Starting a Vacation Rental Business
It is always exciting to start new endeavors that provide you with a way to make money and really enjoy what you’re doing. If you are ready to start making people’s vacation dreams come true for a living, starting a vacation rental business is the way to do it. It’s an exciting venture, with opportunities to meet new people, learn new things and make money! Thought of as an investment, having vacation rental properties provides anyone with a way to stretch out and really enjoy working with not only properties but also people.
With any new business venture, there’s plenty that needs to be done prior to launching a business like this one. It’s an exciting venture, with opportunities to meet new people, learn new things and make money! Buying the properties, fixing them up and getting them ready to rent for vacation are just some of the tasks. It can take a bit of time, but once you have gone through the available options, you’re able to move ahead and actually enjoy being able to provide vacation rental properties to those visiting the area. Whether you’ve managed your own vacation rental before or you’re new to the game, you’re in for a ride! Before you jump in, take a minute to read this guide to ensure you’re set up for success!
What You Need to Know before Starting a Vacation Rental Business
Starting a vacation rental business is no small feat, and comes with its own unique set of good and not-so-good things to consider. There are pros and cons to everything you do and owning a vacation rental business is no exception. Being able to know these pros and cons can prepare you for the day when it comes to renting to someone and being able to provide them with the rentals that they want to stay in and that they recommend to others.
There are pros to short term vacation rentals such as:
- Being able to rent to multiple people within the same year.
- Vacation rentals typically see less wear and tear than long-term rentals, which means you may spend less time money on maintenance and repairs.
- The recurring revenue is a definite plus. During peak seasons you can have back to back reservations paying your top rental prices. This additional income is a significant perk of owning a vacation rental business.
- They give more flexibility and tax breaks than long term rentals are able to do.
These advantages provide the business owner with a way to know that they’re making the right decision to invest in this type of vacation rental business.
Of course, there are not just benefits to owning vacation rental properties. They also come with cons, as well.
- There is no guarantee that someone is going to rent your property, so you might not make as much on certain rentals.
- Homes require routine upgrades and maintenance, and these can get pricey.
- There can be too many things to manage.
- Competition is serious. You have to be dedicated to staying relevant, to being creative in your marketing, and to provide excellent customer service 100% of the time.
- Nightmare guests. You’ll get a few of them, and they’ll make you question why you got into this business in the first place. They’re few and far between, but they can make things difficult.
However, either way, you choose to go, it is important to note that it is not a hard industry to get into, but it is definitely one you have to be smart about. You never want to jump into something without knowing both sides of the coin. This is where you have to weigh up if the cons are something you can handle because the pros definitely make this a worthwhile investment.
How to Start a Vacation Rental Business
Before you start a vacation rental business, it is important to know what you’re going to do and how you’re going to get there. Jumping in and getting in over your head are common things that happen. First and foremost, you need to have a business plan first which outlines what you want to do and your goals. You will then need professional photos of the property, you need to list those photos on a great website and other portals. Make sure that you open up reviews for your rental and charge the appropriate going rates.
The rental that you’re putting out there has to be in good shape. Depending on the property that you chose to purchase, this might be something you have to put a little elbow grease into or it might be something that doesn’t need to be done at all.
There are so many things that you have to take into consideration when it comes to owning a vacation rental business, but it is a very lucrative and profitable business to get into in the long run. You just have to make sure to stick with it and keep to making the properties better. When you do this, you’re able to succeed and provide those that come to visit with a way to enjoy their stay and let everyone they know learn more about it.
What You Need to Start a Vacation Rental Business
Create a Business Plan
One of the biggest reasons new property managers fail is that they don’t run their vacation rental like a business. Sitting down and creating a solid business plan will help you get your ideas and expectations down on paper instead of swirling around in your head (or in the notes section of your phone). Along with a business plan you’ll need:
- An Operations Plan
- A Marketing Plan
- A Financial Plan/Revenue Management
If you’re new to starting your own business, you may want to sit down with a professional to get all of your documents sorted out before you move forward.
Get the Home Ready for Guests
Once you have a clear business plan, you can move on to the next phase. It’s important to keep in mind the comfort and convenience of your guests when preparing your home. If you’re working room by room to upgrade your home, focus on kitchens and bathrooms first. These are areas where guests expect cleanliness and functionality. Whether you’re going for a luxury vacation rental or something more fundamental, guests expect certain amenities in their home to ensure a comfortable stay. Make sure you equip your home in a way that allows guests to feel at home.
Set the prices
One of the hardest parts of marketing your vacation rental business is to find the sweet spot for your nightly rates. Too high and it’ll scare guests away, too low and you may attract the wrong crowd or lose money on your bookings. One mistake many business owners make is setting their rental rates based on their own economic situation or emotional ties to the home. Check with comparable properties in the are to find a competitive price that guests will pay and that will make you a profit.
This can feel like a full-time job since there are so many different ways to get the word out about your vacation rental business. Social media is an excellent place to start; it’s free and only takes the sharing of your friends and family to reach a broad audience. Big vacation rental listing sites charge fees to list your home, but you’re bound to reach more people that way. Creating your own vacation rental business website is another way to advertise, and you don’t have to pay the commission as you do on more prominent listing sites.
Write a Compelling Vacation Home Descrpition
When it’s time to write your vacation rental description, attention to detail is critical. A thoughtful description is crucial in getting potential guests to pick your home over the thousands of others they are seeing. Get creative, be honest, and really let the highlights of your home(s) shine. But don’t stop at the home description. Make sure to mention your commitment to excellence, your focus on the guest’s satisfaction, and your willingness to help.
If you have them, make sure you incorporate guest reviews into your listing too. People are big about reviews and want to hear what other people have to say, so posting reviews (even one or two of the bad ones) can help guests get an idea about the services you provide. Your response to negative reviews will showcase your work ethic and show guests how you handle issues.
And while a catchy description is good, you need to take outstanding photos. If you can get professional pictures of the property done, by all means, spend the money to do it. Guests will click through 2-3 images before deciding to move on to another house. Make sure the home is free of clutter and mess, focus on lighting, and use a tripod to prevent blurry pictures. If you’re doing the photos yourself, take your time and highlight your home’s best features. Post the pictures in chronological order as if the guest was moving through the house. Some people won’t even waste their time looking at a property if there are less than ten photos. The more the better, but when it comes to photos, it’s quality over quantity.
Create the Required Documents
While a lot of the vacation rental industry is about connecting with people and creating lifelong memories for families, it’s also a business and needs to be run like one. This is why you need to create contracts, booking forms, and payment procedures so that the booking process runs smoothly. You want the reservation process to be seamless and safe so that guests feel confident from the get-go in how you run your business.
Once you get to this stage, you’re basically ready for business. Of course, there will be kinks you need to work out and systems you need to set up, but when you’ve got a solid business plan, a marketing strategy, set rates and all of the legalities in order, you’re very close to starting your vacation rental business. Some other issues you’ll need to address before you can get started are:
- Will you manage the home yourself or hire a property management team?
- Who will clean the home before/after each guest?
- Who will be responsible for repairs/maintenance on the home?
- What type of software/technology will you use to run your business?
- Who will take care of the accounting side of the business?
- How will guests get their keys? (Digital door lock, meet you for the key, etc.)
Anything worth having is worth working for. Not only can starting a vacation rental business be profitable and fun, but it’s also a great confidence booster. Starting a company on your own is a big deal, and is something to be proud of. Being your own boss comes with a lot of responsibilities, but a lot of rewards as well. The vacation rental industry is unlike any other aspect of the hospitality industry because it’s personal, it’s customizable, and it’s flexible. If you’ve been tossing around the idea of starting your own vacation rental business, it’s time to go for it. It’s fun, it’ll challenge you, and it’ll put some extra money in the bank. It’s a win-win-win!
What’s an Average Vacation Rental Business Owner Like?
A vacation rental business owner is also known as an entrepreneur and due to this, they come in many shapes and sizes and one can vary from another completely.
They have a desire to grow that a lot of the other people out there do not have. This drive and willingness to succeed is what pushes them to keep moving forward. There always has to be something to perfect, to tweak, to work on or to excel at and they are going to find a way to do so.
Their work is never over and their desire to grow as a business never-ending, making them continue to reach for the stars above. They want to reduce their risks but continue to take them if it means being able to reach the top of the ladder.
Vacation rental business owners are these goal-oriented, high reaching people.
Things You Need to Know before Becoming a Vacation Rental Business Owner
Before you become a vacation rental business owner, you have to ask yourself some of the key questions that come up from time to time to find out if this is the right job path for you to take. Here are some of the essentials to keep in mind before you move forward with this type of business.
Understand and Evaluate the Risks
As with anything, it is important that you understand and evaluate the risks involved with becoming a potential business owner and investor. You need to know what it takes to successfully manage your own rental business, as well as the profit and losses that might come with it. You need to have your concerns listed out along with the preventions that align next to them. Take the time to research all avenues and find out if this is something you want to do.
Invest in Security
Ensuring that the safety of all customers is critical. You want to make sure that you know the importance of security at all times, which includes those rentals. The rental that you have isn’t your home so you shouldn’t treat it as such, it is your business. You should always consider investing in a business security system to protect your profits. This also reduces the chances of working with dishonest guests, as well.
Think of the Consumer’s Needs
Successful business owners are always thinking about their customers and consumers that they work with. They need to improve their offerings and provide something that their customers need and want before they even know that they need and want them. Think about what you would want to see in a home that you’re renting while out of town and then make these available to your guests.
Consider Hiring a Third-Party Cleaning Service
Having a clean rental is a must since no one is going to want to stay somewhere that is dirty and not well kept. Since you need to make sure that the home is up to par with almost every guest, hiring a cleaning service or rely on a cleaning software to come in and provide the cleaning that is needed can keep the place in the best shape, but also ensure that it is always clean, no matter what time of day it is. Plus, they usually hold a higher standard to clean than some others might.
Listen to What Consumers are Saying
When you actually listen to what they are saying to you then you’re easily able to benefit from this since you can adapt to their needs. When this is the case, you should always make sure that you listen to what they say, act on it and improve from it. You can always send out follow up emails or cards to find out what they thought of you and the services you provided them with.
Keep up on the Trends in the Market
Stay competitive and current in the market when you have rentals that are listed. You want to make sure to watch market trends and then move along with them. Find out what other listings in the area are offering and see if you can compete with that. Are you currently doing what the other places are doing for their guests? Can you get that listing out to others that might be interested in it? Being on top of the market as a business owner is key to success in many ways.
5 Mistakes Vacation Rental Business Owners Often Make
There are many mistakes that can be made in all of life. The same is true for those that are being made for the vacation rental business and the owners that own them. Instead of worrying about the mistakes, know them, own them and if you make them, learn from them.
This is a somewhat new industry, so there are a lot of inconveniences and even complications that you’re going to come across. You have to find solutions to these problems along the way. Complaining is not going to help anything and it might actually make you more stressed. Instead, try to think of things in a new light, in a more positive way, so that you can feel good about moving ahead with the business. Don’t get caught up in the complaining aspect of it. Move on, move up and learn from it.
Those out there that assume that they are going to make a lot just because of this or that usually find themselves being upset when they do not. Don’t make assumptions and you won’t be let down if something doesn’t happen the way you planned it to happen. Don’t assume that everyone asking about it is going to turn into a renter. You also don’t want to assume that you know how one thing works or the next, especially if you’re new to this. Hope for the best and always ask fellow rental owners for help.
3. Treating the Renal Business Like a Hobby, Not a Business
Whether you’re doing it on the side to your full-time job or not, it is not a hobby. It is a business and it should be treated as one. You can list it up, respond to inquiries and do what needs to be done here and there, but it is not going to be especially fruitful to you to do this. This is actually the hospitality industry and it is a business of its own. You want to be as professional as possible when offering your place to others. You’re competing with hotels and you’re offering a premium service for a fee. This is a business.
4. Selling the Properties
While you can sell, no one here is telling you what to do and when to do it but there is a time and place for such things. You don’t want to sell those vacation rental nights in the wrong way. Selling is a privilege and you don’t want to ruin it by selling to the wrong people, during the wrong times, at the wrong place. Just don’t do it. Try not to be the salesperson, but the business owner that is offering something different to your guests.
5. Letting Your Fear Hold You Back
Everyone has anxiety and sometimes it gets the best of us. However, you have to step back and make sure it is not getting the best of you. You are kind of on your own out there since many people are your competitors but that doesn’t mean you shouldn’t be able to consult with someone. It is good to keep going and find ways to boost your ratings and your listings inexpensively. You’ve already calculated your risks and you did the research needed. You can excel in this industry if you’re smart about a lot of the things you do.
Setting Vacation Rental Rates
Setting the right rate for your vacation rental can be a stressful and confusing ordeal. You don’t want to charge too much, but you also don’t want to charge too little. You want a comfortable amount that you can safely charge to those coming and going from the rental. Your vacation rental business needs to be supported by a relevant income.
There are consequences to how you set your rate for your rental. If you set it too high then the rental might not have anyone that can afford to stay there or their expectations of the rental might be much higher than you can deliver, depending on how high the rate is.
If you set the rate too low then this might not bring in a profit, it might only attract people that abuse it and use it only as a cheap rental and it might not be rented out at all due to the low rent.
In order to have the perfect rental rate, you have to find a balance between the too low and too high rates. Using a four-step process is the best way to go about choosing the right rate that matches your property and makes everyone happy in the long run – you and your guests.
Keep in mind that whatever you choose to have your rate be, it is not permanent. You can change it and fine-tune all of the details and rates later when you get a bit more information and research under your belt.
Things to Consider for Your Vacation Rental Rates
When it comes to cost, it is an important factor that anyone should consider. Before you jump ahead and find a price, you need to really consider the rental itself and what comes with it.
What could you safely charge for someone to stay inside it? What should you expect to get? These are all details that mean a lot when it comes to making the right rates for the rental and getting the right payout for it when someone stays in it.
1. Cost to Run Your Rental
As a vacation rental owner, you want to make sure that you know how much it is going to cost for upkeep to keep the rental going. You need to be able to cover any and all overhead expenses and then make a little off the top, as well. You need to be able to calculate how much you spend to keep the rental going so keep in mind – mortgage, taxes, cable and internet, insurance, salaries, etc. which are prices that never change and then those that do such as guest supplies, property repairs and electric and gas.
Knowing how much is going out for the management of your vacation rental property can give you a base to start with because you have to cover all of these expenses when you rent it out. Keep in mind that this is something that you pay every month and those that are staying generally stay a week or less, which means you’ll have to break the costs down.
There is always going to be competition out there, so find out who is nearby and what they are offering. Know their prices and then compare with what you’re offering. Can you safely offer the same amenities at the same prices? Will these prices still cover the overhead costs?
While hotels are nice, rentals can actually cost more than hotel stays because they’re larger and private. People tend to pay more for this experience.
Research other vacation rentals around the area, as well as those that are like yours. This will give you an idea of what others are going for and what you may be able to get away with charging.
3. Automated Pricing
For an affordable price, you can use a service that will automate the pricing for you. When the market changes, it can change your price but it will always make sure you’re covering your overhead so you don’t have to do all of that math yourself. For example, Beyondpricing.com is a recommended pricing website and service to use.
4. Extra Fees
This is a debate amongst those that rent out to others. Do you want to charge extra fees on top of the rental fee for specific things? Is your rate high or low? Depending on where you fall and what you want to charge extra for, you may be able to do so comfortably. There are usually optional add-ons that are extra but not mandatory for those staying to get.