6 Drawbacks of Investing in STRs

While investing in short-term rentals does offer a variety of benefits, there are definitely things that every investor should be aware of before starting their STR journey. I have a modest portfolio and am by no means a real estate mogul with dozens or hundreds of investment properties. But I have invested in two properties that have been STRs over the last few years, and it has not always been roses and daisies. In fact, I've had enough bad experiences from these two STR investments to write this cautionary tale for you.

Before you get started on your STR investment journey, first consider these 6 drawbacks...

In every market, there is seasonality, so the demand for each area fluctuates depending on the location and time of year. For instance, the South of France is booming between May and September. Whereas, Arizona thrives in the cooler months like October through March. During times when the demand is lower, that usually results in STR owners lowering the price so that they can get bookings, or they experience higher vacancy rates with no bookings or income at all.

Reservations also vary in duration, and some guests may stay for 3 nights, while others will stay for 3 weeks or even 3 months. Between the seasonality and the varied booking durations, the income that STRs provide fluctuates and can be unpredictable. In fact, one of the reasons that I decided to rent out my investment property in Philadelphia as a long-term rental was because I wanted a more consistent and predictable stream of income.

When investors buy properties to rent out, the most common strategy is for landlords to offer long-term rental agreements. But with sites like Airbnb and VRBO starting this new trend of short-term renting, the STR market has grown exponentially over the last 10 years.

With long-term rentals, the tenants typically bring their own furnishings. Sure, furnished long-term rentals exist... but most renters tend to have their own furniture that they bring. With short-term rentals, the property owners are required to have all the basic necessities for guests, and those basic necessities can cost thousands (or even tens of thousands) of dollars up front.

To furnish my 735 square foot 2bd/1ba loft in AZ, it cost about $7,000. And my 248 square foot studio in France cost just under $5,000 to furnish. I could have saved money by providing fewer things, but I am trying to set myself apart from the competition by offering certain niceties… like coffee, tea, sugar, along with bath robes and basic toiletries.

In addition to the added cost, it is also time consuming to research and purchase all of the products. Which is exactly why I put together these inventory checklists with my affiliate links to recommended products for all of you! Feel free to print these lists to have as your own physical checklists, or you can click on each of the items to see each of the specific products. I hope you enjoy these checklists and that they help you in your STR journey! And btw - I earn commissions for purchases made through the links in these checklists.

Be sure to buy products that are easy to replace. You never know when a guest will ruin something, whether intentionally or by accident. Generally, it seems like STRs experience more wear and tear than long-term rentals (although, that's not always the case), so it's better to have basic items, versus expensive ones that cost more to replace.

When we think about buying investment properties, many of us are lured by this idea of passive income. But what does “passive income" actually mean? According to Google, it means "money that you don't have to actively work for." So how is running a short-term rental passive? Well, it’s not… Between communicating with guests & property managers, keeping track of all the financials, and dealing with repairs and unexpected issues, there is no way that short-term rental investing is "passive."

A lot of people have the misconception that by having a property manager, you don't have to be as hands-on. And while that may be true to an extent, owners still need to be available to address issues when they arise.

A couple of years ago, the air conditioner broke in my STR in France, and even though my property manager was on top of it, the guest called me through the Airbnb app to complain about it. And even with having property managers overseeing everything, my AZ and FR investments took up more of my time than any stock, index fund or HYSA would have. Plus, a stock never would have been able to call me to complain about the broken AC.

Whenever a guest writes a review, I am always waiting with bated breath to see what they wrote. We mostly get 5-star reviews, but you just never know what guests will say after they check out. There have been times when guests have given us a higher rating than we deserved, while other guests have given us lower ratings for stupid reasons that could have been addressed during their stay if they had communicated with us. For example, we had a guest staying in Villefranche and they left us a 2 star review after they checked out. One of the reasons that they left us 2 stars was because they said that there were no blackout shades in the apartment. However, if they had complained about the lack of blackout shades after their first night, we could have informed them of the button on the wall that controlled the built-in blackout shades. If they had communicated with us during their visit, maybe they would have enjoyed their stay more, and their 2-star review would have been 3 or 4.

When a guest leaves a bad review, not only does it count against our Superhost status with Airbnb, but it also upsets me sometimes. I pour my heart and soul into these properties and try to offer a great guest experience, so it sucks when we get negative feedback.

Over the years, I've learned that the guests' feedback is not within my control, and we can't please everyone - no matter what we do. It is an emotional rollercoaster waiting to see what people say in their reviews, but I’m trying to be less offended when people leave less than 5 stars.

In Arizona, the most expensive time of the year to run the property is during the summer months (which is basically more than half of the year in Tempe). With the air conditioning constantly running, the electric bill is 2 to 3 times more than in the Winter months. And unfortunately, the price per night in the Summer months is much lower.

Usually, when a tenant is paying for their own utilities, they are more mindful of the usage. And I think the opposite is true when people do not have to pay for them. When people do not have to pay based on their consumption, they have a tendency to consume more, which results in higher bills/operating costs.

One other downside to paying for utilities is that the rates continue to rise. For instance, my cable and internet bill in AZ was originally $145 per month. Then, after my 1 year contract period was up, the amount increased to $160, then $185, all the way to $225! Once the price went up to $225, I downgraded my plan... so now my guests have to suffer with slower internet.

In the past 4 out of 5 years, I’ve rented my AZ condo to guests from Airbnb and Vrbo. During these 4 years, I’ve had 3 guests trash my place… the first guest was someone who rented the property for a long weekend and had a party. They left trash and drug needles behind, but fortunately, not a lot of major damage was done.

But then I had a crazy cat lady who overstayed her welcome. Luckily at that time, I had a property manager overseeing things. So when the crazy cat lady refused to check out, my property manager handled it and called the cops to remove her (and her cats) from the property.

We had back-to-back bookings that day where we had another guest checking in after the cat lady was supposed to be out, so it didn’t give my cleaning lady much time to prep the home for the next guest. Especially because the place needed a MAJOR deep clean since this woman’s cats had sprayed EVERYWHERE. Rose, my cleaner, was able to get the condo into livable shape before the next guest arrived, but it still smelled like cats. I'm surprised the incoming guest didn't leave a bad review, but we filled them in on the situation beforehand to help set the expectation.

A couple of short weeks later, I visited AZ for the holidays. My mom and I walked around the apartment with a black light to find all of the places where the cats had claimed their territory. They literally walked up on the catwalk in the loft and sprayed at the farthest end of the landing. They also somehow managed to get behind the washer and dryer and sprayed behind the machines. The cats also tore apart my drapes, rugs and furniture. I had to rebuy everything and have it reinstalled by my cleaning lady and handyman.

And thirdly, I recently had a guest check out of the condo and she completely trashed the place. Not only was there trash everywhere, but it looks like she intentionally tried to fight my refrigerator since there is a cluster of dents on the front of it now. It took my cleaning lady and her crew almost 9 hours to clean the condo and prep it for the next guest.

When I went to confront the guest about the way she left the condo, she had deleted her profile from Airbnb! As a STR owner, you just never know what you’re going to get with the type of people who rent from you. But I think the sad truth is that this type of thing is going to continue to happen more and more as the years go on.

Keeping all six of these drawbacks in mind, into consideration before embarking on your STR or MTR investment journey! And be sure to follow me on Instagram @RealtorGoneRogue for more investment insights and stories.