Author: Jorge Aldecoa, President, reAlpha Homes
When it comes to vacation rental properties, there are a few different routes you could go. You could buy a single-family home, or you could buy a multi-unit property.
The most common examples include duplexes (2 units attached), triplexes (3 units attached), and quadplexes (4 Units attached). All of which are classified as residential, no different than a traditional single-family home. There are advantages and disadvantages to both types of properties, but today we’re going to focus on the advantages of multi-unit short-term rental properties. Specifically, we’ll be talking about how you can leverage economies of scale with more units in one place and how to maximize short-term rental revenue through multiple, yet different, listings of the same property.
Maximizing the cash flow of your short-term vacation rental is at the top of every investor’s mind. When thinking about cash flow – ADR (average daily rate) and occupancy are at the forefront. So how do we maximize these metrics? Well, with multi-unit properties you can 2X or more your listings exposure and potentially even your top line revenue. Let’s say you have a triplex with three identical 2 bedroom units that each sleeps 5. You could list each unit individually, rent them out as two combined units that sleeps 10, or even rent all three out at once that sleeps up to 15 people for larger groups and events. This means 3 different active listings with 3 different ADRs targeting 3 completely different groups of families and individuals all at the same property. The end result – up to 3X the exposure. This type of optionality helps to maximize ADR (average daily rate) and occupancy and can apply to properties as small as duplexes; properties with as few as 2 units.
You could also argue that there’s more potential for wear and tear with a multi-unit short-term rental property since more people are coming in and out of the property. However, with proper maintenance and care, this doesn’t have to be an issue. In most cases, property owners can negotiate discounts from vendors such as cleaning services and management fees resulting from the multi-unit location. Vendors benefit from the reduced costs and time to service multiple units in one place and there is no reason short-term rental property owners shouldn’t benefit also. Even taking expenses such as landscaping and spreading the cost over multiple units as opposed to a single property helps to maximize cash flow.
Another advantage of multi-unit short-term rental properties is that they’re often located in prime real estate locations near popular attractions, restaurants, shopping, etc. This gives your Airbnb guests easy access to everything they want and need during their vacation. This can also potentially lead to higher ADRs as well since guests are willing to pay more for convenience. Multi-unit properties also tend to be located outside of any Home Owners Associations which is often a major limiting factor in even being able to rent a property as a short-term rental.
Multi-unit properties can offer a lot of advantages for those looking to get into the vacation rental market. From the ability to list multiple units simultaneously to being located in prime real estate locations, there are a lot of reasons why you should consider investing in a multi-unit property for your next vacation rental property. So if you’re looking for a vacation rental property that will give you the most bang for your buck, be sure to keep multi-unit properties like duplexes, triplexes, and quadplexes in mind.
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