What Are STRs in Real Estate?

Short-Term Rentals (STRs) offer residential properties for temporary stays, serving as an alternative accommodation for travelers. They are a real estate investment strategy for individuals seeking income opportunities.

Defining Short-Term Rentals

A Short-Term Rental (STR) is a residential property rented for brief periods, typically less than 30 consecutive days. This differs from long-term leases, which span several months or years. STRs are often used for vacations, business travel, or temporary accommodation.

These properties are furnished, providing guests with amenities like kitchenware, linens, and Wi-Fi. Common STR types include:
Entire homes
Private rooms
Apartments
Condominiums
Cabins
Chalets

While some jurisdictions classify rentals up to six months as short-term, the most common definition is under 30 days. The Internal Revenue Service (IRS) also defines an STR as a property rented for 30 days or less at a time.

Operating a Short-Term Rental Property

Operating a Short-Term Rental property involves practical steps and ongoing management. This includes selecting booking platforms like Airbnb, Vrbo, or Booking.com. These platforms allow owners to create detailed property listings.

Managing reservations involves handling inquiries, confirming bookings, and overseeing the property’s calendar. Consistent guest communication is important, covering pre-arrival instructions, support during the stay, and post-departure feedback. This includes providing clear check-in procedures.

Regular cleaning and maintenance are essential. This involves routine inspections and addressing repairs. Dynamic pricing strategies and efficient calendar management help optimize occupancy rates and adjust nightly rates based on demand, seasonality, and local events.

Financial Aspects of Short-Term Rentals

The financial aspects of Short-Term Rentals involve understanding revenue streams and expenses. Revenue comes from average daily rates (ADR) and occupancy rates, which fluctuate with seasonality and market conditions. Properties in high-demand areas or during peak seasons can command higher nightly rates.

Expenses inherent to STR operation include ongoing costs like mortgage payments, utility bills, and property taxes. Operational expenses cover cleaning fees and maintenance costs. Insurance tailored for short-term rentals is also a significant expense.

Property management fees, if professional assistance is used, can range from 10% to 40% of the gross rental income. Booking platform commissions are another cost. Calculating profitability involves subtracting all expenses from gross rental income.

Regulatory Frameworks for Short-Term Rentals

Operating Short-Term Rentals requires navigating regulatory frameworks. Local regulations often dictate where STRs are permitted through zoning laws. Some areas may restrict STRs to specific zones or prohibit them in residential areas.

Property owners must obtain permits, licenses, and complete registration processes. Failure to comply can result in fines or cessation of operations.

Local taxes, such as Transient Occupancy Taxes (TOTs), are frequently levied on STR income. These taxes are collected by the host from guests and remitted to tax authorities. Regulations also include occupancy limits, safety requirements, and noise ordinances.