Property rentals as an investment instrument have been in existence for a long time. The rental segment can be divided into short-term and long-term leasing. Here, the short term could be as low as a week or even a day. While long-term leasing has been a priority for property owners for years, short-term rental have now become popular after the advent of online rental property aggregator platforms, which have effectively shifted traveller preference for short-term rentals over tradition hotel bookings.
The short-term rental segment has been experiencing exponential growth in the past few years. Airbnb, the biggest player in this segment, now operates in 65,000 cities across 191 countries with over 4 million property listings. Expert projections anticipate the market to touch $56 billion over the next 3 years and to cross $194 billion by 2021. Consequently, several competitors are entering the market, increasing the attractiveness and affordability of short term rentals over traditional offerings.
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From a travellers point of view, there are several benefits of choosing short term rentals over hotels. The primary reason is cost. Aggregators like Airbnb offer a range of rental offerings that have clear price advantages as compared to hotel bookings. But the most notable advantage is that you get the experience of a city as a resident. Short Term Rentals allow travellers to live in residential neighbourhoods and gain access to local culture and experiences that they would otherwise have missed out on.
When considering stays which have a longer term, hotel rooms can prove to be restricting and less engaging. Short term rentals, in this aspect, prove superior to hotels in terms of providing closer-to-home experiences and environments along with the obvious price advantage.
From a homeowner’s perspective, short term rentals offer superior rental yields when compared to traditional rentals. As stay durations are shorter, prices can be actively managed to accommodate seasonal fluctuations in demand. Shorter rental periods and easy online listing management also allow the owner to unlist the property as and when there are personal requirements for the space.
Long term rentals have the advantage of delivering consistent income without having to actively manage and turnover the properties for re-lease. With a vast number of competitors flooding the market it may also prove difficult for the inexperienced homeowner to consistently replenish the supply of renters which is crucial for achieving sustainable profitability when looking at residential properties as income generating investments. This is where large, professional investment institutions like SmartOwner come into play. When looking at short term rentals as investment mechanisms to generate steady long term profits, several parameters need to be implemented that may escape the purview of the individual homeowner.
For example, the SmartOwner STR Series utilises dynamic pricing algorithms on an actively managed portfolio of luxury short term rentals in the most profitable rental markets around the world. Such properties, owing to the credibility and superior quality of offerings, will stand a higher chance to sustain demand and generate profitable rental returns for its investors.
The selection of the right properties, property/investment management tools and partners are crucial factors that can spell the difference between lost opportunity and sustainable profitability in short term rental investments. This writer, therefore, advises due diligence and careful evaluation of all investment parameters and the selection of credible, experienced investment management partners before investing in this new, fastest-growing segment of real estate.
Disclosure: This post was sponsored by SmartOwner