10 Tips for Successful Short-Term Rental Property Management
The investment landscape for short-term rentals in the United States is experiencing a significant surge. The sector is flourishing, propelled by online marketplaces like Airbnb and VRBO, and aided by vacation rental management companies such as Vacasa and Turnkey. These platforms have revolutionized how property owners list, find renters, and manage short-term rentals, giving rental owners the ability to achieve brand recognition akin to global hotel chains.
Despite the hospitality industry facing challenges in 2022, short-term vacation rental properties have shown remarkable resilience. According to AirDNA’s 2023 U.S. Vacation Rental Outlook Report, travelers strongly prefer accommodations with home comforts, complete with full kitchens and outdoor spaces. This trend is expected to continue as leisure travel bounces back to pre-pandemic levels, positioning short-term rentals for even greater popularity.
This promising real estate asset is ripe with opportunity for those considering diving into short-term rental management. Yet, it requires careful consideration and strategic planning. This guide will explore key factors to remember before venturing into the short-term rental market.
What is a short-term vacation rental?
A short-term vacation rental is a lodging option where properties, such as apartments, homes, or other unique accommodations, are rented out for short periods, typically ranging from a few nights to a few weeks.
These rentals are a popular choice among travelers looking for more personalized and home-like accommodations compared to traditional hotels. They often come with added benefits like fully equipped kitchens, private living spaces, and the opportunity to stay in residential neighborhoods, offering a more authentic local experience.
Short-term vacation rentals have become increasingly popular with the rise of online platforms that make booking and managing these properties convenient for guests and property owners.
Contrasting short-term and long-term rental property management
Understanding the fundamental differences between managing short-term and long-term rentals is essential for property managers and owners to tailor their approach effectively. While we've previously delved into the various aspects of short-term rentals, let’s now focus on contrasting these with long-term rental management in the following areas:
- Market engagement and pricing strategies: Short-term rentals typically cater to vacationers and business travelers, requiring active and ongoing engagement in marketing, paired with dynamic pricing based on seasonal demands and local events.
On the other hand, long-term rentals appeal to residents seeking stability, with pricing often set annually and less influenced by short-term market fluctuations.
- Furnishing and amenities: Short-term rentals are usually fully furnished and offer various amenities to enhance the guest experience, much like a hotel.
In contrast, long-term rentals are often unfurnished or semi-furnished, leaving room for tenants to personalize their living space.
- Operational intensity and involvement: The operational intensity is higher in short-term rentals due to frequent guest turnovers, requiring more active involvement in booking management and guest services.
Long-term rental management is generally more passive, focusing on periodic check-ins and maintenance.
- Legal and tax implications: Short-term rental owners might need to navigate various local regulations, including specific tax obligations related to transient lodging.
Long-term rental management is typically governed by standard residential tenancy laws, which are usually more straightforward.
- Insurance and liability: The insurance requirements for short-term rentals are often more complex, reflecting the higher turnover and associated risks.
Long-term rentals usually require standard landlord insurance policies.
- Tenant relationship management: The relationship with guests is brief and transactional in short-term rentals.
In long-term rentals, landlords have the opportunity to build longer-term relationships with their tenants, which can lead to more consistent rental income and potentially lower tenant turnover rates.
While both short-term and long-term rental management can be profitable, they require distinct strategies, mindsets, and resources. For many property managers and owners, choosing between the two often depends on investment goals, lifestyle preferences, and the amount of time they can dedicate to property management.
What are the benefits of investing in short-term rentals?
Financial payoff is one of the biggest perks of investing in short-term rentals. Demand rises during peak tourism seasons, meaning landlords can charge higher rates, resulting in better margins and more cash flow. For example, you can potentially get $1,200 of rental income per week on a short-term rental property that would have collected $1,200 per month for long-term tenants — especially when renting during busy windows, like holiday breaks.
Short-term rentals also afford property owners added freedom and flexibility. By investing in short-term rentals, you can block off time to use the unit yourself throughout the year.
Want to rent your Grand Cayman unit out for 11 months of the year, then spend all of February swimming in the Caribbean Sea? With short-term rentals, that’s not a problem, as renters aren’t the only ones who can enjoy your property.
Challenges of managing short-term rentals
Of course, nothing comes without its downsides. Here are five potential drawbacks to consider when investing in short-term rentals and why you might choose to rent your property long-term instead:
While prices may spike around busy holidays like the Fourth of July or Christmas, seasonality can also mean higher vacancy rates and inconsistent cash flow. For instance, a New England beach town rental may get fewer guests during the snowy winter months, and a Houston apartment may see more vacancies during the stiflingly humid summer season.
A long-term lease ensures a relatively steady, predictable source of income throughout the year. If stability is important to you, it might be better to simply rent your property to one tenant on a 12- or 24-month contract.
More time spent managing
If you’re looking for a hands-off investment option, the short-term rental market may not be for you. As the landlord, you’ll be dealing with renters, cleaning, and maintenance on a more regular basis. Alternatively, you can hire a property manager to take this responsibility off your plate, which would cut into your profit margins — more on this later in the article.
Increased cleaning and maintenance costs
Increased guest turnover and higher expectations from vacationing visitors mean short-term landlords will incur more rental expenses to keep their property in tip-top shape. To this end, many landlords investing in short-term rentals must build these costs into the listing price by charging higher rents or additional cleaning fees.
Alternatively, long-term rentals typically require less maintenance, cleaning, and time spent dealing with tenants. That said, once your long-term tenant leaves, you’ll likely have to do a small renovation to the unit, like repainting or installing new carpets that have deteriorated from the everyday wear and tear long-term tenants inflict on a property.
More renters may mean more headaches
Inviting a larger pool of people into your property also opens the door for potential problematic renters. With short-term rentals, you may come across irresponsible guests who mistreat your facilities, are especially noisy, or otherwise leave a bad impression on your neighbors. Avoid these situations by looking at potential guests’ reviews from other short-term rental hosts and creating house rules to which all guests must agree.
Evolving short-term rental regulations
As with many urban areas, New York City has implemented strict regulations for short-term rentals. The most notable is Local Law 18, which requires hosts to register under short-term rental laws with the city and restricts short-term rentals of entire apartments to periods of less than 30 days, unless the host is present. This aligns with regulations in other cities like San Diego, which caps short-term rentals at 1% of the city’s housing stock, with specific exceptions.
These regulations reflect a growing trend in managing the impact of short-term rentals on local housing markets. In NYC, condo and co-op owners must be particularly aware of their building's rules, as many homeowners' associations have strict policies regarding short-term rentals.
Given these evolving regulations, property owners need to consider the long-term viability of their rental strategy. In cities like New York, flexibility in transitioning between short-term and long-term rentals is pivotal. Utilizing property management services for efficient lease and tenant screening can significantly aid this adaptability.
10 ways to effectively manage short-term rentals
Ready to invest in short-term rentals? Here are ten tips for successfully managing your properties and maximizing your investment:
1. Hire a property manager
If you’re using a vacation rental management platform like Vacasa or Turnkey, you should be all set on the property listing and management front. But, if you’re listing your vacation rental property using a booking site like Airbnb or VRBO, you may want to hire a reputable property manager.
Otherwise, be prepared to handle the day-to-day responsibilities — including creating online listings, booking guests, coordinating check-ins, managing tenant communication, collecting rent, scheduling cleaning and maintenance, and more. Remember, build your property management costs into your rent price so you can immediately achieve positive cash flow.
2. Obtain any required business licenses
Ensuring legal compliance is key when setting up your short-term vacation rental business. This typically involves:
- Acquiring a general business license: Most cities mandate a general business license for any operational businesses, including short-term rentals.
- Securing a short-term rental license/permit: Tailored to short-term rentals, this license is crucial for meeting local zoning and safety standards.
- Obtaining a certificate of occupancy: This confirms your property's compliance with building and safety codes.
- Completing additional registrations: Depending on your locale, you might need to register with the Secretary of State, get an EIN from the IRS, or acquire a sales tax permit.
It's essential to stay updated with local regulations, as they change frequently. Consulting a local real estate expert or legal advisor is always a good practice to ensure you meet all legal requirements.
3. Create an attractive (but accurate) listing
Photos are among the top reasons guests book a specific short-term rental. Transport prospective guests to your property with detailed descriptions and high-resolution images featuring clean, well-lit rooms.
Don’t underestimate the power of photography — consider hiring a professional photographer to capture your property in the best light. Airbnb reports that hosts with high-quality photos tend to earn 40% more money than other hosts in their area and can charge higher nightly prices after upgrading their photos.
4. Offer attractive amenities and features
Free parking, a stocked kitchen, complimentary wine, Netflix access, local guidebooks, high-quality towels, and other amenities go a long way to driving repeat visitors and positive reviews. Make your guests feel welcome with small but meaningful touches.
For example, if you’ve got a beach rental, consider providing free beach chairs and toys.
5. Focus on getting positive reviews
Great reviews can make all the difference between a potential guest staying with you or choosing a nearby competitor. To get the best ratings possible, prioritize clear and fast communication, accurate property descriptions and photos, and amenities and features that make guests feel at home. Going above and beyond to ensure early renters have an excellent experience (and leave five-star reviews) will pay off in the long term.
6. Prioritize maintenance and cleanliness
No one wants to rent a unit with leaky faucets, chipped paint, musty bathrooms, or a broken air conditioning system. You can either make maintenance a priority or risk your short-term rental reputation — and profits. Guests turned off by a bad experience will likely give others a heads-up in their review of the property.
7. Be energy-efficient
Make efforts to try to keep utility bills down. After all, you’re the one paying for them when you manage a short-term rental. A few simple and resourceful steps include replacing incandescent light bulbs with LEDs, choosing Energy Star appliances, regularly changing air filters (which can collect dust and stress your HVAC system), and installing low-flow shower heads in bathrooms.
8. Be prepared for expenses
Plan and budget for the many costs that come with managing a short-term rental property, including utilities, furnishings, a regular cleaning service, entertainment subscriptions (cable, Netflix, Hulu), landscaping maintenance, repairs, basic supplies (toilet paper, bath products, laundry detergent, etc.), and welcome baskets. These expenses typically aren’t part of managing a long-term rental.
9. Protect your assets
Consider setting up an LLC for your short-term vacation rental property management business to reduce your liability risk. In addition, make sure you have the right rental property liability insurance and coverage to protect your property and furnishings against potential damage or loss. To take things one step further, create renter guidelines and house rules to prevent damage and complaints from neighbors.
10. Stay organized for tax season year-round
Ensure a stress-free tax season by creating a rental property accounting system to track income and expenses and generate accurate financial reports. Consider opening a dedicated bank account for your short-term rental that you use to receive rent payments and pay all related bills. This will make tracking your properties’ performance much easier while avoiding co-mingling with personal or other business accounts.
For example, Azibo’s all-in-one financial platform allows landlords to collect rent, pay vendors, and manage bookkeeping. You can also tag expenses by Schedule E category and assign them to specific properties. With everything in one place, you’ll maximize the real estate tax benefits and won’t have to track down a year’s worth of transactions come tax season.
Platforms for marketing and managing your short-term rental
Successfully marketing and managing short-term rentals involves leveraging the right online platforms and management services that not only attract guests but also simplify the management process. Here’s a guide to some of the best sites currently dominating the short-term rental market:
- Airbnb: A global leader in short-term rentals, Airbnb offers a user-friendly interface for both hosts and guests. It’s renowned for its vast audience reach, dynamic pricing options, and robust booking system. Hosts can utilize Airbnb’s platform for everything from listing creation to guest communication.
- VRBO (Vacation rentals by owner): Specializing in vacation rentals, VRBO is ideal for property owners looking to rent out their entire home. It offers a straightforward listing process and targets a demographic seeking full-property rentals.
- Booking.com: Known for its extensive reach in the travel accommodation sector, Booking.com is an excellent platform for hosts aiming to tap into a global market. It’s particularly effective for short-term rentals in popular tourist destinations.
- Expedia: As a primary travel booking site, Expedia attracts many travelers. Listing your short-term rental on Expedia can increase visibility, especially for properties in or near tourist hotspots.
- TurnKey: A vacation rental management company that provides full-service management, TurnKey is perfect for hosts who prefer a hands-off approach. They handle everything from marketing to maintenance, albeit at a higher cost.
- Azibo: For the financial aspect of property management, Azibo offers a comprehensive solution. Their platform simplifies rent collection, provides financial tools for landlords, and assists in tenant screening, making the financial management of short-term rentals more efficient and streamlined.
- Zillow Rental Manager: Ideal for advertising and managing rental listings, Zillow Rental Manager allows property owners to reach a large audience of potential renters. It’s particularly effective for short-term rentals in residential areas.
- HomeAway: Now rebranded as part of VRBO, HomeAway continues to be recognized for its effectiveness in reaching travelers interested in vacation home rentals.
Each platform has unique strengths, and choosing the right one(s) can depend on your specific property type, location, and management preferences. In addition to listing on these sites, consider building a direct booking website for your rental property to enhance your online presence and reduce dependency on third-party platforms.
Effective use of these platforms, combined with efficient management practices, can significantly boost the success of your short-term rental business.
Key factors to consider when selecting a short-term rental platform
Choosing the right platform for marketing and managing your short-term rental property is a critical decision that can significantly impact your success in the rental market. Here are essential factors to consider when selecting a platform:
- Market reach and audience: Assess the platform's user base and market reach. Platforms like Airbnb and VRBO have a vast global audience, which can increase the visibility of your property. Consider the type of travelers the platform attracts and whether they align with your target guest demographic.
- Fees and commission structure: Understand the fee structure of each platform. Some may charge a flat percentage per booking, while others might have a tiered fee system. Knowing how these costs will affect your revenue and pricing strategy is crucial.
- Ease of use and management tools: The platform should offer a user-friendly interface for both hosts and guests. Look for features like easy listing creation, calendar management, automated messaging, and financial tracking. Platforms that offer integration with tools like Azibo can streamline rent collection and financial management, making the administrative side of property management more efficient.
- Payment processing and security: Reliable and secure payment processing is essential. Examine how each platform handles payments, the security measures in place to protect financial transactions, and the timeline for payouts to hosts.
- Customer support and service: Strong customer support for both hosts and guests is vital. Look for platforms that offer robust support, including help with dispute resolution, property damage claims, and assistance with guest-related issues.
- Reviews and reputation: Check the platform’s reputation and read reviews from other hosts. Positive testimonials and a strong track record can be indicators of a platform’s reliability and effectiveness.
- Marketing and SEO capabilities: Some platforms offer additional marketing tools and SEO benefits to enhance your property’s visibility. This can include featured listings, promotional tools, and optimization for search engine visibility.
- Flexibility and control: Evaluate how much control you have over your listing, including setting house rules, cancellation policies, and pricing. Some platforms offer more flexibility, allowing you to tailor your rental to your needs and preferences.
- Legal and regulatory compliance: Ensure the platform adheres to local regulations and helps you stay compliant with laws related to short-term rentals. This is particularly important in cities with strict rental policies.
- Additional services and partnerships: Some platforms offer extra services or partnerships that can enhance your rental business, such as professional photography, cleaning services, or property insurance options.
By carefully considering these factors, you can choose a platform that helps you effectively market and manage your rental and aligns with your business goals and operational style. The right platform can be a powerful partner in achieving success in the competitive short-term rental market.
Successfully managing short-term rentals
Short-term vacation rentals present a dynamic and potentially lucrative investment opportunity. These rentals cater to travelers seeking unique, personalized lodging experiences, often providing amenities that traditional hotels can't match. While the financial benefits during peak seasons are appealing, it's important to weigh the challenges involved, such as fluctuating demand, increased management responsibilities, and evolving regulations.
For those interested in this market, effective management is key to success. This marketing strategy includes obtaining necessary business licenses, creating compelling listings, offering attractive amenities, and ensuring exceptional property maintenance and cleanliness. Additionally, focusing on energy efficiency, preparing for various expenses, and protecting your assets are vital steps.
One of the essential aspects of managing short-term rentals is staying organized, especially in regards to finances. Many property management companies like Azibo can simplify rent collection, vendor payments, and bookkeeping by leveraging financial platforms designed for landlords. Such tools help in efficient property management and ensure you're well-prepared for tax season, maximizing potential real estate tax benefits.
Whether opting for short-term or long-term rentals, it's crucial to stay adaptable and informed. By embracing the right strategies and tools, property owners can navigate the complexities of the rental market and make the most out of their investments.
Short-term rental management FAQs
How profitable is a short-term rental?
The profitability of a short-term rental property can vary significantly based on factors like location, property condition, and management efficiency. Due to dynamic pricing strategies, properties in high-demand tourist areas or major cities like San Diego and San Francisco often see higher rental income.
Efficient property management, such as using top property management companies or Airbnb property management services, can optimize pricing and reduce operational costs. Additionally, using platforms like Azibo can help in streamlining rent collection and financial management, contributing to higher net operating income.
Are short-term rentals still a good investment?
Yes, short-term rentals remain a viable investment option. With the rebound of the hospitality industry and the rising popularity of vacation rentals, investing in properties managed under short-term rental property management can yield significant returns.
However, it's essential to consider factors like fluctuating market demand, property management fees, and the ongoing need for property maintenance. Engaging with professional vacation rental property managers or vacation rental management companies can assist in maximizing the investment's potential.
What is defined as a short-term rental?
A short-term rental is typically defined as a furnished living space rented out for short durations, ranging from a few nights to several weeks. This category includes vacation rental properties often listed on platforms like Airbnb, VRBO, etc.
These rentals are distinguished from long-term rentals by their temporary nature and are often preferred by business travelers, vacationers, and those seeking temporary accommodations. Owners of short-term rental properties may work with various property management services, including Airbnb property management companies, to effectively manage the rental process, guest communications, and maintenance services for managing properties.