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Is It OK to Have an STR as Your First Investment

Is It OK to Have an STR as Your First Investment

STR Investments are Lucrative in 2023

As the landscape of real estate investment continues to evolve, short-term rentals (STRs) have emerged as a vibrant and lucrative option. An STR investment typically involves renting out furnished properties for short periods - ranging from a few days to several months. Short-term rentals offer a flexible alternative to the traditional long-term lease approach. 

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With the rise of platforms like Airbnb and Vrbo, the popularity of short-term investment properties has surged, attracting both seasoned and novice investors to the potential for higher yields and increased occupancy rates.

For first-time investors, however, venturing into STR investments carries its unique set of challenges and considerations. It’s essential to understand the dynamics of the STR market, including regulatory landscapes, market demand fluctuations, and the operational demands of managing a hospitality-driven venture. 

Let’s unpack these complexities, providing a thorough examination of whether an STR is a suitable first investment. 

STR Investments Statistics in America

Statistics About STR Investments in America

Most Profitable Locations for STR Investments in America

Prominent areas include Nashville, Tennessee; Charleston, South Carolina; and several cities in Florida, such as Key West and Miami. These locations are particularly appealing due to their high tourist traffic, which drives up demand for short-term lodging.

However, profitable locations for short-term rental (STR) investments in the U.S. may vary across different states and cities. Profitability will be influenced by factors like tourist appeal, local regulations, and market saturation. 

Average STR Earnings Per Year

On average, an American Airbnb host earned $44,235 in 2021. This rose up from $25,553 in the previous year according to All The Rooms. The earnings averaged above $40,000 per year in most prime short-term rental cities.

Average earnings from short-term rentals can vary widely depending on the location, property type, and management efficiency. The exact figures can fluctuate based on factors like local demand and the specific characteristics of the property and market.

Market Value for STR in America

Precedence Research places the market value of the short-term rental market at $112.31 billion. The research firm predicts that the value will triple to over $315 billion by 2033. North America has the largest share of the value with approximately 37%. The home segment of STRs dominated the market and guests primarily booked using online platforms like Airbnb and Vrbo.

The market value of short-term rentals in the U.S. is influenced by a variety of factors including regional tourism, local economic conditions, and regulatory environments. Areas with high tourism and favorable rental regulations tend to have higher market values. Investors often look at metrics like cap rates and cash-on-cash returns to assess potential returns on investments in various locations.

Four Short-Term Rental Trends to Watch in 2024

STR Investment Trends to Watch in 2024

1. Modern Travelers Are Seeking Unique Experiences 

Today's travelers are increasingly looking for unique and personalized accommodations that offer more than just a place to stay. They value experiences that are tailor-made to their preferences and interests, which can range from themed decor to personalized local guides. This shift emphasizes the importance of STRs offering distinctive qualities that stand out in a crowded market.

2. Reviews Still Influence STR Performance

The impact of customer reviews on performance continues to be profound. Positive reviews can significantly enhance an STR's visibility and attractiveness, driving up occupancy rates and allowing hosts to command higher prices. 

Conversely, negative reviews can deter potential guests and decrease booking rates. STR hosts must manage guest experiences meticulously to maintain high review scores.

3. There is Unprecedented Demand For Luxury Experiences

There's a growing segment of travelers who are willing to pay a premium for luxury accommodations, which offer superior comfort, exclusivity, and high-end amenities. STR investments in the luxury market are seeing increased demand, making them a potentially lucrative focus for investors looking to cater to this upscale clientele.

4. Virtual Tours Are The Future

With the integration of technology in travel planning, virtual tours have become a valuable tool for guests to preview properties. These tours help potential guests feel more confident about their booking decisions, particularly when looking for places that meet specific standards or offer certain amenities. STR listings that include virtual tours can increase trust and transparency, leading to higher conversion rates.

Is STR Investing Good For Beginners?

New investors looking at the viability of STR investments

Considering the statistics, trends, and exciting new opportunities that short-term rental properties can provide, then yes, STR investments are a viable option for beginners. Locations like Nashville and Charleston offer promising returns due to high tourist traffic and favorable rental conditions​. 

Furthermore, the shift towards luxury rentals and enhanced guest experiences suggests a lucrative niche for new investors willing to offer premium services​. The ability to capitalize on technological trends such as virtual tours also provides beginners with tools to better market their properties and instill confidence in potential guests​​. 

However, newcomers should understand the challenges, including regulatory environments and the need for active management. 

Start Your STR Investment Journey With The Short Term Shop

Unlock the door to a profitable future in real estate! Specializing in short-term rental investments, The Short Term Shop provides expert guidance and resources tailored to maximize your earnings. 

Whether you're a beginner looking to make your first investment or an experienced investor seeking to expand your portfolio, our team offers comprehensive support. We’ll help you select the right property in high-demand locations and optimize your rental for peak performance. 

Schedule a consultation call with one of our exclusive short-term rental real estate agents.

Avery Carl

Avery Carl

Avery Carl was named one of Wall Street Journal’s Top 100 and Newsweek’s Top 500 agents in 2020. She and her team at The Short Term Shop focus exclusively on Vacation Rental and Short Term Rental Clients, having closed well over 1 billion dollars in real estate sales. Avery has sold over $300 million in Short Term/Vacation Rentals since 2017. An investor herself, with a portfolio of over 100 Doors, Avery specializes in connecting investors with short term rentals with the highest ROI potential, and then training them to manage their short term rental from their smart phone from anywhere in the world.

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