Short Term or College Rental Investing?

Question

I’m interested in hearing people’s perspectives on investing in either Short Term/Vacation rentals or College Town rentals.

My wife and I own 2 - 4 bed/4 bath townhomes in a college town in TX, but also have a desire to move into Short Term/Vacation rentals.

I’m interested in hearing people’s thoughts on either making the shift or diversifying into the short term rental game.

Thanks!

-Daniel

Michael Ablan · Answer

@Daniel T Stockman -  Both have the +-

College rentals = High income, High turnover, High repairs (depending on your asset class), More passive

STR = High Income, Constant Turnover, More emphasis on quick maintenance, constantly changing legal environment, active business

The key to STR success is your ability to be attentive and resolve issues quickly.  People are on vacation, and expect things to go smoothly.   They don't have much tolerance for wifi outages, uncleanliness, or any problems in general.

Jody Sperling · Answer

Priced correctly, short-term rentals have amazing income potential, but they're so much higher touch that for me, they aren't worth the effort.

That said, Texas is an amazing state to build a short-term rental portfolio and if you had a half-dozen or more in close proximity, the cost of hiring good management could make it appealing.

All of the people I know who have short-term rentals have said the once way they fail is the cost of housekeeping. It's hard to get a service that does the cleaning and maintenance cheaply enough, and profits tend to be sucked out of the property through the constant churn.

Daniel Johnson · Answer

@Daniel T Stockman College Rentals. Less turnover,less maintenance, and almost always 100% occupied.

Robert Carter · Answer

@Daniel T Stockman Yes the key is to treat guest the way you would want to be treated and sometimes going above and beyond, especially if you are facing tough competition. When it comes to upfront cost I’ve noticed it’s about the same, for my first few vacation rentals I could put 10% down which of course is less than purchasing an investment property where you have to put 20%-25% down. But of course you have to furnish it and depending how big your vacation rental and separating yourself from your competition you could spend an additional $10k -$25k.

Daniel T Stockman · Answer

@Jody Moscrip - This is a good strategy.  Currently, we own 2 college rentals, but they are in an area that wouldn't offer a large summer draw.  Not a bad approach if you have the right market/location.

The short-term strategy we would be looking for also would capitalize and focus mainly on the summer season and vacation renters.

Thanks for the advice!

Daniel T Stockman · Answer

@Jody Sperling - Thank you for the response! I'm located in TX and we have been looking at the Gulf Coast for our short-term rental properties (if we decided to go that route).   I'd agree, I can see hiring good, and consistent, help to be the challenge.  I'd also see STRs being more time/energy-intensive than say a long-term (or in my mind medium-term) rental such as College Rental Units.

Jody Moscrip · Answer

Have you considered doing both? We are fortunate to be able to do STR and winter rentals in Goose Rocks Beach, Kennebunkport, ME. Our STR season is substantially shorter than in other areas due to beach being primary draw. Winter Rentals helps to keep income coming in year round for some of our owners. With a college 5 miles up the road, we have no problem filling vacancy. Typically full in January for Aug through May leases. Wear/tear is def. higher on both STR and WR. Students frequently don't clean as well as we'd like and not always timely in responses so takes a bit more effort. For those cottages that do both STR and WR, the summer rental weekly rate can be 1.5-2 times the monthly for our high season.

Robert Carter · Answer

Short term rentals are definitely high touch, its more about hospitality than real estate.  Requires more time upfront to furnish the home and setup the logistics. But once its up and running, you might spend a few hours a week answering emails, and/or checking on your cleaning team (depending how anal you might be).  The money can definitely dwarf traditional rentals.  I got into STR because it seemed to be the best way to amplify my income and build my rental portfolio quicker.

Daniel T Stockman · Answer

@Michael Ablan - I agree with your response.  With having 2 college town rentals, we are deciding if we should change our strategy a little and focus on the larger upside, but more energy-intensive investments that are STRs.

Both can produce good returns, but with a desire to replace a W2 salary I feel one might have a quicker path to that than the other.

Daniel T Stockman · Answer

@Robert Carter - I could see it being a much more hospitality-focused investment than say a long-term rental.  A little more active investing than long term also.

A question - would you say the initial investment is that much more than a long-term rental?

Short Term or College Rental Investing?

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