Best Real Estate Investment? Maybe! Let’s Get All the STR Info.
In a world of Airbnb, VRBO, RV, Outdoorsy and more, it seems like a short-term rental (STR) has to be the best real estate investment. However, in just the past few years, the competition has gotten so much bigger, and cities are cracking down on regulations for STR owners (not a bad thing). Let’s start at the beginning and see if we end up at STRs being good investments.
What is a Short-term Rental?
According to GovOS “A short–term rental is typically defined as a rental of any residential home unit or accessory building for a short period of time. This generally includes stays of less than a month (30 days), but the maximum length can vary depending on the state and jurisdiction in which the rental is located.”
Since our city of focus is Kansas City, it’s important to know their definition (not much different than what we listed above):
The City of Kansas City defines a short term rental (STR) as the rental of property, a dwelling unit or a portion thereof for a period of less than 30 consecutive days, unless the rental meets the definition of “lodging” or “bed and breakfast”.
If you’ve ever rented an Airbnb, you know you have the option to rent a room, guest house (considered an accessory building) or the entire place. Some people are renting out a room in their primary residence or even their full primary residence on occasion. Others are renting out a second home or vacation home to create additional income.
Are Short-term Rentals Profitable?
We’d like to say, yes, of course – but obviously, there are so many variables to this question: location and how much competition you have, your financial situation, property maintenance (including property management), just to name a few.
If you’re comparing long-term rentals to STRs, although you have more stability with a long-term renter, the potential to profit more definitely lies within a short-term rental. You can fluctuate rental prices depending on time of year and other variables that, well, continue to vary.
Are Short-term Rentals the Best Real Estate Investment?
Like, the best real estate investment ever? We may not say that, but depending on your financial situation, it could certainly be a good investment for you.
Going back to what we just mentioned before on long-term vs. short-term, you have so much more flexibility with an STR. Example: You want to renovate the kitchen, but it’s a pretty penny out of the ‘ol pocketbook. No problem. You raise the rent to cover those costs (not to mention, you now have a very marketable kitchen for photos).
And just like when you own your own residence, your second home is appreciating in value and you’re building equity, and someone is helping pay down your mortgage.
Let’s not forget to mention the tax benefits that can come from an STR: interests paid on loans are tax write-offs and there are deductions for things like marketing, maintenance, insurance and more.
Where Can I Have a Short-term Rental?
One of the most important things to know when deciding to host a short-term rental is to know your local city and state STR rules and regulations.
The City of Kansas City has a registration process (new process starting in June 2023), and they also provide a detailed, interactive map which shows you where STRs are allowed in the city.
You’ll want to click this link and then follow the instructions below: https://maps.kcmo.org/apps/parcelviewer/
- On the map click “layers.”
- Make sure “zoning” is checked.
- The red and yellow zoning and zoning overlay districts should be checked.
- In the box at the top where it says street address, you can type in address to find out if it is an area that can be used as a short-term rental.
Beyond the legal stipulations, you’ll then want to consider your proximity to airports and highways, local attractions, restaurants and shopping, and, of course, any known competition.
If you feel ready to start the process of owning a short-term rental property, and you’re looking to do that with a second home you’ll need to purchase or a vacation home you already own, don’t hesitate to reach out to our team for help with your search or questions you may have! We’re happy to point you in the right direction if we don’t have the answers.