Whether you read Rich Dad, Poor Dad or listen to Dave Ramsey, it seems like everyone is a fan of rental properties but have you considered short term rentals? Short term rental income in Avon can be much higher than with a more traditional landlord-tenant relationship.
We’ll start with expenses, because you will have some. According to Zillow, you should be able to find a good rentable property in Avon around the $615,000 mark. A 20% down payment ($123,000) and a 3.95% mortgage leaves you with a monthly payment of $2,335 on a 30 year term. Let’s say $3,300 all in with property insurance, taxes, maintenance, etc. (Your specific numbers will vary).
On Zillow, a similar property is renting for $3600 a month. While you’re getting a tax advantage on mortgage interest, your profits are not tremendously high. With our example, you’re looking at a scant $300 a month. You’ll have a house at the end of it all (along with a fairly sizable rent check monthly after it’s paid off!) But short term rental is a different animal.
Avon’s ADR is $461. Cut out 3% for listing fees and for simplicity’s sake, $30 a night for housekeeping (let’s say the average guest stays 3 days and you only have to pay a one-time $90 fee for housekeeping). That’s about $417 you’re keeping PER NIGHT.
10 nights a month? $4170. 20 nights a month? $8,340. That’s not only a lot better than $3,600, it’s $100,000 a year. Even after subtracting your costs, you’re profiting $60,000 a year.
That’s almost a 50% annual return on your initial $123,000! Now, that’s assuming you’re very good at property management. An average occupancy of 42% would show profits closer to $23,450 a year. But short term rental income in Avon can be very high.
We haven’t even spelled out most of the tax benefits. Once you own the property free and clear, your profits go up substantially. Or you use the property as the down payment for a multi-unit building, taking advantage of a 1031 exchange to defer capital gains taxes. Plus, you get to stay for free in Avon whenever you want.
What’s the catch? There really isn’t one, except the hard work involved in running a short term vacation rental. Managing bookings and listings can be done online, and you can set up systems like smart locks for remote access. But chances are you’ll spend a fair amount of time managing the place.
For profit without the pain, you could always contact an Airbnb rental management company that specializes in Avon. We’ve been managing units in the valley for years and would be happy to take a look at your situation.