Short-term rentals are a burgeoning industry. You can make big profits whether you rent a vacation home on Airbnb, VRBO, or through a property management firm.
There are numerous factors to consider before renting a property. After all, you’re beginning a business, and short-term rental rules and regulations apply. Let’s take a look at some of the things you’ll need to think about when beginning a short-term vacation rental company.
Check the zoning laws in your area.
Make sure a property is zoned for short-term rental before renting it. Because of the popularity of online rental platforms, towns and counties are rapidly enacting short-term rental restrictions. Specifics can be found in your city’s zoning or administrative code. These restrictions usually apply to short-term rentals of fewer than 30 days and properties where the owner is not present during the rental period.
In some cities, the length of time a property can be rented is also limited. Short-term can refer to anywhere from 30 to 180 nights each year, depending on the locale. Zoning restrictions also limit the number of people who can stay in a house at any given moment.
You might discover that a city restricts short-term rentals to primary residences only or outright prohibits them. If you rent your home, check your lease agreement to see if subletting is allowed.
Finally, if your home is part of a Homeowners Association (HOA), your HOA may prohibit short-term rentals or limit the number of visitors or pets that can remain at any given time.
Make a business strategy.
A business plan is required to ensure the success of your short-term rental business. A well-thought-out strategy may help you identify hazards, as well as get capital to extend and grow your business.
Here’s an example of a business plan for a short-term rental:
- Executive summary: A synopsis of your business, your property differentiators, and why your vacation rental business will succeed.
- Company description: Describes your company in detail and highlights your competitive advantages.
- Management and organization: Who will operate your company and how it will be constructed. Will it be a partnership, LLC, or S-Corporation, for example? Who will be in charge of day-to-day operations?
- What is the industry’s forecast, according to market research? Who are the people you want to sell to? What kind of competitors do you have?
- A description of your funding requirements, thorough financial statements, and a financial statement analysis are all included in your financing plan.
- A marketing strategy is a comprehensive plan for reaching out to potential customers and converting them into paying customers.
Consider creating a corporation.
It’s critical that you handle your short-term rental like a business and structure it accordingly. Consider creating a limited liability business (LLC) or corporation to protect your personal assets in the event a guest sues you. These organizations also offer tax advantages.
General company insurance can provide an additional layer of security.
To identify the best route for your new business, consult an attorney and an insurance broker.
Obey all tax laws.
Short-term rentals, like hotels, must register, collect, and remit sales and occupancy taxes (also known as lodging tax). The requirements vary by location, but you’ll normally need to register your business with municipal, county, or state agencies for tax purposes.
Rental tax is paid by your guests at the time of booking. It is, however, your responsibility to remit such tax to the appropriate government agency. If you don’t, you could face penalties and interest on the unpaid tax.
Consider partnering with a property management company or an online booking platform to avoid any liabilities or problems (many will automatically collect and pay occupancy taxes on your behalf).
Make an application for licenses and permissions.
A general business license and a short-term rental license are two common licenses and permits required before renting your property.
In most states, any business owner, including short-term rental owners, is needed to have a general business license. A short-term rental license, on the other hand, verifies that your property is up to code and meets specific health and safety requirements (fire extinguishers, smoke detectors, etc.). You’ll also need proof that you’re abiding by zoning restrictions and that your neighbors are aware that you’re renting.
Additionally, some localities need you to obtain a permit before renting your property. A home inspection and an annual fee are required.
More information on specific licensing and permit requirements can be found on your city’s and state’s websites. An attorney or a legal services provider can also help.
Make your rental stand out from the crowd
Consider your location and prospective customers when you create your business plan. This will influence your marketing strategy as well as how you decorate and equip your home.
Are your visitors primarily families, business travelers, or outdoor enthusiasts? Each person will have their own preferences and needs. Make certain that your property satisfies those requirements.
Invest in high-quality security.
With home security, you can keep your visitors and your property safe. Doorbell cameras and sensors, smart lighting, recording devices, and other deterrents are examples of smart technology that may provide you and your guests with peace of mind. They also dissuade unwanted visitor conduct and give video evidence in the event of an incident.
Establish a price range
The way you price your short-term rental will have a significant impact on its performance. You want to be competitive, but you also want to be able to pay your bills (both expected and unexpected).
When deciding on your pricing, keep the following in mind:
- Rent vs. mortgage
- Premiums for insurance
- Fees for business licenses and permits
- Repairs and renovations
- Fees for listing
- Cleaning and laundry services are available.
- Fees charged by the homeowners’ association
- Appliances that are newer
- Place your home on the market.
There are more possibilities for listing your property than ever before, including online platforms and property management firms. You also don’t have to limit your list to just one item. The more listings you have, the easier it will be for potential visitors to locate your property.
Starting with Airbnb and VRBO is an excellent idea. Guests can easily search for hotels depending on their interests, and each platform handles most of the back-office labor, such as reservations, marketing, tax collection and remittance, and more.
You can also build your own real estate website. This gives you more control over your listing and eliminates the need to pay service fees to third-party listing firms.
It’s also a good idea to use social media to advertise your short-term rental. You can publish regular updates, photographs, and specials, as well as communicate and engage with prospects and returning guests, in addition to reservation links.
Renting tasks can be automated.
Look for strategies to streamline property management and bookings because short-term rentals have a high guest turnover. Online reservations, guest reviews, contactless and keyless check-in, occupancy tax remittance, payment processing, and other features can help you and your visitors have a more smooth experience.