What is a Short Term Rental?
Would you like to learn how to earn over $2,500 a day? It may sound too good to be true, but if you understand how short-term rentals work, you can potentially earn that much.
If you’re still skeptical, we’re going to show you how.
First, you need to know what short-term rental (STR) means.
A short-term rental is a property that you own or control that you rent out for short periods of time.
Basically, it means repackaging something that already exists, such as time, at a property that you either own or control.
In this article, we’ll show you:
How repackaging works
What non-linear income with a STR means
Why we’re excited to show you how to make the most of this opportunity
Finally, we’ll take you to the next step so that you can start on your journey to financial freedom.
Ready to get start learning how to earn more in a day than you might ever have imagined?
Short-Term Rental Repackaging
Do you like soda? That question might seem silly but we promise — it’s relevant. It’s relevant because it’s going to help you understand repackaging.
Say you buy a case of soda for $13.99. The case contains 24 sodas, so each one cost you $0.58.
If you turn around and sell each soda for a dollar or a $1.50, you stand to earn a profit of as much as $0.92 per soda, or $22.08.
Now imagine you have 19 cases of soda, and you repackage them all for $1.50 per soda. You could make a profit of $419.52.
But wait, you’re probably thinking who is going to pay $1.50 for a soda that only cost $0.58?
If you’ve visited a vending machine, you’ve probably paid that. You’re paying not just for the soda but for the convenience of a single bottle being available right where you need it when you need it.
That’s the key to repackaging–you can charge more because you’re not only providing the product, but also a service.
Let’s translate the soda example to a short-term rental.
How much can you earn with a short-term rental?
The vacation rental industry is growing. It’s projected to increase $70 Billion by 2019. Would you like a piece of that pie?
We’re not here to teach you how to sell soda, though if you want to do that on the side, be our guest.
We want to teach you how to earn even more than our soda example, and the best way we know of to do that is with a STR. Think of a short-term rental like a vending machine.
Except instead of selling soda, you’re selling time and a place to sleep.
You know how we discussed selling the individual sodas? With STRs, you’ll want to repackage to sell in increments of days.
Why sell in increments of days?
You might be tempted to try to get longer rental agreements, to know that you’re going to have a renter for an entire year. Resist the urge.
Here’s why: You can charge a higher price for a shorter amount of time.
If that makes no sense right now, that’s okay. We’re going to dive a bit deeper and explain.
Say you have an apartment that you rent for a year. It’s empty when you rent it, and maybe you charge $1,000 a month. That’s almost $33.00 a day.
If you have 19 units (the number of units I currently have), that’s $627.00 a day. That’s not bad, but it could be higher.
Imagine you have the same 19 units, but you’re only going to rent them out for four months. You provide the furniture, so you’re adding a service.
You charge $2,000 a month. Now you’re earning over $66.00 a day–double what you earned renting for a year even though you’re only renting for a third of the time.
With 19 units, you’d be generating over $1,250 a day.
We talked years, and we talked months. It’s time to break short-term rental profits down in terms of days.
When you have a unit that you rent out for a day or days, you provide more services: furniture, utilities, linens, etc.
Because you offer more services, you can charge a higher price. You’re charging a premium for service and convenience.
If you charge $135 a night, you can earn over $2,500 each day. That’s more than would earn per unit in the year-long and four-month contracts we described above.
What is non-linear income and how does it work?
Let’s look at this another way.
How many hours of work do you do a week? Let’s presume the standard 40 hours a week.
If you’re renting out a STR, you’re earning 24 hours of work in a day from each unit. If you have 19 units, it’s like getting paid to work 456 hours a day!
Have you ever heard yourself say, “There aren’t enough hours in the day?” If so, then short-term rental income can help.
STR is the fastest, easiest, and most profitable real estate investment we’ve ever tried–and we’ve tried a lot of different types of real estate investments.
In contrast, linear income would be working your eight hours for the day and getting paid for those eight hours.
The question you need to ask yourself is, “Do I want to get paid for one day of work in 24 hours, or 456 hours of work?”
We hope you answered the latter.
Short-Term Rental Investment is Exciting
Are you beginning to see why we get so excited about short-term rentals?
We’re not the only ones, either. You might recognize some of these companies that have also discovered the profitability of STRs:
Home Away
Airbnb (Posted positive growth numbers every year since they started)
Flipkey
Trip Advisor
Expedia
Wimdu (Popular in Europe)
And let’s not forget about hotels. Did you know that there are hotels that don’t even own the hotel building?
The key is that they control the building, so they stand to profit from renting out rooms for a few nights.
Again, hotels offer services that you wouldn’t get if you just rented an apartment. There’s furniture, linens, and the room gets cleaned. If you check into a hotel, you’re not expected to call the electricity company to get the lights on.
We’re excited about short-term rental income because it means you can escape the daily grind. You work hard for your money, but the fact is that you don’t have to.
If you aim to earn $1,000 a month from a unit (and at $135 a night, you will get there easily), you can easily figure out how many units you would need.
If you have to budget for $5,000 of personal expenses a month including your own home, then you need at least five units. See how easy that is to figure out?
We bet you didn’t even need a calculator (though it’s okay if you used one).
Remember, you can control a building without owning it.
That means even if you don’t have the cash to lay out for a down payment, or if your credit score isn’t sky high, you can get started with a short-term rental.
How many real estate investment ventures can make that claim?
This is a great way for beginner investors to get started, because of the fact that you don’t have to lay out so much cash or put your credit on the line.
Bonus: Short-Term Rental Tips
We love to share, especially if it helps you make the most of your investments. That’s why we’ve added in this little surprise section.
Below you’ll find some tips on how to get the most out of your STR experience.
Knowledge is power, right? So power up and check these out:
Know your local regulations regarding STRs.
Know your guests–screen them before they rent.
Lay down the law–set ground rules for guests and be clear.
Choose the right rate for your unit, the location, and the season.
Stage and market–the better your unit looks, the more likely renters are to rent it, and in turn, recommend it to others.
Keeping these tips in mind can ensure that both you and your guests have a positive experience.
That positive experience can do wonders for the future of your units. Maybe guests will come back and rent from you again, or tell their friends, family, and coworkers that your space was comfortable, convenient and that they had no complaints.
Following these tips will also protect your investment. By screening your guests and setting the ground rules, you can ensure that your units will remain well-cared for, even if you’re not there.