3 Ways to Start your Short Term Rental on a Budget
Who I am and why I love short term rentals
Hi Guys! If you don’t already know me my name is Alisha Arnold I’m a Creative Director, Design Mentor and online educator. I own two full-time short term rentals with my husband Weston. It’s my mission to help others build long term wealth through short term rentals.
Owning short term rentals combines all of my loves: decorating, marketing, hosting, real estate investing and my family. I love that short term rentals are a way to make properties pay for themselves.
How I got started with short term rentals
You might be wondering how I got started with short term rentals. It all started because a few of my friends had short term rentals and they seemed to be really successful. It ranged from part-time apartment renting to cover half the rent, to a full-blown wine country rental. The full-time rental was not only affording that friend a property and covering her investment but was netting a pretty penny to boot. That was the friend who got me obsessed with wanting a short term rental in wine country.
Since I had never managed a short term rental before, I convinced my husband Weston to rent out our house when we would travel on the weekend to test the short term rental waters. Our miniature side hustle went well - I really enjoyed hosting people and we were able to offset the expense of our vacations and had a few thousand dollars accumulating in the bank with little effort. So we decided to take the next step and search for a property of our own in wine country.
How I pick my short term rental locations
I’m a bit of an emotional buyer (my husband is the rational one), so our first criteria for buying a new property is that we must want to spend time there ourselves. After all, one of the great benefits of this investment is the fact that you get to use it yourself with your family and friends!
We wanted our first full-time short term rental to be in wine country - I freakin’ LOVE wine tasting, and Weston does too, so he agreed. We searched all the wine areas we knew - Napa, Sonoma, Healdsburg, etc., but they were all too expensive. One day, on a whim during an unrelated road trip, we decided to stop into this small town that we had only heard of once or twice - Lodi, CA. We did some wine tasting downtown, talked to a few locals, and ended up changing our plans and staying the weekend at an Airbnb! We were sold on the charm (and the wine) in this little-known town; that’s when we started our search for what is now Lodi Landing.
After a couple of years of successfully operating Lodi landing with positive cash flow, we decided to try a new market - Hawaii! We fell in love with the Big Island (Kona, specifically) on our babymoon, and casually started looking for properties on a return visit with our 6-month-old son, Ryder.
Once Kona Landing is off the ground and turning a profit, we plan to set our sights on a ski destination. Between wine country, Hawaii beaches, and a ski destination, this will round out our family’s dream portfolio of vacation homes, and all while effectively growing our long term wealth. Below I’m sharing a few tips and tools that have helped us make informed decisions on our property purchases.
Reasons to start a short term rental
There are many reasons to start a short-term rental, so let's explore a few and you can see if one of these paths might be right for you too.
Reason number one: You are excited about the process! Creating a short-term rental can earn you thousands of extra dollars per month, build long-term wealth, and enable your properties to start paying you. But, you have to be excited about this proposition because it takes hard work.
Reason number two: You want more free time and flexibility so that you can work from home, travel and spend time with the most important people in your life.
Reason number three: You are all so sick of spending all of your time making money for somebody else. You want to turn this into a full-time gig and plan on operating many short term rentals.
It’s important to define a goal for your short term rental before you get started so you can determine if it will be successful. I start from an emotional point of view because one of my goals is to have all the comforts of home when I’m on vacation with my family (this is becoming more and more important to me since having our baby boy Ryder.) My secondary goal is to make sure the property will be profitable and contribute to our long term wealth.
But how do I get started if I don’t have a ton of money to invest?
I understand that not everyone has a huge lump of cash to throw down for a second home, not to mention the setup costs. There are a few ways to get started that make things a little easier and cheaper.
1. Rent out the space you already own - Dip your toes into the short term rental waters like I did and rent out a room in your home. Or, rent out your entire space when you are out of town if you don’t want to room with strangers.
A few tips:
Check that your homeowner's insurance covers STR - many don’t and will drop your coverage if they find out you have a STR in your home. It’s not extremely expensive to get STR insurance but you might need to switch providers.
Update the decor in your space to prep for guests to arrive. I’ve written a detailed post about that here.
Make any repairs around the house that visitors would frown on like slow shower drains or a garbage disposal that isn’t working properly.
Do a deep clean before guests arrive to ensure five-star cleaning reviews.
Install a smart lock on your door so check-ins and outs are a breeze. Also, if this is your home you never have to have your house keys with you again. It’s a total win-win.
I’ve created a freebie to help you get started called How to Turn Your Spare Room Into a Short Term Rental.
2. Rent out space someone else owns - That’s right, some landlords will let you sublet their space as a short term rental and you don’t have to buy the property - it’s called rental arbitrage.
A few tips:
The first step is finding a landlord that is cool with you subletting their space as a short term rental.
Then you need to set up the operations of the space (who will clean it and deal with guest bookings. etc)
Then you need to furnish the space, you can rent furniture through a stager or rental company, buy used furniture or get creative and see what your network has that they want to part with.
Last you have to set up your online listing.
3. Buy a place that is already a short term rental - A simple way to enter the short term rental business is to purchase a property that is already being utilized for this purpose. These properties are sold turnkey with furnishings, supplies and perhaps even future reservations (that’s rad right?). A great place to find these properties is to check out Vrolio as they offer a marketplace which connects buyers and sellers of existing short term rentals.
If buying a vacation rental had a relationship status, it would be “it’s complicated” so get the help of Vrolio's team of experts. They have a full suite of tools and data analytics to help you make an informed investment decision. Since I know the folks at Vrolio, I’ve convinced them to give my followers a free vacation rental purchase assessment from a Vrolio expert! Talk about free coaching. You’re welcome. Simply email Mike@Vrolio.com and referencing the promo code AlishaArnold.
A few tips:
Make sure you understand the seasonality of the area you are buying
Inspect the appliances, furnishing, linens and towels and make sure they are in the style that you think your guests will like. If you can’t use the items in the house because they are dated, then what’s the point?
See if you can spend the night in the unit as a guest before buying so you can see how it all functions.
Tools of the trade
No matter how you go about acquiring your first short term rental you need to run the numbers to see if your goal is attainable. I’ve created a Free Short Term Rental Start up Kit to help you including a profit & loss statement and a competitive analysis worksheets. Download the worksheets below and watch the video below to get a walkthrough of how to fill out the worksheets.