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ContinueWhat do you need to know about short term rental management? We explore pros and cons and actionable advice for rental management.
In this guide, we take a look at everything you need to know about short term rental property management. Should you be renting your space out as a vacation rental on a platform like Airbnb, or should you instead be looking for long-term tenants?
On the one hand, you can expect higher rent rates with short-term rentals – however, they are often seasonal, and on top of that, the management of short-term rentals comes with a little more involvement from the landlord. People expect excellent service and quality experiences when it comes to Airbnb’s – they are on holiday after all – and one bad review can see your occupancy rates drop dramatically.
Short-term rentals are most commonly used by people either on vacation or business trips. As such, stays vary from a few nights to several weeks. A short term rental is normally a residential property, unit or accessory dwelling that is rented out to guests for no more than 30 consecutive nights at a time. However, the maximum length can vary depending on the state and jurisdiction in which the rental is located.
Month-to-month leases are generally not considered short-term if there is no specified end date.
Short-term rentals can refer to single-family houses, multi-family properties, or even individual rooms in either of these.
Related: The Short-Term Rental Tax Loophole: What Investors Need To Know
The term short term rental management refers to overseeing and running short-term rental properties using property management software (like Landlord Studio) or general property management services. The person or company in charge of managing a short term rental property will need to tackle an extensive daily checklist including:
In essence, the primary aim of short-term property management is to ensure the seamless operation of the business, deliver a top-notch guest experience, and boost the Return on Investment (ROI) for your short-term rentals.
Given that there are different risks associated with short-term rentals, it pays off to be prepared from the beginning. Before you dive in and list all of your properties on Airbnb or VRBO, ask yourself the following questions:
Once you’ve decided that your property and investment style are right for the job you need to consider both the advantages and disadvantages of running a short term rental vs investing in long term residential property.
In the US, the average rate in 2021 for a private room in a house on Airbnb was $66 a night. That works out as $462 a week, or $1980 a month, for just 1 room in a house. A whole property is much more valuable.
This being said, whilst people are willing to pay a premium for vacation rentals, they also expect more for their money. An increased level of service, obviously, you need to supply it furnished and it needs to be well maintained.
All of these factors contribute to a large increase in the setup and running costs of a short-term rental (which is the reason you can and need to charge more).
Often, people fall into short-term rental management when they decide to rent out a second home. In this scenario, you might want to maintain a week or two in the properties calendar for you to visit on your own vacation.
During the rest of the year though, there’s no point leaving the property vacant – not only because vacant properties often deteriorate without attention, but they can become targets for thieves. It makes more sense to rent it out as a short-term rental. This will allow you and your family (with planning) to use the property as well, and it can start paying for itself as opposed to being a financial burden.
The final bonus is that with a short-term rental you get many of the same key tax benefits that come with owning a rental property. Depending on how active you are in the running of your properties you may be able to deduct up to $25,000 in expenses.
One of the major disadvantages associated with short-term rental management is the increased vacancy rates for properties. As mentioned before, depending on the location of the property, it might only be fully booked during appropriate seasons.
For example, if you own a lodge near a ski resort, it will be full during the winter months, but may be more or less empty for the rest of the year. Higher vacancy rates can be costly, as they mean prolonged periods of time without rental income.
The cost of running a short-term rental or Airbnb includes increased maintenance costs, cleaning costs after every visitor, as well as taking into account the extra time and effort that you as the landlord will need to put in. This contrasts with long term rentals where professional cleaning and maintenance is not needed as frequently.
Another demanding aspect of short term rental property management is that more time and effort is required from the landlord than when running a traditional long-term rental. Energy needs to be put in to make sure that guests leave excellent reviews and that their experience, not just the property itself, is exceptional.
Because of the customer-centric focus of vacation rentals, not everyone is suited to short-term rental management. Many people outsource to management companies which further cuts into their profits.
The first rule of successful vacation rentals is that they live and die on the reviews they get. Bad reviews will see your vacancy rates climb and the amount that you can charge decline.
Simple touches like recommendations for local things to do, local events, or the best restaurants will help your guests have a great time. A small welcome gift is another thing that many hosts also include.
Being a landlord comes with some beneficial tax regulations. However, if you don’t know what they are, you could end up leaving thousands of dollars on the table.
You can rent out all or part of your home or apartment for up to 14 days per year and all the rental income you receive is tax-free, no matter how much you earn. In fact, your rental income is tax-free if, during the year:
However, if you do rent it out for more than 14 days of the year you will need to file a supplemental profit and loss income form.
You can read more about filing your rental income in IRS Publication 527.
Related: 6 Real Estate Investing Tax Strategies You Need To Know
With short term rental management, there are utilities and cleaning expenses to pay for, higher and more frequent maintenance costs, and also the cut that the listing platform is going to take.
Given all of these moving parts, budgeting is an incredibly important component of short term rental property management. Every expense needs to be accounted for.
Imagine you have to explain every single expense to a business partner – suddenly that $300 you spent on cushions seems like an embarrassing investment. Whilst you want to offer your guests a high level of experience you should balance that carefully with your income to achieve a positive cashflow property.
Related: How Much Cash Flow is Good For a Rental Property?
With the increased turnover of guests at a short-term rental property, there is also likely to be significant wear and tear.
And whilst wear and tear is to be expected, guests in short term rentals are often ruthless in reviews. As such, short term rentals need to be maintained to an exceptional standard.
Not convinced? Let’s run through a hypothetical – it’ll be fun (promise).
You’re going on holiday. It’s exciting, it’s the first time you’ve managed to get away from the office with the family for years. Plus, the Airbnb you’ve booked looks amazing.
You drive a few hours, kids chattering in the back of the car nonsensically.
Finally, after being led astray by Google Maps several times, you arrive. There's a lockbox in with the keys. You open her up, step inside, and a feeling of depression hits you like a buffalo. Your family walks up behind you. And the excited chatter that lasted all that drive quietens to an ominous silence.
The insalubrious nature of this Airbnb has, there is no doubt, ruined your vacation. Your depression lifts, and anger takes its turn straddling your chest. You decide you are going to do everything you can to make sure this never happens to another excited holidaymaker. It is now your mission, your singular purpose, to take down the Airbnb catfisher.
For dramatic effect, this is perhaps an extreme example, but I think I made my point. Vacation guests expect excellence. Keep the property nice or suffer their wrath.
Related: The Complete Property Management How-To Guide for Landlords
One challenge that comes with short-term rental property management is setting the right rental price. A lot of things can determine the rental price, amenities, location, square footage, and more.
To determine what you should be charging may take a little trial and error, and you may also have to adjust the rental price depending on the season.
To determine your short-term rental prices you will want to do some comprehensive market research. Look at what comparable properties in similar locations are charging on platforms like those listed above and use those rentals as a guideline.
For a short-term rental, you as the landlord are going to be paying the utility bills, even when no one is staying. Investing in energy-efficient solutions for the property will keep your utility bills down and help improve your cash flow. This could mean installing smart meters or lights, to better regulate the temperature and energy usage of the property.
Wherever you decide to list your short-term rental, you are likely going to be fighting for the spotlight in a sea of comparable offerings. In order to make your listing stand out there are a few things you can do:
Speaking of the importance of photography, here are three stats that prove just how important great photography is to online property listings:
You can outsource short-term rental management to a professional company. This is great for people that are looking to earn 100% passive income. However, it does come at a high cost. There are several payment structures that you might choose from:
The alternative, is to take on short-term rental property management yourself. Thankfully this has never been easier than it is now with listing sites like Airbnb and VRBO, and property management and accounting software like Landlord Studio.
Short term rentals in some markets can be incredibly lucrative, and in order to scale your operations you might decide to look at property management companies willing to take on the majority of the work involved. This will free up your time, allowing you to focus on finding new deals and making your income more passive.
However, since short-term vacation rental properties necessarily require greater attention to detail, with small personal touches like welcome communications, fresh flowers or gifts like chocolates and champagne, laundry facilities or services, a well-maintained private space to relax, and local tips and advice, outsourcing the management of these is often expensive. There’s no getting around paying for the time it takes to pay that level of attention.
In fact, you can expect to pay as much as 30%-50% of the total revenue. This cost is dependent on the level of service you require, with the higher end of that spectrum generally including marketing and professional management services.
A more cost-effective solution is to self-manage your short term rentals. By utilizing tools like Landlord Studio you can simplify this management, and once you’ve developed processes and found quality contractors for things like maintenance and cleaning you can streamline day to day operations.
That being said, if you’re looking to scale your portfolio, you may find that operating your short term rentals yourself is just not practical, taking up too much of your time.
Whether you choose to self-manage or outsource your short term rental property management depends on your available time, property location (it’ll be easier if you’re closer to the property), and long term investment goals.
If you're opting to delegate the management of your short-term rentals to a company or service provider, start by outlining the tasks you need assistance with. then before finalizing any agreements, conduct thorough research taking into account the following factors:
Airbnb is the industry staple for short term rentals. Originally designed to enable people to easily rent out rooms in their house, it has developed into a fully-fledged private short term rental platform.
You’ll want to consider the costs of hosting—including cleaning, higher utility bills, taxes, and Airbnb’s host fee, which is 3% for payment processing. Your guests pay Airbnb’s 6% to 12% booking fees.
Homeowners on VRBO can only rent out whole properties, which means you can’t use it to rent out space in your own home. This is unlike Airbnb where you may also book a room in a shared house. VRBO will handle bookings and your calendar for you. The commission that VRBO charges for pay-per-booking listings start at 8% per booking.
Vacasa offers a more comprehensive service to the previous two on the list. As North America’s largest property management company with over 25,000 short-term rentals currently under their management. Vacasa provides a variety of services, from guest screening, helping you with taxes and permits, to 24/7 guest service.
Evolve Vacation Rental will primarily help you with the marketing of your property and help you fill and manage your bookings calendar. However, they also offer 24/7 support for guests, making it a good solution for landlords who want a more hands-off experience. Evolve has one of the lowest fees on the market — 10% of your Airbnb revenue.
Casago is a vacation rental management company operating in Southwest US and Canada. Every property managed by Casago receives an onsite property manager whose job is to ensure a perfect guest experience. This personalised and detailed property management experience will help ensure your guests have an incredible time, reviewers stay positive and your rental stays full.
Hundreds of people use Landlord Studio to help them with their short-term rental property management.
This saves them a huge amount of time when it comes to filing taxes at the end of the year, as well as offering succinct and clear financial overviews of their rental portfolio.
With Landlord Studio you can stay on top of your short term rental's income and expenses and ensure you're maximizing your end of year tax deductions. There is a built in receipt scanner, a GPS mileage tracker, and integrated bank feeds for fast reconciliation, all designed to make it as easy as possible to keep accurate audit proof records.
At the end of the month you can quickly run any of over 15 reports to quickly dig down into your short term rentals financial performance, analyze occupancy stats, identify areas of overspend, and determine seasonal patterns. At the end of the tax year, simply send these reports on to your accountant for an accurate and easy tax season.
You can also set reminders for important events, like property inspections, safety certificate renewals or even to mark the arrival of new guests.
Short-term rental property management isn’t the right choice for everyone or every property. However, when done right, short-term rentals can be incredibly lucrative. Not to mention, the additional benefits of meeting fascinating holiday makers from all over the world and having your own accessible slice of paradise to visit when it’s finally your vacation time.
However, investors do need to understand that investing and managing short term rentals comes with higher costs and larger time requirements, especially if you are self-managing. From managing bookings to maintaining the property to ensuring your guests have the best stay possible so they leave a glowing review.
As such it is absolutely crucial that investors employ the best possible tools, like Landlord Studio to help them stay on top of their investment finances and maximize end-of-year tax deductions so you can run a profitable and sustainable short term rental property business.
Landlord Studio is an easy to use property management and accounting software designed for landlords.
Find and screen tenants, collect rent online, track income and expenses, run reports, and more - all for free.
Learn how you can simplify your year-end tax preparations. Join Our Free Webinar with guest speaker, Real Estate CPA Thomas Castelli.
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