Alts Academy: How to Invest in Short-Term Rentals

Hello everyone, and welcome to our first edition of Alts Academy

Alts Academy gives you the A to Z of our favorite alternative investments. It’s your playbook for alternative investing — how to start, what to do, where to look, how to win, etc.

Today, we’re kicking things off with a look into short-term rentals (STRs). What are they, why do we like them, what advantages do they have over other real estate, and most importantly, how to invest in them.

Let’s get to it!

The current real estate market

The real estate market is all over the place right now. Interest rates are soaring in the United States, Australia, the United Kingdom , and Canada.

Property prices are falling all over the globe, and US mortgage rates are the highest in decades. The only way people are really making money now is from yield. And yields are likely to keep going up.

When we think of rental yield, apartment complexes, commercial warehousing, and office spaces jump to mind. But there’s another under-appreciated property class that outperforms nearly all of its peers – short-term rentals.

What are STRs?

Short-term rental is just a fancy word for saying “Airbnb”.

Okay, not quite. They are vacation properties that are only occupied for small amounts of time (less than six months). STRs are usually built in tourist destinations – think a condo in Miami or a penthouse in Tokyo.

Yours for $500 a night.

For many, STRs are “holiday homes” that people rent out when they’re away.

STRs aren’t just for holidays though. The rise of “digital nomads” – people who work remotely while traveling – has led to an influx of +30-day Airbnb stays.

Expats who need somewhere to stay for a couple of months or renters who just want to try out an area are other potential customers.

How do STRs make money?

Short-term rentals make money like any other real estate investment. They just have different priorities.

Yield and appreciation

The primary source of income from STRs is rental yields.

Short-term rentals can rake in premiums of over 100% compared to their long-term counterparts.

STRs can be very lucrative compared to traditional rentals.

Short-term rental investors place less emphasis on capital gains. (And in this market, seeking price appreciation might be tough).

But properties in highly sought-after locations can still see plenty of growth. Emerging tourist markets are a great place to look out for – enough traffic that the STR won’t be vacant, but not enough for the investment to be too costly.

Keep reading with a 7-day free trial

Get the All-Access Pass to access our best content, forever

Share

Author

Picture of Wyatt Cavalier

Wyatt Cavalier

With a background in finance & intelligence analysis, Wyatt has an unhealthy obsession with finding the best blue chip investment opportunities. His previous newsletter, Fractional, resonated deeply with subscribers, bringing actionable insights and unconventional trading strategies. His rare book collection specializes in banned editions. He currently lives in Spain with his beautiful wife, three young boys, and dog Monty.

Related Posts

how to invest in opportunity zones fund

Investing in Opportunity Zones

You can get big tax benefits from investing in America’s distressed areas. But they’re set to expire soon. Are they still worth doing?

Red Rock Island is on the market

Independence Day cookouts hit ​record high​ of $71.22, Red Rock Island is on the market for $25 million, Rapid7 acquired management startup Noetic Cyber, and More.

capital tack

Home Equity Investing

Home equity investing may be the single biggest story in real estate that almost no one is talking about.

Recently Published

Curious about Fractional Real Estate investing?

Get rich analysis on opportunities across Crowdstreet, Fundrise, LEX Markets, and Groundfloor


Join the club. Start here.

    Join thousands of subscribers.
    Absolutely spam-free.