You’ve seen many people take the plunge and start a vacation rental business already and you think to yourself, should I also become a rental property owner? Whether that’s because you already have a summer home which you could profit from when you’re not staying there, or because you want to invest in a property (or three!) and rent it out to tourists – it can be daunting starting this type of business.
You think to yourself:
Do I have what it takes to be a host?
Is it going to be profitable?
How can I prevent visitors from damaging my property?
Often, people don’t dare start a business like this (even though it could generate considerable income) because they don’t have the answers to these questions.
Today’s objective is to clear up all of these doubts and show you how you, too, could transform your home into a short-term vacation rental for tourists.
Should you start a vacation rental business?
The vacation rental market is becoming increasingly popular. Each year, a growing number of tourists are preferring this option over hotels for reasons such as they’re more convenient, they offer a more personal experience and they allow guests to feel like local residents during their trips.
Does that make it an attractive investment? Yes. Is it possible to earn a profit? Of course. That said, you will need to stay on top of coordinating all of the different aspects of your business.
Even though there is a lot of demand for vacation rentals, there is also a lot of supply, and one of your main jobs will be to make your property stand out from the rest to catch a potential guest’s eye. You will also need to balance all the tasks that running a business like this entails. For example, being available for any possible guest emergencies, managing bookings, setting rates for high and low seasons, and so on.
But don’t let this put you off. By dedicating some time and effort to it, this type of business can flourish and even transform into the main source of revenue for property owners. In addition, there are many ways to run your business without the need to put in so much time or effort. For instance, by enlisting the help of a property manager, or by contracting a vacation rental software which will allow you to manage all your listings and calendars from one place, automate repetitive processes and take online payments.
Another frequently asked question is what works out better, renting long or short term?
There are a lot of pros and cons to take into account when comparing these two business models. Overall, although short-term rentals generally mean more work for the property owner, they also provide more flexibility and the opportunity to earn a lot more economically speaking.
The most common existential doubts
If I rent my vacation home, will I still be able to use it as a second residence?
By all means. As you’ll be the person managing bookings and in charge of updating the calendar for guests, you can always block out any periods in which you would like to enjoy your property yourself.
I’m scared that guests will destroy my holiday home
Property damage is one of the biggest rental host concerns. After deliberating long and hard about the pros and cons of short-term rentals, many do not go ahead with the business simply to avoid the risk that guests may destroy the property.
In reality, it’s straightforward for hosts to prevent these Airbnb horror stories by putting a few safety measures in place and directing marketing campaigns towards certain demographics of potential guests. As well as this, you’ll need to buy the right vacation rental insurance and even think about taking a damage deposit which will protect you in the case of accidents.
Can I manage my rental property even if I don’t live nearby?
A lot of property owners do not live close to their rental homes, especially as many of these are investments in areas where vacation rentals are high in demand, or they’re simply the second home which is only used during the holidays.
How can you manage it, then, if you are not there to welcome incoming guests, to clean the property between stays or even to keep an eye on it when it’s empty?
There are many options for property owners in this situation. On the one hand, there are a lot of companies dedicated to check-in, turnover, cleaning and anything else which requires a physical presence in the property. You can also automate check-in/out processes with smart locks which you can configure for each guest from anywhere in the world.
In terms of security when your property is vacant, it’s always a good idea to have a local neighbor, friend or concierge who can keep an eye on your home from time to time.
Can I advertise my property for free?
Yes! And in this case, the internet is your biggest ally. More specifically, social networks are – and the majority of these are totally free. You can use Facebook to reach a huge audience (it has over 2.4 billion monthly users) by creating a Facebook Page and adding the “Book” button. You can also use the image-sharing site, Instagram, to visually sell your property to potential guests.
Besides this, search engine optimization (SEO) is vital for driving traffic to your vacation rental website.
With regards to advertising your property formally on listing sites with descriptions, photos and so on, there are a lot of portals which will charge you a fee to list, and others which will simply take a commission from each booking you receive.
These fees and commissions vary from site to site, so be sure to familiarize yourself with the cost of using any vacation rental websites before signing up.
To save on these commissions, you can create your own professional website to advertise your property. To do this, you’ll need a good vacation rental software that will allow you to perform all the necessary tasks for property management, such as taking online bookings, managing calendars and reservations and easy guest communication.
Finally, another way you can market your property for free is by registering with the local tourism association or Chamber of Commerce and by doing lots of in-person networking at community events, festivals and more.
What happens if I don’t know how to manage the admin and legal side? What repercussions are there?
In the last few years, there have been many news stories about legal loopholes, illegal short-term rentals being closed down and much more. It’s true that if you don’t adhere to legal guidelines, you may face a fine later on.
In reality, it’s not that difficult to do everything inside the law.
As a vacation rental business is a relatively small investment, there aren’t that many legal requirements (though some places have restrictions regarding short-term property renting).
While you don’t necessarily have to create a company in order to rent your property to tourists, you will need to apply for any licenses or permits that your zone requires, as well as pay any corresponding taxes when the time comes.
Steps to follow to start a vacation rental business
Physically prepare your vacation home
Before getting started with anything else, you need to prepare your home so it’s ready to welcome guests. That means reforming, furnishing and redecorating so it not only looks good but also has all the amenities guests require.
If you organize yourself and plan ahead, this doesn’t have to be a costly investment. Prioritize your budget and buy items that will last.
To give your home a personal touch without spending too much, you can also decorate on a shoestring with some simple DIY ideas.
Establish your rates
When starting out, you shouldn’t price too low or too high as both practices can cost you money in the long term. The best thing to do is study your immediate competition – you’ll soon discover how much guests are willing to pay for a vacation rental in your area with similar amenities to your own property.
Bear in mind any large expenses you’ve incurred in order to make your rental a profitable business. It’s also recommended to vary your pricing strategy depending on the time of year (most destinations have high and low seasons). You can even use dynamic pricing and revenue management tools which will automatically vary your rates depending on competition, occupancy etc.
If or when you achieve around a 75% occupancy rate, this will be a strong signal that your prices are right. If you struggle to achieve this, you may want to think about lowering your rates.
Prepare a vacation rental agreement and house rules for your home
Having a rental contract from the outset is not only good for you and your guests, but it can also save many headaches down the line. Be sure to include any conditions of the stay and use of your property, along with topics such as cancellation policies or detailed contact information for both parties.
Not sure how to write a vacation rental agreement?
You should also think about preparing a set of house rules to help your guests understand how to use your property correctly. Be sure to include details of how to recycle, any noise restrictions, parking, etc. You could also add instructions on how to use any electrical appliances or other household items to make for a more comfortable stay.
Create and publish your listings
Now is the time to craft your property description to show off the best of what your home has to offer. Try not to be just “one more listing” and steer clear from clichés like “spectacular views” or “pretty”.
Focus on what your property has that your competitors don’t (especially when it comes to the specifics) and narrate your property through storytelling to paint a vivid picture for your guests. Complement your listings with high-quality photos that show your offerings from many different angles.
Once you have prepared all of the above, it’s time to decide which platforms to list on – including your own website.
Declare your taxes
An important step that many new owners may overlook during the first months of business is taxes. Not only should you declare your taxes correctly, but you can also claim back for any business expenses incurred – such as repairs, insurance, even accounting and marketing fees may be deductible.
Now you know the steps to follow, if you’re seriously thinking about turning your property into a vacation rental for tourists, you’ve got no excuse! Put these tips into action and you’ll soon see great results from your new business.