Year after year, the data demonstrate — short-term rentals break all records and become increasingly popular. For instance, the global vacation rental market was valued at $91.2 billion in 2021 and is expected to reach an impressive $315 billion by 2031. The 2020 AirDNA report also showed that vacation rentals demonstrated impressive stability and resilience, although the vacation rental industry was hit hard during the pandemic. So, are you ready for short-term rental investing?
While it can be lucrative, the vacation rental business requires careful financial housekeeping to keep your budget on track. High-quality property management encompasses a myriad of things: from accessing cleaning and maintenance costs that can strongly influence your rental price, to evolving short-term rental property regulations. With the right landlord tips and practices, you can make sure that your vacation rental business will be profitable and sustainable long term.
Our guide includes several important vacation rental owners’ tips for renting a house, such as how to balance quality rentals, how to use advanced management techniques, and how to get the most out of your investment properties.
Investing in short-term rentals can bring various benefits, including a financial payoff, leading to passive income. Landlords can charge higher rates during peak tourism seasons for better profit margins and increased cash flow. For instance, a short-term rental property can potentially generate $1,000 of rental income per week compared to $900 per month for long-term tenants, particularly when renting during busy windows, such as holiday breaks.
In addition, short-term rentals offer landlords more freedom and flexibility. With this type of investment, you can block off time to use the vacation rental property throughout the year. Vacation rentals in Miami, for example, can rent out for 11 months out of the year, leaving that same unit for the owner to use for one. Prospective guests aren’t the only ones who can enjoy this investment property.
With more vacation renters expecting a higher standard of accommodation, landlords must maintain their every single property competitive in the short-term rental market. Attractive online listings, high-quality photos, and exceptional tidiness of your vacation rental home.
Don’t let cleaning fees hurt your rental property’s appeal. Having an excellent cleaning service is important if you want to build a great reputation with your guests, along with getting positive reviews on your property’s Airbnb listing.
Investing in a reliable short-term rental cleaning service that will keep your property sparkling clean and your guests happy, could be a solution. A specialized cleaning service will know exactly how to clean the property well between short-term renters and how to catch potential maintenance issues before they become problems, which can translate to savings. Additionally, consider the terms of the contract with the cleaning service so that you will be protected from future issues or disputes.
However, many guests complain that the cost of cleaning is too high, leaving owners and property managers struggling to find a middle ground between rental revenue and approachability. Taking into account the type and size of your short-term rental properties (room in your vacation home or 3-floor villa), target audience (hitch-hikers, families, or luxury segment), and desired length of stay (one-day or more), you can test cleaning fees pricing strategies that will work for your specific short-term rental property.
For instance, in case you want to discourage one-nights, — include cleaning fees as a separate category of expenses not influenced by the duration of stay. And if you are looking for short-term hosts on a budget, consider including your cleaning fees in the rent, ensuring predictability of the final price for your guests, which are usually irritated by sudden total amount increases on the checkout.
Going green can help you save some green. But how much income can you get from being environmentally efficient? As a short-term rental property owner, you could reduce your utility bills and help the environment by making a few small changes:
Reducing your carbon footprint can be an initial investment. However, these changes can save you money over time. Additionally, by choosing energy-efficient appliances, you can reduce your monthly bills and decrease overall carbon emissions, saving some green while saving the planet.
Has running your short-term rental business left you feeling overwhelmed managing multiple short-term rental properties? Bringing on an experienced property manager or a vacation rental management company is always recommended. Streamline processes, such as creating listings online, booking guests quickly, and coordinating check-ins smoothly with enough time for maintenance between bookings, all while collecting rent effortlessly. And don’t forget to include management costs in your rental price to maintain your positive cash flow right off the bat.
If investing in a real estate manager or a financial advisor is not possible or within budget, then make sure you’re ready to handle all aspects with specialized management software like iGMS:
Prioritize quality over quantity and streamline your Airbnb listings and tasks without the tedious work involved. With iGMS, you can keep track of reservations, guest screening and communication, cleaning schedules, maintenance requests, and more all in one dashboard.
Keep your business and personal finances separate to maximize profits and minimize headaches. Open a dedicated bank account for your short-term rental income and expenses. Having a separate account can help you track your expenses more accurately. You can monitor your spending and see where to cut costs or make adjustments to increase your profits. Keeping your accounts separate is not only important for tax benefits but can also help with identifying potential fraudulent activity and protecting personal funds.
According to Airbnb, hosts who set up a dedicated business account earned 19 percent more income on average than those who didn’t. Plus, keeping your personal finances separate simplifies bookkeeping and accounting, especially for tax time.
Ensuring the safety and security of your rental property is crucial for protecting your investment. Here are some steps to consider:
Managing a short-term rental property requires careful planning and budgeting to factor in all associated costs. From utility bills and taxes to furnishing expenses, regular cleaning services, entertainment subscriptions like cable TV or streaming platforms such as Netflix, Hulu, or AppleTV; from landscaping maintenance to repairs over time — not forgetting the basic supplies for tenants’ comfort (think toilet paper) — making sure you’re well prepared is essential for providing an enjoyable experience that will keep short-term guests coming back again.
Although it’s tempting to save money by purchasing cheap pieces, these will need more frequent replacing; guests appreciate a unique aesthetic and feel soothed in surroundings that look great for the long haul. On tighter budgets, there are bargains waiting at real estate sales or secondhand stores — ensuring you can still create an inviting style without breaking the bank on ‘big tickets’ items such as beds and dining room tables; just don’t forget those all-important details like shower curtains and lamps!
Accurately predicting maintenance costs for a short-term rental can be challenging, but having an estimate in place is key to being financially prepared. Many good property managers use formulas like setting aside $1 per square foot of space each year or 1.5 times the monthly rent as their basis for planning ahead and budgeting accordingly. Taking additional safety measures such as damage protection from online booking platforms may provide some coverage; however, it’s important not to rely solely on those payouts when significant damages are caused due to wear-and-tear versus guest negligence.
Owning and managing a short-term rental can be a profitable but challenging business. However, there are ways to get maximum protection from almost every possible risk. Although some of these tips may require initial investments of time or money, the return on investment will be worth the cost. Because we can no longer rely on a handshake, be sure to utilize carefully drafted legal documents with guests, cleaning services, and all vendors.
Need more help? Try iGMS! Our software can help you manage the daily operations of your short-term rentals, as well as:
Veronika Pshenychnykova is PR Manager at Lawrina. Veronika has an international law degree and hands-on experience in the legal sphere with the EU and US markets. At Lawrina, Veronika builds ties with bloggers and external sources to spread the word about Lawrina’s projects and ideas. If you’d like to contact Veronika, you can reach her via email at firstname.lastname@example.org.
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