In recent years, short stay rentals have become popular with investors as an alternative to traditional buy-and-hold rental properties. This is true not only in the United Kingdom, but in many other countries like Canada and the United States of America. This trend is thought to continue to grow as more and more people are realising that renting a vacation home can be a more financially advantageous option than the more traditional buy-and-hold rental property, and as a result, short stay rentals for vacations continue to grow in popularity.
One of the key benefits of short stay rentals is that they provide a very unique way to "invest" in real estate. Unlike traditional real estate investments, the properties that you invest in for short stay rentals are not properties that you are simply buying for your own personal use. Instead, you are buying a property that you will rent out to other vacationers to meet their needs. Even in this advanced technological society, the knowledge of doing this has always been a savvy real estate investor's secret weapon. Short stay rentals offer this very advantage because of the Colony When You Stay on Location Concept borrowed from the hotel business.
The Colony When You Stay on Location Concept revolves around the fact that most people who are looking for vacation destinations often have already found their "best" destination and often have something in mind for their visit. Thus there are often times that original reservations can turn into waiters, housekeeping, or even later in the day - concierge!
Here is where the unique and "risky" part comes in. In this scenario, once you have an original reservation, every attempt is made to have the reservations actually become a reality. This actually makes the original buyer the owner of a vacation property for that period of time, while at the same time lets them stay in a luxury hotel.
A Convenience Trap
One key downfall of short stay rentals is the fact that the typical investor who is buying them likely has no intentions of staying there. They are buying this property as an investment so they can generate an income, so they will want to use this investment to go on vacation. However, it is simply a fact of life that most vacationers do not stay in the same location year-round or even year-long.
For example, in 2004, I stayed at this same short stay rental for a vacation along with my family for a week in Hawaii. During that week, we had no intention of actually staying, but simply being able to hang-out in the hotel for a few weeks and then hopping back on the plane to go home. The fact that we were even able to find a place to stay was a new insight for me as a real estate investor in that period of time. It was also a good reminder that no matter how well you devise a marketing plan or work on your web site, the traveller somehow etc. just doesn't know where they are going!
Therefore, although these reservations can turn into long term leases, these are typically short term rentals arrangements, due to work or family, or other reasons. Obviously this doesn't have to matter as much for investors who know where they are going to be in five years time, because they will already have a solid investment.
However, for the average vacation home owner, this can be frustrating especially if the investment property they are living in is not particularly in demand. In order for a property to provide a decent profit, you have to keep the property maintained on a regular basis in order to keep it from becoming an eyesore. (A good management company might be able to assist you here.)
There are other issues as well, such as insurance, finding renters for short periods, etc. Some of these can be avoided, but oftentimes they cannot. You have to weigh your options and ask yourself whether or not you think you will still be around in a couple years' time. If you can, that first investment is probably a good one.