Looking to create some extra income? If meeting people from around the world and providing memorable experiences is something you enjoy, consider a vacation rental business. Vacation rentals are furnished residential properties available for lease over a short term, typically less than 31 days.
Start a Vacation Rental Business to Earn Side Income
They can be condos, cabins, guest houses, or a single-family home. Vacation rental owners lease properties to short-term guests to supplement their income or to make a second home more affordable. Learn how to start a vacation rental business that will turn a profit.
1- Research the short-term rental market
Are vacation rentals profitable? When owners make smart decisions based on data, yes. Successfully running a vacation rental business means understanding the factors at play in your location. Some markets have a seasonal component. Others have specific attractions that draw particular guests. Supply and demand also affect the market. A market with a high supply may not necessarily meet the demand for vacation rentals, leaving the property more vacant.
Do research to learn about the local vacation market. Find the most profitable vacation rental locations. You may find some neighborhoods or property types are better than others.
2- Know the vacation rental rules
Before starting a vacation rental business, learn the rules and regulations in your state, county, and municipality. These stipulate how to run a vacation rental in the area. For instance, you may find short-term rentals are not allowed in certain neighborhoods. Remember to check vacation rental taxes and licensing fees. Some areas impose a hospitality or occupancy tax on short-term rentals.
3- Create a business plan
Continue preparations by writing a vacation rental business plan. Define the goals of the vacation rental financially and personally. Think: “what kind of experience will the guests have when they stay at the vacation rental?”
Dedicate a large section to the operations and finances. Create a budget for the short and long term. Address the particulars of operating a vacation rental business, like marketing, guest turnovers, property maintenance, and communication.
Another essential vacation rental business plan component is market research. Do a customer analysis. What kind of people are booking short-term rentals in the local market? Target the property to their particular needs and interests. Additionally, research the competition. What are they doing to attract bookings to their property? Plan for ways to differentiate yourself from them.
4- Find the right property
Choosing the right location and the right home to run the short-term rental business is critical. The purchase needs to make sense of the business budget. You’re balancing affordability with picking a location that will have a high interest to your target guest.
Depending on your local real estate market conditions, finding the right home can take time and be one of the more stressful aspects of starting a vacation rental business. Be patient. The right opportunity will come as long as you keep looking and stick to the business plan.
5- Prepare the property
Once you purchase a property for your vacation rental business, it’s time to get ready for your first guests. The longer the preparation takes to complete, the longer it will be until your first booking. While there is plenty to do in this step, it’s important you are well-prepared before the first guest spends the night.
When working on the property design, do something that will impress guests and capture the area’s character. At the same time, think about the function of the spaces. Select durable furniture and materials. Balance design with practicality.
Stock the home with the necessary amenities. Create some house rules to include in your welcome book. As you near completion and prepare for your first guests, consider how the guest will access the property. Owners tackle keys in different ways, such as a smart lock or an off-site key pick-up box.
6- Set a pricing strategy
Pricing is a critical component of driving revenue for your vacation rental business. Your area may adjust pricing based on the seasons, or if a particular event, week or weekend brings high interest. When you researched the competition, you should have noted their going rate. At the same time, you need to calculate the costs of property ownership, marketing, and turnover. Know what numbers to clear to be profitable.
Consider using dynamic pricing. This feature available on vacation rental software platforms will adjust and update the pricing based on the demand and the competition’s rates.
7- Start promoting your vacation rental
Making money with vacation rentals depends on a low vacancy rate. Get booking as quickly as possible. Start by listing the vacation rentals on multiple platforms like VRBO, Airbnb, HomeAway, and more. Put the vacation rental on tourism websites and forums. Create a dedicated property website to tout its features and showcase exceptional photos. Use social media to reach a wider audience and drive traffic. Promote, promote, promote!
As you begin to secure bookings, do what you can to earn top reviews from your early guests. High marks in guest satisfaction help convince travelers to book with you.
8- Invest in vacation rental management software
One way vacation rental owners manage the workflow is by using the latest automated tools available for vacation rental management. In addition to dynamic pricing, these platforms will push listing updates across the various short-term rental listing websites, help schedule your vendors, and create cleaning checklists. They offer auto-responders to quickly answer guest questions and solicit guest reviews.
Vacation rental software reports features help track the expenses and revenue. Knowing where every dollar is going helps owners figure out how to make money on a vacation rental property. Overall, these platforms ease the burden of Airbnb property management so you can provide better service to your guests.
When well-managed, a vacation rental business can be a worthwhile side hustle and profit stream. Besides the financial rewards, starting a vacation rental business allows you to meet interesting people from across the world. Knowing you’ve made their stay exceptional and memorable is a rewarding extra benefit.