Unraveling the Potential of Short-Term Rentals in a Cooling Real Estate Market: The Changing Tides in the Real Estate Landscape
By: Brad Greiner, CEO of Open Air Homes and OpenAiRE Brokerage
July 28, 2023
In the dynamic world of real estate, fluctuations are the name of the game. As we navigate a shift towards rising interest rates and a cooling market, the implications for second-home owners become increasingly pertinent. The question arises: how does this climate impact your investment property?
Decoding the Dynamics: Increased Interest Rates and a Slowing Market
Interest rates act as a significant determinant in the housing market. When these rates escalate, the affordability of mortgages decreases, thereby dwindling the pool of potential buyers. If you own a second home that’s currently unoccupied or struggling to sell, this trend might be distressing. However, the current climate also presents an opportunity to reassess your strategy and consider alternative, lucrative options.
The Bright Side: Renting as a Viable Solution
If the market is not ripe for selling, why not consider the alternative? Renting out your property for the next 2-3 years could be a wise choice for various reasons:
1. Consistent Revenue Stream: As you wait for a favorable selling market to return, rental income can provide a steady flow of revenue, helping to counterbalance costs such as mortgage payments, property taxes, and maintenance expenses.
2. Flexibility: Renting out your property allows you to maintain ownership and make a selling decision when market conditions are more advantageous. A number of homeowners we work with don’t want to take a 1+ year rental, so choose to go the short term rental route. Further, a number of our homeowners choose to only rent in Month+ stints. Flexibility for you is the name of the game.
3. Property Appreciation: As a rule of thumb, real estate value generally appreciates over time, implying that holding onto your property could pay off in the long run.
Surge in Demand for Short-Term and Medium-Term (Month+) Rentals
The travel and hospitality industry has seen a paradigm shift in recent years, with a mounting demand for short-term rentals (STRs). More and more people, influenced by a flexible work-from-home culture, are opting for month+ bookings. This new-age trend of seeking a homely, welcoming environment to work and live has caused a ripple in the rental industry.
Further, as more people decide the work from anywhere lifestyle is right for them, we have seen a major uptick in our homes that rent for 1-3 month periods. It does take a leap of faith to rent your home for these longer periods of time, but when priced properly, you can see high occupancy and great demand for your place.
Advantages of STRs include:
1. Higher Potential Income: Short-term rentals often yield higher revenue than traditional long-term rentals, particularly in coveted locations.
2. Flexibility: STRs offer flexibility in terms of availability for personal use. This flexibility makes them an ideal choice for second-home owners who wish to utilize their property from time to time.
3. Market Adaptability: The short-term nature of these rentals allows you to adjust prices based on market changes, seasonal demand, or special events, maximizing your earning potential.
Partnering with Open Air Homes
If managing a short-term rental appears daunting, aligning with a professional property management company like Open Air Homes can make the journey smoother. We handle everything, from marketing to tenant screening, maintenance, and more, helping you capitalize on the benefits without the worry.
Seize the Opportunity
As a homeowner with a property struggling to sell, now might be the perfect time to delve into the potential of short-term rentals. With a burgeoning demand for STRs and an uptick in month+ bookings, this could be your silver lining amidst a cooling real estate market.
Contact us at Open Air Homes today. We’re committed to supporting you through this process and assisting you in making the best decision for your investment property amidst these fluctuating times.
