Short-term rental investing involves hiring several parties, each of whom will present themselves well. The questions that separate a track record from a pitch are specific and mostly the same across all of them.
For an acquisition firm
- How many deals do you screen and how many do you bring? A firm that brings most of what it sees is not screening.
- Can I speak to clients who bought in situations comparable to mine? Not a testimonial list, actual references.
- What is your repeat buyer rate? It is the only statistic that cannot be manufactured.
- Show me a deal you rejected recently and explain why.
- How do you get paid, and by whom? Any compensation from the sell side is a conflict worth understanding.
- What markets do you refuse to work in, and why?
That last question is unusually informative. A firm that will work anywhere is either extraordinary or not doing regulatory diligence.
For a property manager
Show me trailing twelve month occupancy and average daily rate for three properties you manage that are genuinely comparable to mine, in this submarket. A manager who cannot or will not produce that is selling a pitch.
Which pricing tool do you use and who sets the strategy? A manager running static weekend uplifts in a market with event compression is leaving a large share of the year's profit unclaimed.
What is your average guest response time, who covers nights and weekends, and what is your cleaner bench depth on a same-day turnover when someone calls out?
Do you mark up vendor invoices? What is the all-in cost including cleaning markups, not the headline percentage? And does the listing account stay in my name?
For a cost segregation provider
Is the study engineering-based, and who performs the analysis? The credibility of the position rests on the methodology.
What happens if the position is examined? Do you provide audit support, and is it included or additional?
Can you provide a sample report? A study is documentation as much as it is a calculation, and the report is what supports the position.
What is the fee structure, and how does it relate to the size of the deduction? A fee contingent on the result is a structure worth understanding carefully.
This is an explanation rather than tax advice. Your CPA should be involved in selecting the provider and in reviewing the result.
For a lender
How do you credit short-term rental income? Market estimate, trailing twelve months, or long-term rent schedule? This single variable is the largest factor in whether a deal is financeable.
What haircut do you apply to a third-party estimate, and where are your DSCR pricing tier breaks?
What is the prepayment penalty structure, and what does a shorter stepdown cost in rate?
What reserves are required at closing, and can you give me a full itemized closing cost estimate now rather than at disclosure?
Do you permit entity ownership, and what personal guarantee is required?
For a CPA
How many short-term rental clients do you work with, and how many are using the seven-day average stay and material participation structure?
What documentation will you need from me, and when? A CPA who tells you in March what they needed in January is not helping.
How do you want participation hours tracked, and do you have a preferred format?
What is your view on the grouping election if I own more than one property, and when should we make that decision?
Will you review my management agreement before I sign it? The participation structure is decided there, not at filing.
The question that applies to everyone
What is the most common way this goes wrong, and how do you prevent it? A professional with genuine experience answers immediately and specifically. Someone selling a service says it rarely goes wrong.
Anyone who cannot describe their own failure modes has either not been doing this long or is not being straight with you, and both are reasons to keep looking.
The corollary: be suspicious of anyone who presents the outcome as certain. Real estate involves risk, tax positions depend on facts and circumstances, and results depend on execution. Certainty is a sales technique.
What good answers sound like
Specific, numerical and occasionally unflattering. A manager who says their occupancy on comparable properties runs 62% and explains why is more credible than one who says it runs 85% and does not.
A firm that names markets it will not work in and explains the regulatory reasoning is demonstrating the diligence you are hiring it for.
A lender who says the deal does not work at their income method and suggests a different structure is more useful than one who finds a way to approve something that should not be approved.
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Frequently asked questions
What should I ask a short-term rental property manager?
For trailing twelve month occupancy and average daily rate on three genuinely comparable properties they manage in your submarket, plus their pricing tool, response times, cleaner bench depth, vendor markups, all-in cost and whether the listing stays in your name.
What should I ask an acquisition firm?
How many deals they screen versus bring, their repeat buyer rate, references from comparable clients, an example of a recent rejection with reasoning, how they are compensated, and which markets they refuse to work in and why.
What is the single best question to ask anyone in this business?
What is the most common way this goes wrong and how do you prevent it. A professional with real experience answers immediately and specifically; someone selling a service says it rarely goes wrong.