Is A Vacation Rental Business Profitable
One of the most common questions that future hosts ask is whether they can actually make a profit from starting a vacation rental business. On average, hosts earn around $924 a month from their Airbnb businesses.
This can vary depending on how many properties a host rents out, as well as on occupancy rate and expenses involved. So, is a vacation rental business profitable? The answer is a definite yes, provided you plan and use strategies to maximize your rental income.
The Airbnb Experiment: How I Impulsively Started A Vacation Rental Business
I wonder if
The greatest adventures of my life usually begin with that phrase.
When I say greatest, I dont necessarily mean best. Sometimes I mean weirdest-smelling or insanely-profitable or almost-gave-me-malaria.
- I wonder if I could start my own business
- I wonder if I can really resist ever working for someone else
- I wonder if I can eat this??
The latest I wonder, however, is relatively mild all things considered.
It wont involve cross-country trips or cross-contamination or even cross-dressing. It wont land me on the nightly news. And it wont hold any potential for billionaire profits, but it also offers limited downside.
You see, Im a landlord. I recently finished renovating one of my apartment units.
Pre-renovation, it rented for $700 per month. Post-renovation, I can rent it for about $1,100/month.
But then I started thinking, I wonder if
I could boost my profits by becoming an Airbnb host?And thats how The Airbnb Experiment began.
How To Start Up A Vacation Rental Business
Not only do you need a good plan for your vacation business, but youll also need to follow through with it. In most cases, there are compelling financial and practical reasons buying.
Vacation Rental Business Plan Revenue Projection Plan Projections Bed And Breakfast Business Planning How To Plan
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Consider Allowing Pets In Your Vacation Rental
Who doesnt love to travel with their pets? Pet-friendly vacation rentals are on the rise. According to Booking.com, 42% of pet owners around the world would choose their accommodation based on whether or not they could bring their pets.
As vacation rentals typically offer more space than a simple hotel room, it makes them far more desirable for pet owners looking for a place to stay. So why not change your rules and allow pets at your property? While allowing pets at your property might mean more work for you, just think about all of the new bookings you will get. If you are nervous that someone is going to bring a pack of animals, set a limit on the number of pets and their weight limit, to make you feel more comfortable. Some hosts even ask for a picture of the pets before the stay, so they have an idea of what type of pet will be at their property.
Build An Online Presence
As a rule, beginners in vacation rental business tend to rely on large platforms. However, their fee policies and requirements to hosts force landlords to operate on their own especially if they own several properties.
To this end, you will need a robust and feature-rich website with must-have features like booking models, review systems, integration with web property listings, etc.
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A Robust Business Model
All franchise brands are defined by a business model that investors will follow, but not all business models are created equal. Some are more effective than others, and the iTrip model is unmatched in the private accommodations industry. We have applied decades of experience and used it to refine systems and procedures that take the trial and error out of starting a vacation rental business. A few benefits of our model include:
- Award-winning software and technology: Our software platform is a turnkey system thats driven by the latest developments in technology.
- Extensive property marketing: Rental properties will appear on over 80 websites, including Airbnb, Booking.com and Vrbo, in addition to social media marketing and targeted marketing to prospective rental guests.
- Work from home: This means no building to lease and maintain, and no build-out costs. Youre free to work from anywhere within your market.
- No accounts receivable: You wont have to chase money thats owed to you because all payments are made on the front end of the rental stay.
- A better work/life balance: After the initial hard work of getting up and running, you are free to spend some time away from it and enjoy downtime with family and friends.
A time-tested and proven business model is not always an advantage thats available to anyone opening a vacation rental business from scratch. With iTrip Vacations, ours is at the heart of our franchise opportunity.
How To Start A Short
Short-term rentals are a hot business. Whether you plan to rent a vacation home on Airbnb, VRBO, or with a property management company, you can reap significant profits.
When you decide to rent a property, there is a lot to consider. After all, you are starting a business, and rules and regulations for short-term rentals apply. Lets look at some things youll need to consider when starting a short term rental business.
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Do I Need To Hire Staff For My Property Management Company
A massive decision youll need to make is whether or not to outsource operations or hire in-house for tasks like cleaning and maintenance. You may also find youd like assistance with managerial responsibilities and will therefore need to take time to assemble a committed and capable team. Of course, solo vacation rental managers can do very well for themselves as long as they have the right tools to aid them, which brings us to our next step.
Find And Buy A Property
If you dont already own a vacation rental property, your next step should be to start searching for one. Start by identifying a location and determining how much you are willing to pay. Not only is the location essential to your potential guests, but it will have a significant effect on the amount you pay in taxes and fees.
Next, youll want to conduct market analysis to gain a better understanding of how youll operate. As you conduct your research, keep the following questions in mind:
- How much does it cost to rent other similar properties?
- What are the busiest tourist times of the year for that area?
- Are there any notable attractions or destinations nearby?
- Will there be enough demand to make your investment worth it?
Once youve identified a property that fits your preferences, its time to negotiate a purchase. Remember that its important to find a property that will help you achieve your long-term goals of starting a vacation rental business.
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So What Are The Important Steps In Starting A Vacation Rental
Locate the Property: Unless your are converting an existing property, we, of course, need to start here! But what do you consider when you are looking for a vacation rental property? The answer is, a LOT! Number of bedrooms, location, finish quality and so many other things can affect your rental rate. And in turn, your rental rate affects your return on investment, or ROI. In the end, you are investing in a business, and the numbers should line up! Our agents can help you scour the market for a potential vacation rental, help you estimate what your earning potential could be, and give you the tools you need to determine whether or not a particular property will meet your investment goals.
Improvements: So you’ve found the property. Now what?? The next thing that you need to do is determine which improvements to the property are necessary. The health and safety of your guests is a priority, which will make certain improvements absolutely necessary . Other improvements made to the aesthetics of the home may not be absolutely necessary however, they may pay you back big time! For example, if a renovated kitchen or cozy back patio can help you drastically increase you nightly rate, then your investment in those renovations makes a lot of sense. Again, this is something our agents at Oak & Key can assist you with. We can complete a design board, recommend improvements, and even refer you to local contractors to complete the work.
Know The Rules And Regulations In Your Area
Youll want to prepare for any liabilities BEFORE you write an offer so there are no surprises. Check out zoning laws and understand if short-term rentals are allowed. See if there are any restrictions like how many nights youre able to rent, if you need to live close to your rental, any sanitary rules like how many people your place can sleep based on the size of the sewer/septic system, what licenses and permits will you need? What taxes will need to be paid? Should you put your property in an LLC? This is not a reason not to get into the business, theres risk in everything, the important thing is to do your research and know what youre getting into.
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Be A Guest First In A Vacation Rental
Another piece of advice I have for those considering this business is to start by staying in vacation rentals. Visit Airbnbs and take notes on what you liked, what you thought could be improved, and notice how they run things. Looking at things from your future guests perspective is going to pay off in terms of creating an experience in your future vacation home and will also provide insights into if this is the kind of business you want to run. It will also help you determine what to look for from a real estate standpoint which brings me to my next point:
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 youâre 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. Donât 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. Donât make assumptions and you wonât be let down if something doesnât happen the way you planned it to happen. Donât assume that everyone asking about it is going to turn into a renter. You also donât want to assume that you know how one thing works or the next, especially if youâre 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
4. Selling the Properties
5. Letting Your Fear Hold You Back
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Treat Your Vacation Rental Like A Hotel
Research has found that vacation rentals are becoming more popular to travelers than ordinary hotels. That doesnt mean that we, as hosts, still cant learn a lot from the way hotels operate. A study by HomeAway and the University of Texas found that travelers are 73 percent more likely to remember their trip if they feel happy and excited about it during the planning stages, before the trip ever starts. So its all about offering your guests a great experience.
Start by sending them a welcome message, and include a guide with recommendations for restaurants and things to do in the area. Nine out of 10 times, guests staying at short-term rentals want to experience life as a local.
Who doesnt love a nice welcome present? This is the part where you can get creative. You might want to leave your guests a local specialty like a bottle of wine, some snacks, or even a little souvenir to remind them of their wonderful stay at your property. Its a small gesture, but it will make a massive difference to your guests and might even help you to get that 5-star review.
Write A Vacation Rental Business Plan
Before advancing with any plans to start your vacation rental business, its important to write a business plan. A business plan is a roadmap that guides you through the process of starting your business and can be a valuable tool for securing funding and gaining support. A successful business plan should include information on your business concept, the market youll be operating in, the structure of your business, and detailed information on your financials.
To learn more about how to write a plan of your own, check out our article on how to write a restaurant business plan.
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Benefits Of Owning A Vacation Rental Management Franchise
Being a franchisee in the vacation rental industry means that you can receive initial and ongoing support from a team of experts who want to help you grow your business.
As you manage your short-term rental properties, you can maintain a level of independence to run your day-to-day operations as you see fit. That said, when you need assistance, youll have the staff and systems in place through your franchisor to be successful.
In addition to support, running a vacation rental management franchise also comes with a pre-existing customer base of people who are already familiar with and loyal to the organization.
Look at it this way: a vacationer is probably more likely to book their stay through a well-known and trustworthy brand vs an independent mom-and-pop company. Youll still be able to provide a welcoming, boutique-like experience for your guests, but theyll have increased trust and security knowing that theyre booking with a reputable and established brand.
Apply For Licenses And Permits
Common licenses and permits needed before renting your property include a general business license and a short-term rental license.
A general business license is required of any business owner in most states, including short-term rental owners. Meanwhile, a short-term rental license demonstrates that your property is up to code and complies with certain health and safety standards . Youll also need evidence that youre following proper zoning laws and that your adjacent neighbors know youre renting.
Furthermore, some cities require that you obtain a permit before you rent your property. This involves a home inspection and an annual fee.
Your city and state website will have more information on specific license and permit requirements. A legal services provider or an attorney can also advise.
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Do I Need Experience In A Vacation Rental Business To Succeed As A Vacation Rental Franchisee
Absolutely not. You dont need to have any experience in a vacation rental business to start and be successful as a franchisee. However, there are a few different traits that will make the work much easier for you if they are a natural part of your personality.
For example, do you have:
- A strong entrepreneurial spirit? If you have a strong social and professional network and enjoy connecting with people from all walks of life, then it will be easier for you to grow your business. A willingness to take a calculated risk is also a key trait that all good entrepreneurs tend to have.
- High motivation? Getting your own business up and running requires a lot of energy and drive to push through the paperwork and other details that seem to be endless. However, this level of effort is only temporary until the business begins to almost run itself. Motivation is still a good quality to possess to keep everything running smoothly and profitably for the long term.
- Passion for customer service? Are you willing to go above and beyond for the sake of your guests enjoyment? Doing so reaps the very real rewards that positive reviews bring. Being personable and a team player will go a long way in establishing a thriving, trustworthy business.
- Organizational skills? Keeping track of multiple listings is only easier if you can coordinate your efforts and manage other members of your crew .
What Grand Welcome handles to help you focus on your business:
Create A Real Estate Business Plan
Before you get your vacation rental business started, itâs important to know what youâre going to do and how youâre going to get there. One of the most common mistakes beginner real estate investors do is jump in and get in over their heads. In addition, one reason that they fail is that they donât treat their investment like a business. A vacation home investment is more than just listing your rental property on Airbnb and waiting for the money to roll in. Itâs a business and, just like any other business, you canât expect to succeed without a business plan. Therefore, the first step to starting a vacation rental business is putting together a real estate business plan that outlines your goals and keeps you on track.
Hereâs your guide to Developing a Real Estate Investing Business Plan for Beginner Investors
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