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Short-term Vacation Rentals: Everything They're Cracked Up to Be?

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 It’s hard to believe that short-term vacation rentals like Airbnb have been around for over a decade now.  

What started as a simple way for a few roommates in San Francisco to earn some extra money with a few air mattresses (hence the name “air” bnb) has grown into an international phenomenon. Today, Airbnb operates in over 191 countries, is valued t $25.5 billion, and has transformed how many people travel.

From a yacht in Alaska for $10,000 a night, or a treehouse in South Africa –to more than 300 villas in Italy, there’s no shortage of options to choose from. Part of the platform’s appeal is that Airbnb offers accommodations that are more far-reaching than what’s usually available at your local hotel chains. The other appeal is the price: Airbnbs –while not always, are generally more cost-effective than hotels.

With the average Airbnb host earning $924 per month; it’s easy to see why many investors are starting to turn their attention to the short-term rental market. While Airbnb is largely a way for hosts to earn some side income by renting out a portion of their home, some investors are purchasing properties with the intention of renting them out on Airbnb. Some –especially those who have properties in high-demand popular vacation destinations, are even converting their long-term rentals into Airbnbs.

Of course, while there’s a lot of potential when it comes to operating a short-term rental, this type of venture doesn’t come without its own set of risks as well. 

While success stories are common, there are also cautionary stories of short-term rentals gone wrong; where hosts sometimes experience terrible guests –who party all night or damage their home. Sometimes there are even run-ins with law enforcement. When it comes to finding success with short-term rentals, it’s important to have a clear idea of what you’re in for –from the start. Most Airbnb hosts run into trouble by diving in without having a clear plan in place first. Part of the process of finding success also involves carefully weighing up the pros and cons of both long and short-term rentals and determining which one is best for your situation.

If you’re on the fence about Airbnb (or other short-term vacation rental service) and wondering if it’s a good option for you, here’s a look at what you should know before you dive in.


Thinking of Going Short-Term? Here Are a Few Things You’ll Want to Do First

Is Airbnb everything it’s cracked up to be? Is going short-term always a more lucrative option? 

The short answer is: it depends! While vacation rentals can be a viable investment, there are a lot of factors that you’ll want to consider first, things that will need to be taken into consideration first.

  • Brush Up On Local Regulations 

First up, regulations. Different cities have different ordinances in place regarding short-term rental activity. While most places are relatively Airbnb-friendly, there are some places where short-term rental activity is heavily regulated. This could mean that you’d only be able to rent out your property for a short period of time, or in some cases, only if you reside there as a host. Other times, you’ll need to register with the city if you’re going to operate as a short-term host, and failure to comply could result in heavy fines and penalties. Make sure you check your state –and local legislation to see what requirements are in place. 

Cities that heavily regulate short-term rental activity include New York City, Las Vegas, Los Angeles, San Francisco, and Santa Monica, however, laws are always changing and there’s always a chance that others could eventually join the list. This makes it risky to purchase property as an Airbnb rental. In fact, most major cities –including Denver, Seattle, Portland, and Minneapolis have their own sets of rules and requirements in place, so make sure you’ve taken the time to review the law before you start looking any further. 

  • Check HOA Rules

In addition to local ordinances, you’ll also want to pay attention to any HOA rules as well. Some HOA rules require Airbnb hosts to purchase liability insurance, or even prohibit renting out the property altogether. If you own a condo, or are part of an HOA, you’ll need to check the fine print to see if it mentions anything about short-term rentals. 

  • Consider Your Location 

Next up, location matters –especially when it comes to a short-term rental. In fact, location is one factor that will make or break a property’s success as an Airbnb rental. While long-term rentals generally need to be close to jobs and schools, short-term rentals are situated in prime getaway destinations, or areas that are popular with visitors. So coastal areas tend to do well in the summer, while ski or scenic winter locations might do better in the winter. Properties located near major metropolises that are popular with visitors also tend to do well. If your property is near amenities or sights, or close to public transport links, that’s always a plus as well.

  • Be Aware of the Time Commitment

Short-term rentals require more time as well. Short stays and busy seasons often mean short turnaround times; which means you’ll want to spend time cleaning, restocking, and ensuring your guests have everything they need for a comfortable stay. If you don’t have time to commit to the project, you’ll want to hire a housekeeper to oversee the chores and ensure a smooth transition in between guests. 

In addition to the work that goes into getting the place ready for guests, you’ll also need to be on-call when you have guests as well. You’ll need to respond to any questions or problems that arise –regardless of the time.  

  • Plan for a Higher Vacancy Rate

Many short-term rentals are super popular during “peak” seasons, but often are vacant during the “off-seasons” –making for unpredictable and often unstable income. This is great if you’re able to make up for the deficiencies during the busy season, but make sure you’ll be making enough to offset the months where your property could be sitting empty. Again, demand will depend on how popular your area is as a year-round destination, so make sure you keep this in mind when calculating your returns.

  • Factor In Additional Costs 

Just because your average per-day rent might double, doesn’t automatically mean that your take-home pay will. 

There are additional costs that come with running a short-term rental, so make sure you factor them in as well. To start, you’ll need to furnish the property. Things such as furniture, bedding, and dishes are all generally supplied in an Airbnb. You’ll also be paying for utilities –electricity, high-speed internet, water, and more –along with the cost of hiring a cleaner if you choose to go that route. Instead of paying for a professional clean once every few years (or whenever your tenants move out) –you’ll need to pay for cleaning services every time a guest leaves. 

Experts also say that roughly 10% to 15% of every vacation rental booking is going to go to repairs or maintenance. Compare that to the 1-2% that’s considered standard for maintenance for most long-term rentals. Then there’s the listing fee, Airbnb currently charges hosts 3%.

  • Consider the Insurance

Then there’s insurance; which would look different than your standard rental property insurance as well. Airbnb offers coverage for hosts of up to $1 million, but is subject to their terms and conditions. It’s still a good idea to have a good separate liability package, to cover any potential lawsuits that could arise –or in the even that a guest damages a neighbor’s property. 

For more information on insurance, check out: 5 things Airbnb hosts can be liable for.

Tips for Short-Term Rental Success

As we’ve seen, being prepared can make or break your success. If you’ve decided that a short-term rental is the way to go, here are some tips that can help you to plan for success.

  • Market your property: Airbnb will do this for you, but you’ll need to create an eye-catching, detailed description. 

“People choose Airbnb because they want a break from the traditional and are looking for an affordable, authentic getaway,” says Scott Shatford, a long-time Airbnb host. “Create an Airbnb listing that focuses on experiences, not the property facts.”

  • Take great photos: Or hire a professional to do this for you. (This should cost roughly $100-$200). Scott says that he saw his listing’s popularity skyrocket after he had professional photos done.

  • Ensure a great guest experience. Remember, your success on Airbnb will be based on the reviews that you receive from your guests, so make sure you go the extra mile to ensure their satisfaction. The little things matter too, so try to put yourself in your guests’ shoes. For example, if you’re running a family-friendly rental, some children’s toys or a fenced outdoor play area would be a welcome addition. If your Airbnb is located in a scenic coastal location, then a guide to enjoying the best local beaches would be appreciated. 

Scott recommends staying in your own rental once in a while. This will help you to notice small, yet important things that should be done.

  • Offer excellent amenities: 

Offering everything that’s necessary for a good stay is crucial for satisfied guests, and good reviews.

Ideal Airbnb amenities includes: 

  • Fast broadband: Get a network extender if you have a weak signal
  • A smart TV
    A digital keyless entry system 
  • A/C : If your area sees high temperatures
  • A coffee maker
  • Basic kitchen supplies including cookware, dishware, and consumables like dish soap, dishwasher tablets, and some basic ingredients like sugar, tea, coffee, salt, and pepper
  • Toiletries: Shampoo, soap, toilet paper
  • Plenty of good towels
  • Clean bed linen
  • Firm and soft pillows (One of each per guest) 
  • Laundry facilities (If feasible)

See also: How to get started on Airbnb.

  • Have a plan for management: Someone will need to be on-call 24/7. And someone will need to go and restock in between guests. Having a cleaner and property manager is necessary unless you’re planning on doing this yourself.

At the end of the day, remember: long-term and short-term rentals are tremendously different, and each requires a very different approach and strategy for success. In some markets, Airbnb is a viable investment option, but you’ll want to ensure that you’re aware of the risks, challenges, and potential pitfalls that can quickly eat into your profits as well. Areas with strict legislation surrounding short-term rentals could be challenging, if not impossible to operate in. Additionally, places that see seasonal visitors would mean a higher vacancy rate as well. 

Remember, the best way to approach any investment –be it a traditional rental or a short-term Airbnb is to go into it with a business mindset, so take the time to build systems from the start, and always treat your guests or tenants as customers. A professional approach will help you to go far, enabling you to get the most out of your investments –whether they’re short-term, or long-term rentals. 

Are you thinking of operating short-term rental properties versus long-term rental properties? 

Take a look at this article exploring the benefits of both long-term and short-term rentals.

Also, check out these articles on getting started with rental property:

First-Time Income Property Investors, How to Begin? and 

So You Purchased an Investment Property - What to Do Next.

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