How Your Vacation Home can Pay for Itself

The global vacation rental industry is expected to reach $113.9 billion by 2027 according to a Grandview Research report from May of 2020. If you have ever considered owning a vacation income property or converting your home into one, the time to make that move is NOW.

According to former Expedia and Airbnb executive Shaun Stewart the percentage of vacationers going the vacation rental route grew from 1 out of 10 trips in the U.S, to 4 out of 10 trips, a number whose growth he says has only been slowed by the lack of supply to meet the demand. And, an industry that was already benefiting from a "seismic shift" in how people vacation pre-pandemic is now completely revolutionizing the vacation industry.

The pre-pandemic data reported by Grandview Research clearly shows the shift toward rentals at that time. The trend is illustrated in facts such as that 71% of families with children were seeking accommodations with kitchens while 65% of Millennial travelers rated cost as the most important factor when choosing vacation accommodations. The average number of Airbnb units had successively doubled year after year while the number of hotel rooms had grown by a mere 1.1%.  The arrival of sites like Airbnb allowed renters and homeowners alike to more easily manage the rental exchange. As a result, more and more people turned to short-term rentals as a more affordable and convenient alternative to staying in a hotel. 

As the industry continues to grow and the demand for vacation rentals increases the time has never been better to let your property pay for itself. Before you decide if this might be a good choice for you here is what you need to know: 

Rental Management

Short Term Rentals are a great way to create a reliable income source. However, if you're not careful managing your property can turn into a full-time job between marketing your listing, vetting guests, preparing the property for arrival, assuring guests are taken care of during their stay, cleaning the property after departure, and general property maintenance. Unless you plan to spend a good part of your time on these tasks you’ll need to hire a rental management company to do it for you. 

Local Rules

As short-term rentals have become more and more popular, many municipalities have passed laws about them in order to A. get their piece of the income pie and B. to ensure the safety and comfort of all citizens. Chances are your town has something on the books about your new venture so make sure you do your research. 

Taxes

Rental Income is just that, income and will need to be reported on your tax return as such. Most likely you’ll want to create an LLC or other legal business structure so help with this. Consult your accountant on what the additional income will mean for your tax future and plan accordingly. 

Insurance

When you go through a service such as Airbnb or Vrbo they offer “host protection” which provides very basic protection for yourself and your property, however, they are the first to encourage their hosts to get additional property and liability insurance. Even if you are the most responsible and vigilant homeowner there is no way to foresee or prevent every possible incident that may happen. Get insurance. Get good insurance and rest easy knowing that you and your investment are protected. 

Amenities Increase Value

Put yourself in a renter’s shoes. What are the amenities you expect to find in a short-term rental? Things like coffee makers and clean towels? Now ask yourself what are things that you can offer that would go a step beyond and show your guests you have their experience at the forefront of your mind? Thoughtful amenities such as beach chairs and a buggy, a firepit, and a guide to local restaurants can help increase your nightly rate by 10- 15%. Create a niche and amenities that attract a specific clientele and you can expect an increase of 20- 25%. 

Yes, I know all of this may seem like a lot to take in, and it is. An undertaking like this should not be taken lightly. However, with careful planning and smart marketing, short-term rentals of your home could create a healthy nest egg.