You've found the perfect short-term rental home to add to your existing real estate portfolio, and it's in Santa Fe, NM. Now may be the ideal time to make it your next investment.
Research shows that Santa Fe's short-term rental market increased 30% during COVID and remains lucrative, as 40 million people visit the state annually. Santa Fe is a popular vacation spot for its numerous shopping opportunities, galleries, hotels, restaurants and museums.
How do you know if short-term rental management is right for you? Let's explore the pros and cons of managing these types of properties.
Short-Term Rental Pros
Managing a short-term rental involves renting out your property to a guest, traveler or corporate client for no longer than 30 days at a time. A significant benefit of owning a short-term rental is that you can charge a higher nightly rate than you could with a long-term rental. That's because they offer greater flexibility to travelers requiring temporary accommodation, particularly in tourist destinations.
Another reason you can charge more for a short-term rental is that it incurs higher maintenance costs since they require more frequent cleanings and inspections following guest stays. More services and amenities, like linens, toiletries, cable TV, and Wi-Fi, may need to be included to attract guests. These expenses are incorporated into the pricing.
Yet another reason to manage short-term rentals is that they offer increased flexibility, as you can use these properties when you're not renting them out. You may also adjust your properties' prices according to the season and demand.
Short-term rentals require less commitment, too. Investors don't have to sign binding contracts that obligate them to collect rent payments from tenants for extended periods. This reduces your chances of experiencing legal disputes or having to enforce financial penalties if your renters break their leases early.
Short-Term Rental Cons
A major drawback of a short-term rental is that it typically doesn't produce consistent income. The demand for your rental home may be lower during an economic downturn or off-peak season.
Your short-term rental may also incur higher expenses for utilities and insurance. You'll need to offer electricity or gas and water, which can be expensive over time. You might also have to buy an extra insurance policy specifically covering short-term rentals since renters' and traditional homeowners' policies might not cover your home.
Investors may need to pay sales, property and income taxes on their short-term rentals, too. The good news is they can receive tax breaks and don't have to report their incomes if they rent out their properties for no more than 14 days per year.
How We Can Help With a Short-Term Rental
A primary benefit of short-term rentals is that they often generate more income per day than long-term rentals. You can also use these homes when you're not renting them out. The main drawback of short-term rentals is that they typically don't generate consistent income.
At PMI Santa Fe, we can help you manage your short-term rental home in Santa Fe. This includes coordinating bookings and responding to guest inquiries. Learn more about our vacation rental management services by booking a free consultation today!