Short Term Rentals
In high-appreciation, high-value markets like Santa Barbara, it is very difficult to find a property that cash flows right out of the gate. Traditionally, Santa Barbara has been more of a "park cash and watch it grow" market, rather than one that will generate immediate and significant returns. However, the advent of short term rental sites like Airbnb and VRBO have allowed homeowners and investors to capitalize on the tremendous tourism industry that Santa Barbara enjoys.
Of course, short term rentals have also become a hot-button topic at the legislative level, so it is critical to be educated on the local rules and regulations that govern their operations. Luckily, we can help with that!
Below, you can learn more about the numbers and rationale behind Short Term Rental investing, using our personal investments as case studies.
Key Benefits of Short Term Rentals
Better Cash Flow
STRs can increase annual revenue between 50-150% over traditional long term rentals
Tenant Law Protection
California has become increasingly aggressive in passing laws that favor tenants over landlords. Things such as rent control, mandatory relocation assistance and eviction moratoriums make long term landlording a risky proposition.
Constant Maintenance
Short Term Rentals are cleaned constantly, and if there are issues, short term guests are more likely to bring them up than long term renters. That means your investment won't have any deferred maintenance to deal with.
Eyes on the Property
With an STR you have consistent eyes on your investment property and can address any issues immediately.
Personal Use of the Property
When you own a Short Term Rental, you can block off as many days as you want for personal use. Your investment can also be your escape!
Full Service Property Management
If the idea of managing a short term rental gives you stress hives, don't worry! Many full-service management companies exist in Santa Barbara that take care of everything for you...for a fee.
Short Term Rentals vs. Long Term Rentals
Item | Long Term Rental | Short Term Rental |
|---|---|---|
Provides Tax Benefits | X | X |
Provides Long Term Appreciation | X | X |
Subject to Transient Occupancy Taxes | - | X |
Subject to Local STR Restrictions | - | X |
Approx 20 - 25% Management Fees | - | X |
Approx 5-8% Management Fees | X | - |
Requires Active Management | - | X |
Must be Furnished | - | X |
Easily Get Rid of Problem Tenants | - | X |
Provides Passive Income | X | - |
Subject to Local Tenant Laws | X | - |
Subject to Rent Control | X | - |
Typically Cash Flow Positive Right Away | - | X |
Regular Access to Property | - | X |
Case Study:
The Blackrock Beach House
Property Details
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Purchase Price: $1,470,000
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Renovation Expense: $300,000
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All In Cost: $1,770,000
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5 Bed/3 Bath, approximately 2,800 sq. ft.
Financial Details (2021 Actual)
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Occupancy Rate: 86%
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Average Daily Rate: $1,100.00
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Total Revenue: $304,245.45
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Total Expenses: $160,064.13
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Net Operating Income: $142,983.49