If you’re a real estate investor, then you’ve probably heard of the term “STR.” But what is STR in real estate? And is it considered a business?
In this blog post, we’ll answer those questions and more. So if you’re wondering what is STR in real estate, read on!
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What is STR in Real Estate?
If you’re thinking about renting out your home on a short-term basis, you might be wondering what is STR in real estate.
In a nutshell, STR stands for short-term rental.
As the name implies, a short-term rental is a rental property that is rented out for a short period of time, typically 30 days or less. Short-term rentals are becoming increasingly popular, especially in tourist destinations and major cities.
STR real estate is usually in the form of fully furnished condos and apartments. Any rental property that is rented for under 6 months is considered a short-term rental.
Most STR properties are second homes or vacation properties in tourist destinations that are rented to tourists while the owners are not there. These rentals are also appealing to people who do not want a long-term lease, such as those who will move after a few months.
Many people own vacation rentals as a source of extra income. In the United States, there are about 23,000 STR units, which make up 20% of all worldwide vacation homes.
Additionally, online platforms like Airbnb, VRBO, and Trip Advisor make it easy for millions of people to find short-term rentals in their area of interest.
The increasing popularity of short-term rentals has been attributed, in part, to how they compare with more traditional forms of accommodation. These include:
- Homey ambiance
- More privacy
- More affordable
- More space
- Flexibility (STRs can be rented for a few days to up to a few months)
There are a few things to keep in mind if you’re thinking about renting out your property on a short-term basis.
First, you’ll need to make sure that your property is zoned for short-term rentals.
Second, you’ll need to get a business license if you plan on renting out your property on a regular basis.
Finally, you’ll need to make sure that you have adequate insurance coverage for your rental property.
If you’re thinking about renting out your property on a short-term basis, there are a few things to keep in mind. But overall, renting out your property on a short-term basis can be a great way to earn some extra income.
An STR can help save you time and money on your investment property by providing a short-term rental option for tenants. This can help you avoid the hassle and expense of traditional long-term leases.
Short-Term Rentals as an Investment Vehicle
If you’re looking for a solid investment that will yield returns year after year, you may want to consider investing in short-term rentals (STRs). With the rise of sites like Airbnb, VRBO, and HomeAway, vacation rental properties have become increasingly popular in recent years.
For real estate investors, these short-term rentals are a great option for generating more revenue than a standard rental property. Using the sites listed above, investors can post their properties at no cost, reach more potential renters, and pay less commission for successfully booked stays.
Most real estate investors choose one of the following paths to enter the STR real estate market:
- Rent a primary home out when it’s not in use, either fully or in parts, and offset your living expenses.
- Rent a room out in a principal residence, such as a basement or accessory-dwelling unit (ADU).
- Rent a unit of a duplex, triplex, or quadplex. This is a popular strategy for generating income from multifamily properties.
- Buy a rental property and rent it out on a short-term basis.
Some cities have enacted laws that prohibit property owners from renting out their properties on a short-term basis. In New York, the city has outlawed the practice due to the potential to displace long-term residents in favor of higher-paying tourists.
Others have argued that poor or confusing tax or zoning ordinances for residential properties are to blame for the decrease in short-term rentals. Some HOAs also restrict short-term rentals due to disruption to their neighborhood.
Just like any property, short-term rentals require planning, marketing, and upkeep. Here are some things to consider if you’re thinking of renting out your home.
Location, location, location. Just like any real estate, the best short-term rentals are found in areas with high demand such as vacation destinations.
When considering an Airbnb property, it is important to run some numbers to see how realistic the projected income is based on occupancy rates and expected rent.
Targeting certain segments of travelers, such as business travelers or families, can help to increase occupancy rates. However, this requires renovating your property to appeal to those specific markets.
Frequently Asked Questions
What is a good STR cap rate?
There is no definitive answer to this question as it depends on a number of factors, including the location of the property, the type of property, and the current market conditions. However, a good rule of thumb is that an STR cap rate should be at least 5%.
What do LTR and STR mean in real estate?
LTR and STR stand for long-term rental and short-term rental, respectively.
Is an STR a business?
An STR is a business, but it may not be considered a traditional business. An STR is a short-term rental, which means that it is rented out for a short period of time, usually 30 days or less.
Now that you know what is STR in real estate, it’s time to crunch the numbers. One way to gather data is to go to Airbnb or VRBO and find rental properties that are similar to what you’re looking for. Reading the reviews and getting additional information on the property and its surroundings can give you a better feel for the place.
There are a ton of tools out there for real estate investors to analyze their market. For example, Price Labs, Airdna, Mashvisor, AlltheRooms.com, Airbtics.com, and Evolve can help you determine rent prices, occupancy rates, and average rental costs.
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