The best investment that a homeowner can decide on is the construction of an ADU because, in addition to all the household and functional advantages, the property owner will get the opportunity to generate rental income. However, before you sign a rental agreement, you need to carefully check the ADU's suitability for renting.
In this review, we will tell you what marketing tricks will help you determine the target audience if you decide to rent an ADU, what legal aspects each homeowner should take into account, and also reveal what factors it is extremely important to pay attention to if you want to provide renters with comfort.
Unlike primary residence, the ADU designed for short-term rental usage has completely different legal aspects that each property owner should strictly follow.
We will discuss some aspects in more detail in the next parts of our review, and now the most important information about local restrictions:
Perhaps the most difficult subject in the question of short-term rentals is the definition of the type of ADU which is suitable for such purposes. Local laws in relation to many parameters vary between cities that stand a couple of miles apart. To be sure of the legality of your actions, visit the Planning Department and specify the zoning requirements in your city, as well as request permission to use your ADU for short-term and vacation rental purposes.
The stay of potential guests in your ADU can be limited to short periods of up to 30 days, unlike hotels that have an official ordinance for long-term rentals. However, do not despair because, firstly, short-term rental regulations tend to change, and in some places, this period reaches 60 days; secondly, obtaining a license for a vacation rental business will help you get benefits, e.g., extending the period to 120+ days.
Continuing the theme of vacation rentals, it is crucial to get special documents to conduct business legally. To do this, you need to get at least one permit from the local authorities; most often, it is a professional or tax license. The algorithm consists of several steps; namely, you first need to study the law, then vacation rental owners submit an application that specifies all the characteristics of ADU, lodging purposes, a description of each room, and so on. After that, the authorities evaluate your proposal and issue a permit, that is, a license.
When a property owner provides a lodging space even for one night, he takes responsibility for this person and, in case of unforeseen circumstances, will be responsible for his state of health. In this case, you can not do without liability insurance which will cover all your expenses and the expenses of the tenant. Usually, insurance obligations are mentioned in the rental agreement, so before you will give the keys to the renter, take care of this moment.
Overall, using vacation rental property to get extra income is a wonderful idea. However, to make everything according to the letter of the law, it is necessary to do a lot of work and comply with all local regulations. In order not to miss anything essential, we recommend contacting a lawyer or a property management company.
Before using an ADU for short-term renting purposes, the property owner needs to understand how the existing space is suitable for living. First, put yourself in place of leaseholders to analyze how many people can live in your ADU to avoid a situation when you populate three people, and they live in cramped quarters. Secondly, estimate how comfortable and mobile the common spaces are, e.g., kitchen or living room. Finally, make a list of basic needs, in particular, powerful Wi-Fi, a comfortable bed, hot and cold water, hygiene products, and kitchen utensils, and make sure that your ADU has it and it's all functional.
In exchange for a charge for the occupancy, a potential tenant wants to get all the amenities, so think in advance about how you can improve the living space and complete a short-term rental deal with benefits for everyone.
After you complete all steps which are related to the formal documentation, you need to analyze your target market because this is the key to success in the vacation rental business.
Pay attention to the following aspects:
On the whole, any property manager will tell you that if you can predict your target audience after a thorough analysis, then your vacation rental business and the number of offers will be at a consistently high level.
The construction of an ADU for short-term rentals is very popular among property owners, so if you decide to do this business, it is critically essential to study the existing level of competition and the field of players. To do this, you can use two strategies. First, visually analyze the number of ADUs in your area to understand the number of competitors. Secondly, there are special platforms that, after filling out the profile and all the data, calculate all the necessary indicators, e.g., expected booking performance, which will help you assess the likelihood of renting an ADU.
Fewer sleeping accommodations offered by house owners in your area is a favorable condition for the successful implementation of the idea of short-term ADU rentals.
After you determine the target audience that will be interested in your short-term residential rental unit, you need to start implementing a marketing strategy. History knows many cases when successful marketing brought huge profits, for example, HBO's focus on the shadow of a dragon on the house or Nike's revolutionary solutions when creating sneakers for Michael Jordan.
The following marketing strategies can form the basis of your plan:
In addition to all the points described above, you can resort to more complex methods, for example, creating your own website or application. This requires special skills in programming and UX design. However, they guarantee to attract attention to your business.
In an attempt to earn more money by renting out the lodging space, many homeowners have inflated fees, and this can be your advantage. A reasonable fee, which is based on the characteristics of your ADU, will attract the attention of guests and will become the ground for long-term rentals. In addition, if you add a system of bonuses or discounts, it will give you the opportunity to receive stable fees without the downtime of your ADU without renters.
Each individual has special wishes for the organization of the living space that he rents as part of short-term rentals, so it is very difficult to do everything in an ideal way in advance. In this case, a few tips are really effective. First, provide your short-term residential rental unit with all the basic amenities, e.g., a soft bed or a clean bathroom, or you can also leave a basic set of products in the refrigerator. Secondly, during the first acquaintance, property owners can find out about the renter's preferences to add them to the ADU. Finally, during the stay, you can keep in touch with people to find out what they want to see in ADU and what is missing for a more comfortable stay.
Regardless of who makes a deal, whether it is a property owner, licensee, property manager, or individual with any other possessory capacity, the main task of this person is to ensure security in a short-term residential unit. To do this, you need to complete an inspection of all protective systems, in particular, fire and gas safety, as well as double-check external security cameras. Also, everyone knows that there are several sources of potential injuries in each room, and the task of property owners is to minimize them, which consists in installing anti-slip coating and eliminating sharp corners, high shelves, or exposed wires.
If you decide to rent out your ADU, then at the time of settling in, the living space should be in perfect condition because, first of all, people evaluate the visual component. Furthermore, we recommend maintaining the cleanliness and aesthetic appeal of the site. Of course, residents are responsible for the internal cleanliness of the ADU, but everything that is outside is in your power, and if you want people to stay in your ADU as long as possible, then you can maintain the cleanliness as it will contribute to this.
The financial issue is the most important if you rent out your ADU, so it is crucial to say a couple of points once again. First, consider all external factors such as season, location, or the state of the real estate market when setting rental prices. Secondly, prescribe in the contract all the financial details, in particular, responsibility for the payment of utilities, cleaning or maintenance costs, e.g., payment for the Internet.
Finally, do not forget about taking out insurance also, and analyze here that all expenses should not exceed your income so that you are always in the black.
First of all, you need to make sure that your ADU does not violate zoning restrictions; then, you need to request a permit from the local authorities, pass checks and get an ordinance or a license to run a vacation rental biz. On par with this, every property owner should remember that repeated violations of prohibited rules in any form will lead to fines and fewer customers.
As with all other businesses, if you want to increase your customer base, you can use several tactics at once. First, place an ad about your ADU on the listing site. Secondly, use an e-mail newsletter where you describe the nature of your ADU and its advantages. Finally, you can use any other social media or launch your website.
To distinguish the rental property from other options, the homeowner needs to tell about his ADU as interesting as possible, describe all the advantages in as much detail as possible, present colorful photos, and also offer bonuses to tenants to persuade them in their favor.