Short-Term-Rental Real-Estate Investing Advice for Beginners

  • Michael Elefante and his spouse built a portfolio of six vacation rental properties in Tennessee and Florida.
  • They purchased their first short-term rental property in 2019 and scaled up while still working full-time.
  • Here are Elefante’s top pieces of advice to help you get started in short-term-rental investment.

This essay is based upon a conversation with Michael Elefante (a real-estate investor who is also an Airbnb Superhost). It has been edited for clarity and length.

Jill, my wife and I bought a house together. our first short-term-rental propertyAfter moving to Nashville, November 2019, we moved to Nashville. It was a profitable investment since we lived in a tourist hotspot. 

Three months after listing our property on Airbnb, we had already made $7,000 in profits. This was just March 2020. Despite the fact that COVID-19 cancellations hampered our goal, the income potential of investing in STR properties was clear.

While growing our short-term-rental portfolio, we continued to work full-time. We sold our retirement savings to buy our second Nashville property in May 2020. Three months later, we used our savings from our salaries as well as cash flow from our properties to make a deposit on a cabin in Gatlinburg.

We currently own and manage six Airbnb properties, which generate an average of $118,000 per month. I also run a successful online coaching business for STR. Our bookings have reached $740,000 so far this year.

We are able to offer an experience, and not just a bed and breakfast. I believe this is the reason we have been so successful. These are my top tips for beginners to avoid common pitfalls in investing in short-term rental properties. 

1. Do a basic market-research analysis in the area you are looking to rent or buy

Prospective investors should first look at the travel trends in the area where they are interested in investing. Then research the area’s local laws and regulations regarding short-term rentals — local government sites usually have these details.

I call the county or city zoning offices if I have questions about a property.

2. Reach out to local experts in your industry to gain as much knowledge as possible 

It’s different from hunting for traditional realty to find a short-term rental that is profitable.

You can avoid investing in an area that isn’t profitable. Instead, look for a real estate agent who has experience working with investors or with short-term vacation rentals. They will be able to tell you which areas are best for STRs, and why people are willing pay more to live in a particular ZIP code. 

3. Before you invest in a property, do a thorough investment analysis

Do a thorough investment analysis before you consider investing in an STR. An Excel spreadsheet is what I use to visualize where my money will go, and the potential outcomes of any new short-term-rental investments. 

When I first started looking into investing in real property, I did some online research and used investment calculators such as Bigger Pockets to determine the potential earnings, purchasing costs, and cost of adding decorations or furniture. 

I did market research on similar properties in the area to my property and compared their characteristics and prices. AirDNA would be a good option to check out for daily rates and occupancy in any given market or ZIP code.

All this information was used to create my investment-analysis Template on Google Sheets. This template is still being used to analyze properties today. 

4. Always prepare for the worst.

When I evaluate potential properties, I use conservative numbers in my Google Sheet template. I enter slightly lower-than-expected daily rates, occupancy, and operating expenses.

Once I have found a subject property that matches my return on investment criteria, I stress test the investment. I rerun the numbers to find the break-even point, and the best possible profit. These numbers give me a lot confidence when buying a property. 

I have only experienced one major unforeseen expense. One of our Florida properties has a pool heater. It’s been more expensive than expected to run the electricity and other maintenance costs. Our monthly cash flow is lower but has not been detrimental to the overall investment.

5. Invest in property management software

Guesty is currently my preferred software and I pay $31 per month. Property-management software allows for the management of multiple properties across sites like Airbnb, VRBO and One synchronized calendar can be used to manage check-in and checkout messages.

This software can help you avoid making rookie mistakes that can negatively impact your ratings, such double booking locations. 

6. Use dynamic smart pricing software

Everybody should use smart-pricing software, such as Price Labs or Wheelhouse. These software automatically adjusts the nightly rental rates to match market conditions. Software can help you increase occupancy or find the best rate for your property quicker if you don’t know much about the market.  

7. Automate and outsource cleaning maintenance

Cleaning your own property is one of the most common mistakes people make. While it may seem cost-effective for the short term, it is not sustainable.

You need to learn how you can outsource if you want to grow your portfolio. Hire cleaners to increase efficiency in your business. TurnoverBnB or ResortCleaning allow you to automate your calendar synchronization. 

8. Check out what your competitors are offering, and then take a leap of faith. 

AirDNA can help you find the best performing properties in your area. It will also help you to understand why people book these places. What are their design characteristics? Are there hot tubs, games rooms or pools? Are they equipped with accent walls? This knowledge can be used to help you choose and build the vision for your property. 

Our first property was in Nashville. There are many murals all over the city. We hired an artist for a mural to be created at our property. It attracted many guests and distinguished us from the rest. 

9. Don’t underestimate how powerful good design can be in generating income 

Many people don’t focus on design because of a lack of understanding about the return on investment in design and STRs. 

If you don’t have the funds to buy furniture or design, it is a good idea to find a smaller property that is cheaper to furnish. You can bargain shop for furniture and decor. Although it can take longer than shopping online, it will save you time and make your property stand apart. 

Once you turn a profit, you can spend more on interior design and hiring an interior designer. This will increase your future revenue as well as your cash flow. 

10. Hire a professional photographer

Photos are everything. Poor quality photos can make it difficult for thousands of potential guests to view your property.

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