Short-term vacation rentals are popular with families. You’ve probably rented someone else’s house or apartment for a vacation with your kids somewhere along the way (or thought about it). But have you ever thought about turning your primary home or second home into a vacation rental to offset the cost of your family travels?
I’ve been offering short-term rentals of my home for 18 years. I am often asked how I got started and what it’s like to manage. I know how scary it might seem. It’s reasonable to be concerned about strangers in your homes or property damage.
But if you follow some common sense rules and good practices, the risk is minimal and the earnings can be enough to fund your family vacations and more. I’ve had wonderful experiences with renters and most are respectful.
These are the five biggest questions I get about making money by owning a vacation rental home and the best answers I’ve found over the years.
5 Tips For On Make Your House A Lucrative Vacation Rental
1. How do you get started with the rental process?
Before venturing into the short-term rental space, think about your goals. Do you want to rent out a second home or investment property, or are you looking to make a few extra bucks on your own home?
If it’s a vacation property, how many days a year do you want to use it (if any) and when? And when will you rent it out? If it’s your primary home will you rent a room while you are there or only the entire home when you are away?
Next, consider whether you want to manage the rental process and the property yourself or hire a property manager. The do-it-yourself approach is more work, but you keep more of the fee you charge.
If you don’t want or have time to manage your property — especially a second home that might be a few hours away — a manager can be worth the added cost. The Vacation Rental Property Owner’s Guidebook is a good resource.
2. What do you need to know about taxes and licenses?
A short-term rental is considered a business, and in some places the homeowner has to obtain business licenses, register with appropriate tax agencies, and possibly apply for permits.
Rentals may also be covered under multiple jurisdictions, so be sure to learn the city, county and state requirements.
There are two types of taxes in the short-term rental market: lodging and income tax.
Lodging taxes are the same taxes hotels pay. Your guests pay the tax but you collect it and remit it to the proper local authority. Make sure you figure these taxes into your fee as vacation rental websites probably won’t do this for you.
You pay income taxes on the profit you make and report in your annual income tax filings. If you’re earning considerable income from your rental you might consider making quarterly tax payments throughout the year.
You can use an automated online platform such as Avalara MyLodgeTax that will calculate your lodging taxes, file returns and submit the payments to the correct tax authority. An accountant can help you sort out your local and federal taxes.
3. What’s the Hardest Part About Managing Guests?
I always tell people the most critical part of being a rental host is having a reliable, high-quality cleaning service, because this is where you can have the most issues.
Many of my ski season bookings are back-to-back; one set of guests checks out in the morning and another arrives that afternoon. Having the house or apartment cleaned and ready in between is critical.
Getting the key to the renter and getting back can also be a challenge. So I have a keyless entry system for rental. This way no keys to go missing.
Tell Your Clients About Our printable Vacation Home Packing List
• Plus, How to use a vacation home for a family reunion.
• And 5 tips for sharing a vacation home happily
4. What do renters expect?
I’ve rented out a home for nearly two decades, and I’ve learned that the key to being a great host is to treat people the way I’d like to be treated.
Guests like clear and prompt communication. And of course, the right amenities matter. Broadband Wi-Fi is a must. Nice TVs in each bedroom with many channel options, Netflix subscriptions and gaming systems can make a huge difference.
Many beach properties have beach gear and chairs for guests. City home owners might leave guidebooks, street maps and even a list of local restaurant recommendations. These extras will make your home more likely to get positive reviews and help you win future rentals.
5. What goes into my rental listing?
I have always treated my rental like a business. I periodically look at sites like VRBO to see if my price is appropriate for the market, the size home and amenities I offer.
I might charge more during peak weeks and holidays. I also think about marketing. When I list my home on those sites I post clear photos and choose a good headline and description, three things that are key to generating bookings.
It’s also important to offer reliable information on the setup of the home, including how many it sleeps and where, the layout and amenities, and other accurate details so a renter gets what he or she expects and is satisfied. The rental sites offer their own tips for optimizing your listing.
In the beginning, renting out a home can seem overwhelming, but it’s also rewarding. Not only are you helping another family make vacation memories, you’re earning extra money for your next trip.
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