So, you’ve just bought a vacation rental and you’re wondering how to make the most money from it? Well, first things first, you need to start thinking like a businessperson in the hospitality industry. This means focusing on creating a great product, marketing it well, and setting up efficient business processes.
Your vacation rental isn’t going to be a source of passive income. Even if you hire a property manager, you’ll still need to oversee them. Instead, think of your vacation rental as a side business that you run alongside your full-time job.
Once you start treating your vacation rental like a business, you can start making it more profitable with less work on your part. Here’s how:
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Strategic Finishes: After buying the property, your first task is to get it ready for the market as quickly as possible. This includes any necessary repairs, updates, and improvements. Don’t go overboard, but do look for any signs of age in the property, including anything that looks old or unattractive. You should also start planning your automation processes at this stage, as they may affect your property updates. For example, you might decide to install a smart lock or key code lock on the front door. Think about any other smart home upgrades that could improve your marketing. Would guests feel more secure with a smart security system in place?
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Automate & Systematize Guests’ Stay: The less your guests have to rely on you personally, the smoother their stay will be for both of you. Find a way to automate guests’ check-in and checkout process, especially their access to the unit. This could mean a smart door lock, a keypad lock, a lockbox, or keys left with a community office or doorman. But systematizing your renters’ stay doesn’t end at physical entry. You also need to plan for other frequent needs, such as gaining Wi-Fi access, and make them extremely intuitive and easy for your guests.
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Perfect Your Pricing: One of the most important factors for success as an Airbnb host is pricing. To start, ignore what long-term rental properties charge for monthly rents. Instead, look at them to run a comparative cash flow analysis to determine which leasing model would generate more profit for your property. Your competition as a vacation rental operator doesn’t include long-term rentals, but rather hotels and other comparable vacation units. Get a sense of what hotels and similar vacation rentals charge in your immediate area. Consider aiming for around 20% less on a nightly basis than nearby hotels.
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Incentivize Longer Stays: As with long-term rentals, the greatest labor and costs in managing short-term rentals come from turnovers. From cleaning to coordinating access with guests and answering their questions, it costs far more time and money to rent to 10 guests in a one-month period than to a single guest staying for an entire month.
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Consider Pet-Friendly Policies — For a Price: Pet owners often have a hard time finding hotels and vacation rentals that accommodate their four-legged family members. That means a shortage of supply, which in turn creates an opportunity. There’s certainly no shortage of demand. More than two-thirds of American households own a pet, according to the 2019-2020 survey by the American Pet Products Association.
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Take a Multipronged Approach to Marketing: Putting together the perfect vacation rental listing is both an art and a science. Start your marketing with a killer rental listing. First, hire a professional real estate photographer to take photos. It’s less expensive than you think, and it’s a one-time marketing expense that will continue paying off for years to come.
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Optimize for Search Rankings: Vacation rental platforms have their own search algorithms, just like Google does. If you want your listings to appear first, you need to take pains to optimize for those algorithms.
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Accrue Reviews ASAP: You can put together the best listing in the world, but if you have no reviews, guests will be reluctant to book with you.
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Create an Experience: As outlined above, you can and should automate your booking, check-in, and check-out processes as much as possible. Aim to make them so easy an 8-year-old could do it.
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Explore Co-Hosting: If you manage your own vacation rental, and other nearby units also serve as vacation rentals, start networking with the other neighboring owners. You can co-host for each other, or simply have one owner co-host for all the neighborhood units as a side hustle.
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Protect Yourself & Your Property: One way to protect your property is to physically make it damage-resistant, as mentioned above. But protection doesn’t end there.
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Optimize Your Taxes: Vacation rental owners can benefit from both investment property tax breaks and small business tax breaks.
In conclusion, owning a vacation rental can be a fun and profitable venture. But in many markets, it remains a competitive industry, and often property owners find themselves losing money at the end of the year without enough occupancy, particularly during slow seasons. Always run conservative numbers when you calculate cash flow, and never lose sight of the fact that the property is an investment. Don’t get attached to any given property, or even to the idea. In real estate as well as stocks, emotion is the enemy of investing.
