Building A Small Property Specifically for Short Term Rental

[Andrew Wells]

I am considering building a small "home" (1000-1200sqft) specifically for short term rental in a tourist destination area.  I am aware there are often minimum sqft requirements for a home but will cross that bridge later as I don't know where I would build this yet.  My idea is to build it on a somewhat secluded lot, two bed, one bath, normal amenities within driving vacation distance from a major metropolitan area.  The hook is...the style would be of a high-end hotel room (think Chicago/NYC) with the amenities of a home in a small footprint.  Long story short...I want to develop a premium rental with premium rates in a footprint that will keep costs very reasonable.  I would initially start booking with services like Airbnb, homeaway, etc. but would like to move away from that at some point...don't want to hitch my wagon to a single horse.  

I have not talked about this with anyone at this point, not even my wife.  I am looking for some initial feedback on this idea.  I could also use some pointers on developing a presentation for investors. 

[Maura Paler]

Originally posted by @Andrew Wells:

Hi All,

Sorry for my absence.  I posted this and then decided it would be an awesome idea to move!  This is the first chance I have had to reply.

Wow! Lots of great feedback and I apreciate it all.  I would like to respond/clarify a couple of things...

• I agree that by building smaller the cost per square foot is higher, but, overall costs are less.  This is one of the biggest parts of my idea.  I would like to keep the overall costs lower.
• With a smaller build the operation costs (cleaning, landscaping, etc.) are also lower.
• Regarding more bathrooms...I agree with you! I don't know if I will consider it for this rental though.  Since I posted my original thought I have a better idea where I may build this.  When I look at the competition in the area most are larger old homes (read falling apart) with owners renting out a spare room, or, B&Bs with shared bathrooms.  The typical renter is a single family renting for 2-5 days.
• I still need to look into the min sqft requirement and short-term rental regulations for this area.

I have been a vacation rental reservation agent for 12 years - my experience with small vs large is that there is way LESS DAMAGE in small rentals. Damage can be a real buzz kill in this industry - no time to fix stuff between rentals if you are booking them fully, and who will do this for you unless you live nearby? So when we started buying VR properties (we now own 4) we buy small, rent to mostly couples and have just about zero damage or hassles. Even our 3 bedroom we allow just 4 persons to keep wear and damage down. As far as bathrooms, it's nice to have more, but I have to say it has never come up as a deterrent in our houses that have only 1 bathroom. That's not to say people simply are skipping over our listing because of it, in which case I'd never know...but we do get FULLY booked 6 months of the year and our peak season is only about 4 months. Way more important than space, in my humble opinion, is location, view, style and comfort.