Guide to Short-Term Investment Properties in Traverse City

Traverse City, Mich., is a picturesque town known for its natural beauty, vibrant culture, and thriving tourism industry. Nestled along the shores of Lake Michigan's Grand Traverse Bay, it offers a unique blend of stunning landscapes, charming downtown streets, and a welcoming community.

Traverse City has an impressive food and beverage scene, with numerous wineries, breweries, and farm-to-table restaurants showcasing the region's abundance. Outdoor enthusiasts will find plenty in Traverse City, with lush forests, crystal-clear lakes, and sandy beaches surrounding the city. Traverse City's downtown area exudes small-town charm with boutique shops, art galleries, and quaint cafes. Traverse City is a must-visit destination. The unique amenities make Traverse City the perfect spot to invest in short-term rentals.

Short-term rentals, also referred to as vacation rentals, are properties that are leased for shorter durations compared to long-term rentals. While long-term rentals typically involve leases spanning from one to 12 months, short-term rentals generally are rented out for a few days or weeks at a time.

Airbnb is the most well-known platform for short-term rentals in the real estate market, offering homeowners the opportunity to rent out their houses, condos, or apartments to travelers. However, various other methods and platforms are available to rent your property as a short-term rental. Owners can list their properties on alternative platforms such as VRBO, HomeAway, and Booking.com or create independent rental websites. These platforms provide a wider reach and exposure to potential guests, increasing the chances of attracting bookings.

Short-term rentals can be more lucrative for real estate investors than long-term rentals. Investors can charge higher rates and accommodate many renters by offering shorter rental periods. Guests will pay premium prices for convenience, flexibility, and additional amenities. Moreover, short-term rentals afford investors greater flexibility and control over their properties. They can adjust rental rates, allocate time for personal use, and undertake necessary maintenance or renovations between guest stays.

Short-term rentals provide an excellent starting point for beginners venturing into rental property investment. Their potential for higher returns, coupled with the opportunity for active management and increased occupancy, makes them an attractive choice for newcomers to the market. If you’re interested in Traverse City real estate for short-term rentals, it’s crucial to understand everything you can. Let’s start by assessing what a short-term rental is.

Short-term rentals offer several benefits to both property owners and guests. For owners, they present an opportunity to generate higher rental income compared to long-term leases. Additionally, owners can use the property for personal purposes whenever guests do not book it. From a guest's perspective, short-term rentals often provide a more comfortable and personalized experience than traditional hotel stays. Guests can enjoy the convenience of a fully furnished home, more privacy, amenities like a kitchen, laundry facilities, and sometimes even a backyard or pool.

So, how do you get started with short-term rentals? Let’s find out.

Before diving into investing in short-term rentals, it is crucial to assess your financial capacity. This initial step involves enlisting the help of a certified public accountant (CPA), preferably one with expertise in real estate investments. Collaborating with a professional will enable you to evaluate your finances accurately and make informed decisions.

To begin, you’ll want to consider any available funds you have to allocate toward purchasing a property. Typically, short-term rental investments require a down payment of 20% to 25% of the property's value. Additionally, factor in closing costs, typically 2% to 4% of the property's purchase price. You’ll also want to consider other expenses associated with short-term rentals. These include property renovations, improvements, repairs, furnishings, and upgrades. Considering all these factors allows you to determine a figure you can comfortably afford.

Learning which areas are most profitable when finding short-term rental markets is critical. Some markets will command higher prices, some are seasonal, and some may offer year-long rental opportunities with lower rents. Evaluate the demand for short-term rentals in your chosen area. Look at tourism statistics, local attractions, events, and the overall popularity of the destination. Traverse City is an excellent market for seasonal rentals and higher prices because it offers stunning scenery, outdoor recreation, and ample amenities, making it a unique and sought-after destination, especially in the summer.

Investigating licenses and understanding short-term rental regulations is also crucial in investment. It is essential to ensure that you comply with local laws and regulations before proceeding. In specific markets, like Traverse City, obtaining a license or permit is necessary to operate a short-term rental. Research the particular licensing requirements and any associated costs. Understand the application process and any ongoing obligations or inspections required to maintain compliance.

Engaging a real estate professional to assist you throughout the process is crucial. Real estate agents possess valuable market knowledge and expertise, making them essential team members. They can provide insights into market trends, neighborhood dynamics, and property values. Their expertise is invaluable in identifying properties that align with your investment goals.

By establishing a relationship with a reliable agent early on, you gain access to their network and resources, enabling you to be among the first to know about new properties hitting the market. While you may have conducted a general market analysis, your real estate agent can provide more detailed information on rental rates in specific neighborhoods. With their guidance, assess the investment potential of each property based on factors such as location, rental demand, and potential rental income.

Research and connect with lenders specializing in real estate investment loans or short-term rental properties. Explore various financing options, such as conventional mortgages, portfolios, or commercial loans, to determine the most suitable fit for your investment strategy and financial circumstances.

Once you have your chosen property, it's time to conduct a thorough evaluation. Calculate financial metrics, including property taxes, insurance costs, utility averages, and other fixed expenses associated with property ownership. Compare these expenses against the projected rental rates and occupancy levels to ensure that the rental income sufficiently covers the mortgage and the fixed costs. Work closely with your lender to complete the necessary paperwork and provide the documentation for loan pre-approval. By obtaining pre-approval, you will better understand your borrowing capacity and can move forward confidently when making offers on properties.

 

If you’re interested in homes for sale in Traverse City and want to learn more about short-term rentals, contact the local experts of The Mitten Group. Their dedication and expertise will ensure a smooth journey.