Things to Consider Before Buying a Short-Term Rental

Things to Consider Before Buying a Short-Term Rental

  • The Mitten Group
  • 10/26/23

Investing in a short-term rental property can be an exciting and potentially profitable venture. With platforms like Airbnb, Vrbo, and, the short-term rental market has boomed in recent years. However, before you take the plunge and buy a property to rent out to vacationers and business travelers, there are several crucial factors to consider. In this blog post, we'll delve into the key considerations you should keep in mind before purchasing a short-term rental property.

Location, Location, Location

The first and most critical factor in any real estate investment is the location. When choosing a short-term rental property, it's essential to consider the neighborhood and its proximity to popular attractions, amenities, and transportation hubs. Here are a few location-specific factors to think about:

Proximity to Tourist Attractions

Properties located near tourist hotspots tend to attract more guests. However, they may also come with higher purchase prices and competition.

Local Amenities

Access to restaurants, shops, and recreational activities can significantly influence the rental's appeal.


Is the property conveniently located near airports, train stations, or bus stops? This can be a significant selling point for potential guests.


Be aware of any local regulations regarding short-term rentals, as some areas have restrictions on these types of properties.

Property Type

The type of property you choose can significantly impact your investment. Common options for short-term rentals include single-family homes, apartments, condominiums, and even unique properties like cabins or treehouses. Consider the following factors when deciding on the property type:

Property Size

The number of bedrooms and bathrooms will affect the maximum number of guests you can accommodate and your potential rental income.


Different property types require different levels of maintenance. Condos and apartments may have association fees, while single-family homes come with more extensive upkeep responsibilities.

Property Rules

Some properties may have rules and restrictions that affect short-term rentals, so it's essential to understand the property's regulations.

Budget and Financing

Your budget is a crucial factor when buying a short-term rental property. Consider the following financial aspects:

Purchase Price

Make sure the purchase price aligns with your budget and expected return on investment.

Down Payment

Determine how much you can afford as a down payment, as it impacts your mortgage rate and monthly expenses.

Operational Costs

Beyond the purchase price, you'll have operational costs such as property taxes, insurance, maintenance, and utilities. Ensure these are manageable within your budget.

Financing Options

Explore financing options, such as traditional mortgages, investment loans, or cash purchases. Each has its advantages and drawbacks.

Cash Flow Analysis

Perform a thorough cash flow analysis to estimate your potential income and expenses. A positive cash flow is a critical aspect of a successful short-term rental investment.

Competition and Market Demand

Assessing the level of competition and market demand in your chosen area is vital. Here's how to do it:

Market Research

Look at similar short-term rental properties in the area to understand competition and pricing. Research occupancy rates and guest reviews.

Peak Seasons

Identify the peak seasons when you can charge higher rates. For example, beach properties may have high demand during the summer, while ski resorts are popular in the winter.

Local Events

Consider local events, festivals, or conventions that may boost demand for short-term rentals.

Property Management

Managing a short-term rental property can be time-consuming. You can choose to handle everything yourself or hire a property management company. Consider the following factors when making your decision:

Time Commitment

Managing a short-term rental property involves tasks such as guest communication, cleaning, maintenance, and marketing. Do you have the time and resources to handle these responsibilities?

Property Management Services

Property management companies can handle various aspects, from guest check-in to cleaning and maintenance. They typically charge a percentage of your rental income.

Remote Management

If you plan to invest in a property in a different location, you'll need to decide whether to manage it remotely or hire a local property management company.

Guest Experience

Regardless of how you manage your property, prioritize providing an excellent guest experience. Positive reviews can significantly impact your occupancy rate and income.

Legal and Regulatory Considerations

The short-term rental industry is subject to various regulations and tax requirements. Make sure you're well-informed and compliant with all legal aspects, including:

Zoning Laws

Check local zoning regulations to ensure your property is eligible for short-term rentals. Some areas have specific zones for vacation rentals.

Permits and Licenses

Investigate the permits and licenses required to operate a short-term rental legally. Failure to comply can result in fines and legal troubles.

Tax Obligations

Understand the tax implications of short-term rentals, including occupancy taxes, income taxes, and sales taxes. Consult with a tax professional to ensure compliance.

HOA or Condo Rules

If your property is part of a homeowners association (HOA) or condominium association, be aware of their rules and restrictions regarding short-term rentals.

Marketing and Branding

To attract guests and maximize your rental income, effective marketing and branding are crucial. Consider the following marketing strategies:

Online Presence

Create an appealing and informative online listing on platforms like Airbnb and Vrbo. High-quality photos and detailed descriptions are essential.

Pricing Strategy

Develop a pricing strategy that accounts for seasonal variations, local events, and competition. Monitor and adjust your rates as needed.

Guest Reviews

Encourage guests to leave positive reviews, as they play a significant role in attracting future bookings.

Additional Amenities

Offer amenities that stand out, such as a well-equipped kitchen, free Wi-Fi, and other conveniences that appeal to guests.

Maintenance and Housekeeping

Maintaining your short-term rental property is crucial for guest satisfaction and repeat bookings. Here are some maintenance and housekeeping considerations:

Regular Inspections

Conduct regular inspections to identify and address maintenance issues promptly.

Housekeeping Standards

Ensure the property is cleaned to high standards between guests. A clean and well-maintained property will receive better reviews.

Emergency Response

Have a plan in place for addressing emergencies, such as plumbing issues or power outages, to minimize guest inconvenience.

Property Upkeep

Consider a renovation or property upgrades to keep your short-term rental competitive and appealing.

Furnishings and Décor

Choose furnishings and décor that are durable, stylish, and easy to clean. Quality bedding and linens are also essential for guest comfort.

Investing in a short-term rental property can be a rewarding venture when approached with careful consideration and planning. Understanding the factors discussed in this blog post, including location, property type, budget, competition, property management, legal aspects, marketing, and maintenance, is crucial for success. By making informed decisions and staying committed to delivering an excellent guest experience, you can potentially enjoy a profitable and fulfilling journey as a short-term rental property owner.

If you’re thinking about buying a home for sale in or around Traverse City, contact the expert real estate specialists at The Mitten Group today.

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