re still much more profitable, with the dramatic increase in income, compared with a long-term rental.

Listing it Yourself

There are a plethora of short-term listing websites out there that let you manage it yourself. The prominent ones are:

The downside to trying to do it yourself is that you will be managing the turnover (cleaning, keys, maintenance) every few nights.

Location, Location, Location

Depending on the location, design quality, vacancies, and size, you can expect $100 to $1000+ per night in revenue.

When it comes to maximizing your profits, nothing matters more than location. With nightly rentals, this isn’t just a business cliché, it truly matters. When choosing a property to use as a nightly rental, look for one that’s near places travelers might go.

Good locations include attractions like ski resorts, beaches, or wine country; downtown areas for events and legislative sessions; airports; and children’s hospitals.

If you have a property in a good location with a good interior design, you can end up with a fully booked home almost year-round. Depending on the location, design quality, vacancies, and size, you can expect $100 to $1,000+ per night in revenue.

Nightly Rentals Are Time-consuming

You have to always have your smart phone on you 7 days a week …

Keep in mind that this type of investment property is truly a full-time job. You will have a check-in, check-out, and turnover to coordinate nearly every week for a popular property.

In addition to this, you will likely by heavily reliant on website reviews by your guests and your rating on things like response time to inquiries. So you need to have your smartphone on you seven days a week to make sure that you can respond to a guest within hours.

As you can tell, this kind of investment isn’t for everybody given the work it requires. This is why the investors who truly view being an investor as their profession, hire property management firms. This allows you to focus on finding and buying the properties in the right locations (possibly handling the remodel and interior design) and then turning the job over to a management company.

Note: Some companies offer in-house interior design services that take care of that work for you.

Do Your Research

If you are seriously considering getting into the nightly rental industry, I am happy to answer any questions you might have and offer some free advice.

With my involvement at the board level with organizations like the Portland Area Rental Owners Association, NW Real Estate Investors Association, and the Salem Rental Housing Association, I am happy to help educate or guide property investors when they run into problems or are simply new to the industry.

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