In the current context of high interest rates that affect the traditional rental model, we are forced to explore new alternatives to monetize our real estate investments.

One option is Short-Term Rentals. These refer to the practice of renting a property for a relatively short period of time, usually less than 30 days. These rentals are often an alternative to traditional hotels and offer guests the opportunity to stay in places such as apartments, houses or private rooms, often through online platforms such as Airbnb, Vrbo, Booking.com and the like.

This market has been growing. By 2023, it will reach USD 112.31 billion, with the main market being North America, with 37%. It is estimated to reach USD 315.18 billion by 2033.

Using these platforms allows us to maximize cash flows, since it generates a higher rate per night compared to traditional rentals, which consider one-year terms. Short-Term Rental can generate an average cap rate of 7%, and can yield over double digits.

However, it also carries a number of risks, which should be taken into consideration when evaluating this option:

• Variance in cash flows: Unlike traditional rents, which are more predictable, these depend on occupied nights, behaving more similarly to the hotel sector.
• Regulatory risk: In some places restrictions have been imposed on this type of rent, as was the case in New York with Local Law 18, or cities such as Miami, Paris and Tokyo.
• Increased operational complexityDue to the high level of turnover it generates, actions such as unit cleaning, maintenance, marketing actions, etc. must be considered, which can be mitigated with a good property manager.
• Additional investment required: The investment required to furnish the dwelling, provide sheets, towels, etc. must be considered. In Chile, as it is a furnished lease, it implies having to pay value added tax (VAT) on the rent.

Therefore, to consider this alternative route and achieve higher returns than the traditional market, it is necessary to conduct an exhaustive study of the sector, understand the amenities and attractions to be offered, such as a well-equipped kitchen, which entails a commitment to return on investment. In addition, there must be efficient management to maintain the highest number of occupied nights per month, and consider customer feedback. This implies that this type of business is more similar to the Hospitality business.

José Pedro Márquez

Senior Real Estate Portfolio Manager