Investing in short-term rental properties is proving profitable for some homeowners' long-term financial goals.
Websites like Airbnb, HomeAway and VRBO make it easier than ever to market short-term rental properties to travelers seeking a home-away-from-home, says Fred Miller, president of Consumer Specialists and a consultant for the National Association of the Remodeling Industry, based outside Memphis, Tennessee.
"After the housing market bubble burst in 2008, some people saw an investment opportunity to buy desirable properties at a great price," Miller says. "Now, people have the option to rent their guesthouse, spare bedroom or entire home on a short-term basis for more money per night than if they were landlords of a property with a traditional long-term lease agreement."
Miller says the No. 1 rule of real estate -- location, location, location -- also applies to purchasing a property for short-term leasing. Also, before acquiring investment rental property, know local regulations regarding short-term leasing, as cities -- New York, New Orleans, San Francisco and others -- are embroiled in ongoing housing controversies.
While some urban areas may be scrambling to regulate short-term rental properties, Ryanne Hodson of Luray, Virgina, says her community welcomes the influx of visitors. Hodson and her partner of 12 years, Jay Dedman, bought a 1,300 square-foot, 1850-era farmhouse in 2011, which is a vacation destination located two hours from Washington, D.C., nestled in the Blue Ridge Mountains, and is a gateway to Shenandoah National Park.
In 2009, Hodson and Dedman moved from San Francisco to Luray after buying a home that was in foreclosure and began to renovate it.
"After we finished work renovating our home in Luray, we found the farmhouse property on two acres and knew it was special," Hodson says. "We bought it with the intention of renovating it and using it exclusively as a short-term rental property."
Miller says when considering buying real estate as a rental property, a homeowner should invest in a structure based on its livability, not just its affordability. "After ensuring the property is in a good location for short-term rentals, make sure the house has good bones," he says. "If a property appeals to you as a homeowner -- in that you could live there -- chances are, it will also appeal to renters, as well."
With three bedrooms, one-and-a-half baths and a small cottage, the Luray farmhouse was a total renovation that took about three years to complete, Hodson says. "We wanted to really know the house, and took the time to renovate it room-by-room," she says. "We needed to change the space, without changing its charm."
Years of neglect and so-called "improvements" by previous owners -- plastered brick walls and covered old-growth pine wood flooring -- had to be stripped away to reveal the farmhouse's inner beauty. "I can paint, clean up garbage and lay tile, but when it comes to plumbing, electricity or taking down a wall -- like we did between the kitchen and dining room -- you better have trusted contractors," Hodson says. "Jay and I were the general contractors on the farmhouse, working hand-in-glove with professionals to keep the old-world appeal, while bringing in modern conveniences."
If a home's walls could talk, they would reveal the secret inner workings of a house, Miller says. "It's not only imperative for a home to look good, it also has to work well," he says. "Nothing can kill your stay in a home quicker than an overflowing toilet or a heating/cooling system that doesn't work."
When it comes to walled-in systems, there are four different contractors who install the labyrinth of wires, pipes and ductwork: heating, ventilation and air conditioning (HVAC) professionals; plumbers; electricians; and specialty electrical contractors, who install refined systems such as Wi-Fi and security. Generally, as the pipe or wire becomes smaller, those are the professionals who do their work later in the construction process.
Hodson and Dedman spent an estimated $80,000 on the farmhouse renovations. If the budget is tight, Miller says to spend money wisely in a home, so you get "more bang for the buck."
Create curb appeal
Drive up a home's street appeal by focusing on the front entry. The first impression of a house can start at the driveway and sidewalk as visitors make their way to the front door.
The Luray farmhouse has an inviting wraparound porch that leads to pavers in the yard, which are flanked by gardens. "To create a special place outside, we also had an outdoor masonry fire pit built," Hodson says. "This extends the living space of the home out into the yard."
A first-impression foyer
The foyer of a home is a nonverbal welcome to houseguests and should make a statement about what lies inside. "We love when our renters say, 'Wow!' when they first walk into the home," Hodson says. "We spent a lot of time renovating the kitchen–dining area, which is what you see when you enter the house, with the hope that people will feel at home cooking and eating together."
Miller says the creature comforts of a clean bedroom and bathroom can never be underestimated when it comes to short-term rentals. To brighten and lighten the full bath of the Luray farmhouse, Hodson and Dedman installed a window, which meant cutting into three layers of brickwork on the outer wall.
Removing a wall to an adjacent room created a sitting area and opened up the master suite.
"I have an art background, and furnishing this home was like curating a practical, livable exhibition," Hodson says. "Details such as the farmhouse table with an antique wool rug underneath and making sure there's enough olive oil in the kitchen for cooking make the stay in our house feel like a home to the visitors."
Short turnaround can be a long-term investment
Miller says owning and renting property can still be a wise investment, as long as you've done your homework and know the local market. Hodson and Dedman are in the process of renovating a second home for another short-term rental property in Luray. "We're deciding what to do to a 1973 A-frame home we bought earlier this year, and if building an addition is a good financial move," Hodson says. "At the end of the day, we own the property, and any improvements we make must make dollars and sense."
On the Short List:
National Association of the Remodeling Industry (NARI), NARI.org. To find a professional contractor in your area, click "Consumer," then drop down to "Find a Pro."
To listen to Ryanne Hodson and Jay Dedman's podcast on the adventures of owning properties for short-term rentals, go to: ShampooandBooze.com, so named, because renters are most likely to leave these items after their stay. To view the renovated 1850s Luray farmhouse, go to: LurayModern.com.
(For editorial questions, please contact Clint Hooker at firstname.lastname@example.org.)