Lessons from the Pros

Real Estate

Millennials: A Different Breed of Landlord

I am not a Millennial (far from it, I’m the last year of the baby boomer generation), but I raised two millennials who in turn married two millennials. They have taught me a thing or two about rental property, I’m still the expert (since my husband and I have owed property for 30 plus years) but they have given me a new perspective. They are focused on the Airbnb/VROB model.  My kids are 27 and 29, both just closed on their “first” rental property. Unlike their parents who look for long term renters (I like tenants that stay for 20 years) they are looking for short-term renters.

Let’s start by defining what a short-term rental is:

A short-term rental, or vacation rental, is the renting out of a furnished home, apartment or condominium for a short-term stay. The owner of the property usually will rent out on a weekly basis, but some vacation rentals offer nightly rates. As defined by www.tripping.com.

Short term vs. long term rental properties.

Why can this short-term rentals model be successful?

One reason is that short term rental property will typically rent out for more on a per night basis than by the month. Tweet: Short term rentals cost more per night than monthly rental property. https://ctt.ec/e7R3_+ The question is, will it rent for enough nights to increase income on a consistent basis? Here is a simple example:

A Mid-Century Modern Home (3 bed 2 bath) in Palm Springs, CA during high season rents for $225 a night – if, in average month, the property is rented for 3 weekends (one being a three-day weekend) and one full week for a total of 14 days rented, that equates to $3,150 (14 * $225).

Free Real Estate Investing WorkshopThe same Mid-Century Modern rents monthly for around $2100 as a long-term rental.

Over a year, this is what the income could look like:

Short Term (average of $3150 a month) = $37,800

Long Term ($2100 per month) = $25,200

Exciting, right?? There are additional expenses to having a short-term rental, such as furniture and cleaning. However, one of the things that is very appealing with short term rentals is that a cleaning fee can be charged which covers the expense.

The location of a short-term rental is important, but you would also be surprised at how often people need a short-term rental in everyday places.

More than just a rental property, it is a business:

Many Airbnb’ers create a brand – much like a hotel brand.  They may have multiple properties under the same brand.  I stayed in a place in Austin owned and operated by SoCo Spaces.  They have 17 properties in the great Austin area, things were very well appointed including Tech amenities, and they provided very responsive service. I would rent from them again.

There are also other ways of monetizing the property. For example, a host (this is what the owner is called –  I like it so much better than Landlord) can provide samples of local specialties, and if a guest wants to order more the host could get a percentage of the sale.  Some hosts will showcase furnishings or art which can be purchased. Some have a blog to share their experiences, which they sell advertising on.  There are many creative ideas.

Millennials are about experiences and sharing those experiences from which they are creating new businesses.

Check out this article to learn more about how Airbnb and VROB work.

Good Fortune,

Diana Hill – Dhill@tradingacademy.com

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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