Websites like Airbnb and VRBO have taken the hospitality industry by storm, making it easier than ever for property owners to rent out their homes to guests.
According to AirDNA, a website that tracks data on several short-term rental services, there are approximately 13,188 active listings across Pinellas County.
Now anyone with a spare room or vacation home can become a temporary hotel manager and earn a second income in the process. But is a short-term rental business right for you?
Alan Cohen is the CEO of Coastal Homes, a boutique property management service for short-term rental owners in Pinellas County. He discusses how he got started renting on Airbnb and what factors hosts should consider before taking the plunge.
What inspired you to start this business?
My wife Carol and I built an addition on our home so that we could have a place for my mother and her mother to live as they grew older. We built a 1,000-square-foot apartment behind our garage and each of them lived there at one point.
After they both passed away we sat with this empty space in our house and wondered what we would do with it. Someone suggested we put it on Airbnb. So we did and lo and behold, it took off.
I retired in 2019 but have nearly 25 years of property management experience in the multifamily marketplace. After I retired my wife got a little sick of me being home all the time. She said, ‘You have to do something. Why don’t we just expand the Airbnb business and manage properties for people living remotely?’ We started four years ago and since then we have been adding two properties a month.
How much has the short-term rental industry evolved since you first started?
The number of Airbnb properties available for rent has exploded exponentially in the past two years. Demand has increased but nowhere near enough to keep up with the growth in number of units.
What makes good short-term rentals?
There are a lot of people haphazardly buying properties because they think they are going to make a bloody fortune. And that’s not the only case.
As with any piece of real estate the number 1 thing is location, location, location. Properties that are in beachfront or downtown areas have been able to maintain and sometimes increase their nightly rates despite increased competition.
Another thing you have to be really careful about is local laws and restrictions on short-term rentals. Different jurisdictions have different rules. For example, places like Indian Rocks Beach are very open, while there are some restrictions south of Reddington Beach. If you buy property in Reddington Beach you may find yourself in a legal battle.
For property owners, what are some of the advantages of short-term rentals instead of traditional year-long leases?
The income for short-term rentals is probably two to three times that of long-term rentals. Let’s say you charge $1,500 to $2,000 per month at a prime location. In the short-term rental market, the same unit might fetch $150 to $180 a night.
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What are some of the unique challenges that come with managing short-term rentals?
With a traditional rental model, once you sign the lease you’re not really involved unless there’s a maintenance issue or something of that nature. Most of the responsibility lies with the person who rents the property.
It’s a little different with short-term rentals. It is more like hotel management. You will have three, four or five term turnovers in a month. You have to be prepared to provide cleaning and hygiene. You should have several sets of linens and other supplies.
When people rent a home they also want to feel that they are welcome there. We try to give them that experience by putting out a bottle of wine and snacks. We have our managers meet them and brief them about the property and provide concierge service at dining and entertainment venues.
That’s all in addition to the occasional maintenance issues. Hence the broken air conditioners and hot water heaters.
What are some of the most common mistakes people make when starting out in short-term rentals?
Many people start self-management and realize they don’t have time. It’s a lot of work, especially on top of a full-time job. It’s not just about booking and opening doors. There is a schedule for management, cleaning, maintenance, marketing.
You may also run into problems with parties and other disturbances. Finding quality guests is important. If you don’t advertise the unit properly or don’t have the right price, you run the risk of attracting the wrong type of people. That’s especially important in Florida, which is a popular spring break destination.
What impact do you think short-term rentals have on the local real estate market?
The laws of economics do not change. Supply and demand determine value and rising prices. So if you have more people looking to buy properties to use as short-term rentals, real estate prices will go up.
But when someone invests in a neighborhood, it can also increase home values.