I Recently spent countless hours doing market research on the short term versus long-term rental debate because I personally have a property that I'm debating on which way I should go with. The short-term rentals used to be amazing when I'm working on the mortgage side of things with my clients. I Used to see two to three times Returns on a short-term rental versus a long-term rental, but what about in today's day and age? are they still at that level? when I'm seeing these new clients come in, let me show you, instead of using something like air DNA or some sort of rentalizer online to give you projections on short-term rental income, I actually reached out to the three biggest short-term rental companies to get real data of their current clients property and they even sent me profit and losses for each of those properties. Now, we took a standard three bed, two bath property in three different markets to get a good temperature gauge on how things are going across the country.

We use Phoenix Denver and Dallas which should be a pretty good gauge because those three cities are very, very hot now. Of course, each of these properties will vary three in what kind of amenities that they have, but surprisingly enough, the actual data from how they performed was pretty similar. On average, all three of these cities gave pretty similar results. Starting with Phoenix the average revenue on one of these properties was 43 670 a year with the occupancy rate of 66 percent.

When it comes to Dallas the average revenue was forty one thousand and ninety dollars. with an occupancy rate of 62 percent. Then when it comes to Denver, we have a revenue figure of 48 962 dollars with an occupancy rate of 69. And you understand this is revenue not profit.

Most of these properties had about 16 percent of their overall. Revenue Go towards fixed costs. These are things like utilities, management fees, cleaning, licensing, and permits added Insurance security systems. Then you can add the variable expenses on top of that.

Things like repairs, upkeep, restocking. But I'm actually not going to use those figures for this video because you're likely going to have those same costs on a long-term rental. So after you account for the fixed costs only in each area, it takes Phoenix to a net profit of 36 682.80 Takes Dallas which is at 15 in cost to 34 926.50 and in Denver same amount of costs as Phoenix We've got 41 128 dollars and eight cents for your net profit. It's not terrible I guess.

but if you look at the long-term rental comps in those areas, it doesn't seem as good as you think. For example, if you were to rent that home long term in the Phoenix market, right? and this home should be relatively renovated, fairly nice. If it was going to go on Airbnb it should be pretty nice. Now that long-term rental rate is going to be no less than thirty three hundred dollars a month.

That is a very conservative number for most areas in Phoenix which puts your yearly profit at 39 600 because there are no fixed costs. The utilities are in the name of the tenant. all of those things that you would have with a short rental you don't have when you're renting it long term. So that ends up being three thousand dollars more a year on the long-term rental out than the short term.

Now, of course you need to understand that these are just averages. Okay, there are going to be anomalies. There are going to be special properties out there that are going to skew these numbers tremendously. But I Wanted to start the video with those figures because everyone thinks, oh, you have a short-term rental you make absolutely bank.

That's just not the case anymore. You need to understand that the market will always level itself out whether you're talking about real estate, stocks, bonds, whatever. Anytime there is so much profit in one area, everyone jumps in until that profit comes back down to be about level with where the rest of the market is at. So with all of this and doing all this research with these companies, I Learned three major things about short-term rentals.

Number one: starting us out: Market Saturation. It's what I've been talking about this whole video. All of these Airbnb hosts that are piling into this Market are still fighting for the same pool of guests. This increased supply has led to lower prices, reduced occupancy rates, and has ultimately made it extremely hard for you to make substantial income doing short-term rentals.

Second thing is going to be seasonal fluctuation. Certain locations are going to be heavily influenced based on the time of year or potentially by events that are happening at that point in time. Which means during the off season hosts are going to struggle significantly to cover their overhead on that property. So you need to plan your property accordingly.

Some months are going to be very, very lucrative and some months are going to be very bad. You don't have that problem with a long-term rental, so when it comes to short-term rentals, you need to plan according and then three. The last thing is expenses and regulations look to be totally honest with you. Hosting on Airbnb comes with far more challenges you've probably heard in the news or you've seen HOAs come out with stuff.

The regulations and the laws that are being cracked down on short-term rentals is far more intense than it is on long-term rentals. so you have to think about that when you're planning on doing a short-term rental. There could be laws or regulations that come into play that significantly impact your cash flow on a property. and I'm not trying to make this a super Doom and Gloom video.

I'm just trying to show that it's a lot harder to make money on short-term rentals these days only. The expert operators are absolutely crushing it. And there's really only one thing that separates the expert operators apart from the rest. They are creating unique experiences with a personal touch that cannot be replicated at other properties or even hotels.

Fact of the matter is, Airbnb is no longer used by consumers to save money because if you actually look at the rates of a hotel, hotels are a lot cheaper than most Airbnbs. Now Airbnbs are used by consumers to create a memorable and Lasting experience on their vacation or on their trip. So how do you do this? Well, you have to create something unique and memorable that no one else has done. at least in your mark.

Whether it's a theme, something historic, maybe something cute and romantic, or something with an on-site activity, it has to be 100 different than your competition. Unless you are pricing your property way below the market and not only the market on Airbnb or VRBO, but the market in terms of hotels, you have to be the reason someone books your property. You don't want it to be an afterthought. You want someone to say hey, I'm taking a trip to San Diego and look at this awesome place I'm staying not hey I'm taking a trip to San Diego And yeah, we'll figure out a place where we're gonna stand and this is where it comes no longer.

Doom and Gloom The Airbnb or Vrb hosts that are creating this unique experience are absolutely crushing it when it comes to their P. L. These folks are bringing in two to three to sometimes even four times the amount of what the average Market is bringing in. They're doing so well that they are literally hiring in designers to create these spaces.

This is honestly the future of short-term rentals. Okay, it costs more money up front, creativity up front, and overall planning up front. but once you execute it efficiently, it is an absolute Cash Cow And anyone not doing that is gonna be left behind and you're better off just doing a long-term What's the verdict is Airbnb Still worth it. As you can see for 95 of property owners, it's just flat out: not unless you want to like, use your property for parts of the year, or you're going to create an absolute Unforgettable experience like how these dominating operators are doing right now.

I Can't stress this enough. If you want your short-term rental to succeed, you have to treat it like an actual business venture. The property owners that carefully plan, do their research, and constantly improve their properties are the only ones who are going to still be in the game in the next one to two years. You know it's like starting a mortgage company.

You can't expect to start something without a value proposition or being unique and expect it to succeed. Treat your property like a mini hotel with miniature amenities and if it's Unique enough, it's going to be extremely profitable. Or just do what I do in most cases and plan your strategy around a long-term rental. It's the most bulletproof way to ensure your property succeeds.

So there's my two cents. If you found this video helpful, please hit that like button. Please comment your thoughts down below and subscribe for more content like this. I'm always releasing good stuff to allow you to be more successful with your endeavors.

Thank you.