Short-term rental sites like Airbnb and Vrbo are becoming more popular as people seek unique experiences or desire more privacy than a hotel. When thoughtfully done, property owners can make a hefty profit from renting out their home short-term.
If you frequently travel or have an ADU, attic, or finished basement that could be desirable, it may leave you wondering about renting your home out short-term. Before you take the leap, here is what you may want to consider.
Check Local Rules
Your state or municipality may have laws or restrictions regarding short-term rentals. Some areas may have added taxes for short-term property owners to support local tourism and hotels or bolster available properties for long-term rentals. Additionally, be aware that if your home resides in an area governed by an HOA, additional restrictions may exist–including rules preventing short-term renting entirely.
Evaluate Your Location
A short-term rental is only as successful as its location. For this reason, not everyone’s home will be a successful short-term rental option. However, this doesn’t mean you must live in a tropical beach town to rent your space. If your local area hosts concerts, is a central location between two hot-ticket destinations, or has a particular small-town charm, you may still garnish a lot of interest.
Consider the Time Expenses
Having extra revenue in your pocket at the end of the month is appealing to everyone, but short-term rentals can be a big time-sink if you aren’t prepared. You will need to ensure your rental is furnished and between each renter. In addition, you’ll want to stock the kitchen with supplies and ensure bathrooms are complete with all necessary toiletries. Replenishing supplies and cleaning the rental can take time, as will maintaining bookings and letting in renters. Some or all of these tasks can be outsourced, but that will cut into revenue.
Calculate the Income
Before jumping in, you’ll need to determine if it makes financial sense. Find out what other properties in the area are charging for rent. Calculate your yearly revenue by multiplying the rental rate by the number of nights the property is expected to be rented. Subtract any potential expenses for a rough estimate of revenue. Don’t forget to include any additional insurance costs in the mix–you don’t want to be in a position where you lack coverage if something were to happen to your house while a renter was occupying the home.
