What Are The Benefits Of Starting A Short Term Rental Business For E2 Visa?

Learn how to develop and operate a short term rental business under an E2 visa. The article highlights its pros and cons, compatibility with the E2 visa, and which type of investor suits this business.

Short-Term Rental Business Overview

$19.39 Billion Revenue In The US By 2023

Short-term Rental Business refers to vacation rentals of furnished properties, such as private homes, apartments, and condominiums, that are rented out for a short time to guests who would not be in the area for a long time, such as tourists, business travelers, or locals on a weekend getaway. It is common for property owners or property managers to rent their properties out to guests on a nightly or weekly basis.

Short-term Rental is part of the Real Estate industry. In the US, the Real Estate market is valued at $225.8 billion in 2023, with a compound annual growth rate of 2.15 percent from 2023 to 2025.

In the Short-term Rental segment, revenue will reach $96.85 billion worldwide in 2023. It is projected that most of the segment’s worldwide revenue will come from the United States, reaching $19.39 billion in 2023 with a compound annual growth rate of 1.49 percent. This is combined with a projected US market volume of $20.57 billion and a projected sixty-three million users by 2027. Furthermore, the average revenue per user is forecasted to amount to $311.10, with eighty-three percent of the revenue generated through online sales by 2027.

Short-term rentals have become more popular in hotels and guest houses in the last few years due to the privacy and space they provide guests. Additionally, it often includes kitchens and a separate living room. It can also be overall more affordable to guests depending on the area.

A short term rental business villa in the middle of the beach and trees in USA

What are the advantages of running a short term rental business?

A short term rental business owner calculating 100 dollars bill for today's revenue

Pros of Running a Short Term Rental Business

  • Flexibility – the property owners choose the days, weeks, or months to rent their property. Owners can also travel whenever they want and make money while they are gone.

  • Earning potential – short term rentals can be lucrative since the property owner or manager can set the prices according to the demand, time of year, type of property, and so on. Based on these variables, there can be great potential for earnings. The income for short term rentals adds up to a larger amount than long-term 12-month rentals.

  • Less wear and tear on the property – unlike long-term rentals, there are gaps between the booked dates for short term rentals, so the property is not used daily, leading to less wear and tear. The times the property is not occupied can also be used to book necessary repairs and maintenance to prevent any damage from getting out of hand.

  • Social benefits – well-traveled people tend to be interesting or have interesting perspectives. Renting out properties can allow owners to meet people and even build useful connections.

  • Increasingly high demand – short term rental has been deemed the biggest disruptor in the hospitality industry; it forever transformed the lodging sector. In 2021, the demand for short term rentals went up 66.4 percent. As long as there is continuing high demand, the owner profits.

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What is the downside of starting a short term rental business?

Cons of Starting a Short term Rental Business

  • Little control of renters – sometimes, short term renters are not thoroughly screened. With long-term renters, landlords and property managers often carry out extensive screening processes to ensure the property is in good hands. There is no rigorous standard for short term rentals, so one would have to rely on online reviews and the platform the renters used to book.

  • Lack of income predictability – short term rentals often have a higher vacancy rate than long-term rentals. Thus it is more susceptible to seasonal vacancy, cancelations, or even excess competition, leading to an unpredictable market. For instance, the COVID-19 pandemic put a damper on the short term rental market more than the long-term market.

Rental insurance policy agreement being filled by a renter

Who is a short term rental business great for?

A property management agent presenting the house to a couple

Characteristics Of A Suitable Short Term Rental Business Owner

While a short term rental business can be attractive and highly profitable to some individuals, it is not for everyone. Other than considering the business’s pros and cons, foreign investors must also ensure they are the right fit for the job. After all, certain traits one can possess would make one more likely to succeed. Here are the types of individuals most suitable for the short term rental business:

  • Proactive – short term rental properties can mean having plenty of booking gaps. There might be long days when the property is vacant in such cases. It is up to the owner or foreign investor to use that time to either maintain or conduct cleanings and repairs or look for the next booking. Thus, they must be proactive and always on the lookout for the next guests to book. Aside from keeping the property in good condition, every inquiry should be answered promptly, pricings should be adjusted accordingly, and the vacation rental listing must be regularly updated.

  • Warm, inviting, and friendly – foreign investors must have adequate interpersonal skills to leave long-lasting good first impressions on customers. They must be able to give guests a good experience staying at their property with a nice and warm welcome and consistently good service during and after their stay. This ensures the guests will remember to book again year after year. If guests are given the VIP treatment from when they inquire or book to when they checkout and leave, they will remember and even leave a nice review to encourage others to book.

  • Social media savvy – foreign investors must be able to market their properties beyond the online platform listings they have created for their properties. Social media is free, so Facebook, Twitter, Instagram, TikTok, Pinterest, and the like are all fantastic tools that are easy to use to promote listings. Useful links must be added so guests can easily book through your platform or website. Owners can also run a blog featuring news and recent improvements, local events, etc.

  • Organized – property owners need to keep listings updated and organized. The calendar must be regularly updated, prices set in advance, and property photos kept recent. This will ensure that guests receive exactly what they expected and the properties appear in relevant searches.

  • Strong local knowledge – foreign investors must strive to become knowledgeable about their local area. The more information they can give their guests, the more enjoyable their vacation will be. This includes tips on the best places to visit and dine at, information on public transportation, etc. They must find out how to think like a local.

  • Foreign investors with prior experience – of course, any foreign investor with prior experience in real estate, event planning, travel agency, or any other related profession, especially one where they have to interact with many people, is at an advantage. They have the right soft and hard skills already under their belt to give them a head start on the real estate or short-term rental business. These skills include communication, flexibility and adaptability, networking, detail orientation, organization, etc.

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How to invest in the USA?

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The Best Visa For Foreign Investors

For foreign investors who are sure about their suitability in entering the short term rental business, the E2 visa is a great option to start with.

The E2 visa is a non-immigrant visa for investors who enter the United States under a treaty of commerce and navigation between the country of which they are a national or a citizen and the United States. It also applies to countries with which the United States maintains an international qualifying agreement or has been decided to be a qualifying country via legislation. The list of qualifying treaty countries can be found on the US Department of State – Bureau of Consular Affairs website.

E2 visas grant individuals the right to start or purchase a bona fide US business and work for their business. However, it is a non-immigrant visa, thus not allowing the visa holder to gain a Green Card or permanently immigrate to the US. However, it allows the visa holder and their dependents to come to the US to live and work. Spouses and children over 21 are welcome to join the principal applicant. The visa will renew indefinitely as long as they qualify for the E2 requirement and the E2 business continues to operate and remain profitable.

The maximum two years of initial stay can be extended or granted a change in status in increments of two years each. The treaty investor or E2 employee and their dependants can keep extending but must maintain the intention to depart the US when their status expires or is terminated.

What are the E2 Visa requirements?

Qualifications of a US E2 Treaty Investor

To qualify for the E2 visa, the treaty investor must:

  1. Be a national of a country with which the United States maintains a treaty of commerce and navigation or a qualifying country by legislation or agreement with the US.

  2. Have invested or be in the process of investing a substantial amount of capital in a bona fide enterprise in the US. The capital must come from legal means, and the evidence must be shown. A substantial amount of capital relates to the total cost of establishing the business or purchasing an existing US enterprise. The lower the cost, the higher the investment must be to be considered substantial enough to be of a magnitude to support the treaty investor’s successful direction and operation of the enterprise. A legitimate enterprise is an active and operating entrepreneurial undertaking providing services or products that produce profits and meet local legal requirements.

  3. Seek to enter the US with the sole purpose of developing and operating a legitimate US enterprise. They must also own at least fifty percent of the enterprise or possess substantial operational control through a managerial position or other corporate devices.

E2 Visa application get approved with a green stamp

Short-Term Rental And Property Management Is Suitable For The E2 Visa

A luxury short term rental at night with pool and bikes

One Of The Best E2 Visa Businesses

Real estate investments like short-term rental businesses can qualify for the E2 visa as lucrative businesses can employ locals in the US. However, a substantial amount will be needed to invest and purchase numerous residential properties or one large commercial property to ensure success.

Many foreign investors are looking to enter the short-term rental business in the US by engaging in property management. The initial investment then becomes lower, allowing the investor to build a wealth of relationships in their new community. In this scenario, the foreign investor can purchase short-term rental properties and then hire a property manager to take care of the property’s maintenance aspects, such as assisting the short-term guests and rent collection. This passive income is ideal for those without experience with residential real estate investments. It would be even better if foreign investors were to establish their business in an area with many tourists, such as Florida.

What should I invest in a franchise?

The Franchising Benefits

Some short term rental property management franchises exist in the market to allow foreign investors to become franchisees and own a low-cost, easy-to-learn business. Franchises can be steady and recurring revenue streams providing services always in demand. These are favorable factors for foreign investors looking into the franchise option, as it would be easier without figuring out the more complex process of starting from scratch.

A property management franchise for short term rentals requires the foreign investor to find and screen tenants, process rent payments, provide property inspections, maintenance and repairs, and process evictions when needed. They can also work with real estate agents and developers for business referrals. Franchises are terrific investments because of their versatility and already-established systems. Investors will already have a good idea of their E-2 visa application and how substantial their investment will be due to the franchise model. Furthermore, franchisors offer training and support. This built-in network can help foreign investors feel supported and already part of a community from the beginning of their investment journey.

The real estate and short term rental market is here to stay, especially now that short term or vacation rental businesses are gaining traction due to their advantages over hotels. As more products and services are developed, the more attractive short term rental industry becomes. Thus, it can be a matter of getting there first. Furthermore, it is a type of business that puts foreign investors at a crossroads with real estate developers, agents, long-term property management, and property owners, so they have a lot of ways to branch out and interesting market positioning to pursue.

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Frequently Asked Questions

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