Vacation rentals have surged in popularity in recent years. In fact, 2021 was the best year in Airbnb’s history. Bookings were up almost 50% compared with 2019, and new hosts alone earned nearly $2 billion across the past year.
If you’re a homeowner, you might be considering a foray into the business yourself — especially if rising inflation has got you down.
According to data platform AirDNA, the typical short-term rental brought in a record-breaking $56,000 each last year — a 35% jump from early 2020. Could funds like those help you stay afloat? Here’s how to turn your home into a vacation rental — and ensure its success.
— Check local ordinances.
— Research the market.
— Prep the house.
— Get the right insurance, and talk to your neighbors.
— Establish your systems and processes.
— List and market your property.
[Read: Considerations Before Buying a Vacation Home.]
1. Check local ordinances.
The first step is to make sure short-term rentals are actually allowed in your city, as many have banned them or restricted them severely. In other spots, there may be some red tape to sort through — like getting a business license or registering with the city.
“Regulations are a big topic in the short-term rental world, and it’s absolutely essential that you check — before you start renting — what the local laws are,” says Alex Haler, a strategic account executive with AirDNA in Denver. “Regulations can mean anything from registering for a different tax rate to an annual fee for a license to specific limitations on what properties can be rented out — and fines can be high for those who don’t follow the rules.”
You should also check with your homeowner’s association if your neighborhood has one, as these often prohibit short-term rentals as well.
“This is not a case of ‘asking forgiveness is easier than asking permission,'” says Glenn Schworm, a real estate investor and president at VestorPRO. “You don’t want to invest your time and money only to have the property shut down shortly after.”
[READ:How to Update Your Kitchen Cabinets without Replacing Them]
2. Research the market.
Next, you should research your local market — specifically, how in demand it is. Is there a solid demand for short-term rentals in the area? Are you near a big city, a nice beach, a local college or some other amenity that might draw in visitors?
“Do some market research, and dig into the data to build a solid business case for your property,” Haler says.
From there, consider the competition — both in your city and, in particular, those in your exact neighborhood or community.
“Look for your direct competitors,” Haler says. “What are they doing well? Do any of them have a particular amenity or feature that is helping them outperform the others? Keep track of this group of competitors as they will aid you in setting the right price, benchmarking your performance and staying ahead of the curve.”
3. Prep the house.
Once you’re sure there’s real potential in your market, you can move on to preparing the property. First, depersonalize the place, and be careful to remove anything that holds special value.
“When guests check in to your vacation rental, they want to see a blank slate for their own experience — not your family photos or mementos, as heart-warming as they may be,” says Daned Kirkham, senior director of real estate at Vacasa. “It’s best for both homeowners and guests if you round up your personal items and store them in a private closet or outdoor shed, which can be locked and marked as off-limits.”
You should also make any necessary repairs and fix any long-forgotten “quirks,” as Marcus Räder, CEO of vacation rental management solution Hostaway, calls them.
“Every home is unique, but unfortunately, quirks that you’ve gotten used to — think squeaky doors, poor showers or fridges that don’t close with just one push — can provide a bad experience for a guest,” Räder says. “Fix these before renting your home out to strangers.”
Finally, think about the experience you want to present to your guests. You may want to update the furniture or decor, install new technology, like smart thermostats or smart locks, or add a workstation to help you market the property to remote workers.
“Tons of people are now working remote and are taking work vacays,” says Rachel Black-Johnson, a real estate agent with CENTURY 21 Gavish in Las Vegas. “You should also have a separate WiFi, if possible, for guests.”
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4. Get the right insurance, and talk to your neighbors
Having a short-term rental comes with risk. Guests can damage your home and belongings, and there’s also added liability to consider, too.
For these reasons, most standard homeowners’ insurance policies will not extend to short-term rentals — at least ones you plan to rent out regularly.
“Almost all residential insurance is inapplicable for short-term rentals,” Räder says.
Though platforms like Airbnb and VRBO offer some built-in insurance for hosts, Räder says, “there are many cases where this falls short.” To ensure you’re protected, consider adding a short-term rental policy, landlord insurance or business insurance. Your insurance agent should be able to point you in the right direction.
You might also talk to your neighbors about your plans, as they can help offset some of the risk as well.
“It’s best to let the neighbors know the situation and give them a way to reach you in case of an emergency or other situation comes up,” Black-Johnson says. “Ask them to call you at the first sign of trouble.”
5. Establish your systems and processes.
Prepping your property is only the start. You also need systems to manage it. How will you handle bookings? What about cleaning and stocking the property between guests, or handling questions and concerns?
“It comes down to the time, effort and resources an owner is willing to devote to the success of their vacation rental,” Kirkham says. “If you’re self-managing, in addition to hiring housekeepers, don’t forget to connect with local maintenance and repair professionals that can be on speed dial and available to assist when things go wrong for guests.”
If you don’t have the time to manage the property yourself, you can also bring in a property manager to handle things for you. These come with fees, but they may be worth it depending on your schedule and how often your property is booked.
“Providing hospitality and getting great customer service can be a full-time job, so it’s worth considering whether you have the capacity to do it yourself or if you should hire a property manager to do it for you,” Haler says.
6. List and market your property.
Finally, it’s time to get your property out in front of the public. To start, you’ll need photos of your property; ideally, professional ones. According to Airbnb, professional photos can offer up to 20% more bookings and 20% more earnings.
You’ll also need to create a listing description, choose which platforms to utilize — popular options include Vrbo, Airbnb and Booking.com — and set your rate.
“There are lots of factors that should go into setting your rates, including what day of the week it is, the seasonality of the destination, if there’s a holiday or event happening, the lead time — how far away the date is, and of course your own costs that need to be covered,” Haler says. “Even your cleaning fees should be carefully considered. There may be good reason to bring them down, as having a low cleaning fee can boost your occupancy. On the flip side, high cleaning fees can actually be justified if you’re armed with good reviews.”
Speaking of reviews, Räder says those are often your best marketing tool, particularly in the early days of your rental.
“With your first guests, do everything within your power to earn those five-star reviews,” Räder says. “They are the single biggest point of failure or success.”
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How to Convert a House to a Vacation Rental originally appeared on usnews.com
