How To Start A Short-Term Rental Business?
How To Start A Short-Term Rental Business?
- By: Frank Makrides
- Updated on December 8, 2020
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If you have a spare room or you’re lucky enough to own two or more homes, you have the opportunity to start a short-term rental business.
Renting out a spare room or a second home could bring in significant cash flow that can allow you to live rent-free, mortgage-free and in many cases provide you with a nice flow of positive cash flow income.
Short-term rentals are by no means as passive as long-term leased properties but they do provide a lot more earnings on the same real estate footprint. If treated as a business they can become simple to execute a repetitive forms of income.
Short-term rentals if scaled could even give you the opportunity to quit your 9-5 and completely change your life.
This is easier said than done of course.
But we’re going to give you some extra insight into how this might be able to work for you.
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Short term rental business model
The short-term rental business model is essentially this; you rent out a property that you own on a short-term basis, usually periods of less than 31 consecutive days which in some cases is described as a vacation rental or a short-term vacation rental.
This can be done with a single property or several.
Anyone can start out in the short-term rental business as the first property which they rent out could be their very house which they currently live in.
How do I start a short term rental?
If you’re not sure how you can start your own short-term rental business, then we’re going to give you a simple step-by-step guide on how you can get started with your very first property.
- First, you’re going to need a property to rent out short-term, it’s recommended that you get yourself a triplex – which is a house that has been converted into three separate apartments and each floor has its own entrances and exits as well as being self-contained.
Note: You don’t NEED a triplex when you start out, but it is advised to do so for reasons we’ll discuss.
- Secondly, you’re going to need to make sure that the local government allows you to rent out the rooms/floors of the property out for short-term rent.
- Move into one floor and rent out the other two – you’re going to want to do this to save on costs whilst you’re starting out (hence the recommendation for a triplex)
- Prepare the apartment/floor – your short-term vacation rental must be furnished for you to be able to rent them out; it will require a dishwasher, fridge, microwave, oven, HVAC system.
In one room you will need a bed with all appropriate furnishings (pillows, duvets, etc) as well as side tables with lamps, dressers and a TV.
In your living room, another TV is required as well as one couch, chairs, and lamps.
Lastly, in the kitchen, you will require a table and chairs as well as silverware and dinnerware.
We would further recommend that you do not cut costs on these things, you’re going to want to offer the best experience possible to your short-term renter so that they a) have a good time b) are more likely to recommend you to their friends.
- Place your property on as many vacation home rental sites as your can – adding your rental to sites like VRBO and many more similar sites will just give you more of a chance of being seen – and because you’re accepting payments through a secure portal, you will have peace of mind knowing you’re always getting your money on time.
- Finally – Once you’ve seen success over many months, and you want to develop your rental business, then you’re going to want to purchase more properties for you to rent out.
Be sure to check your local zoning laws, regulations and property management rules where applicable in regards to conforming with short-term rental rules and regulations.
Are short term rentals profitable?
Travelers prefer staying in a vacation rental than a hotel through sites like VRBO because they have full access to a complete home, rather than one little room which they have to inhabit from anywhere between 1-14 days (depending on how long their stay is.)
This whole home is also cheaper for travelers, so it’s very easy to attract a steady stream of guests.
You can set your own prices too, as the host of your own short-term rental property you can increase the rental rate depending on how big the demand is for your particular property to help maximize your gains.
So, when done right short-term rentals are more than profitable.
Please click on the link to check out the IRS guide to “Renting Residential and Vacation Property.“
What is the best rental business to start?
We’ve talked exclusively about short-term rentals when it comes to renting out a property to people who are looking for a short-term vacation home.
But is this the best rental business to start out with?
As always with these things, it all depends on your budget and your knowledge/experiences with this sort of business model.
Including how much time you have to spare to invest in this type of business project.
With that being said, here are some of the best rental businesses to start if you’re looking to make some profit if short-term renting properties doesn’t sound like your thing after all:
- Party Supplies
- Party Character rentals
- Outdoor activity equipment
- Electric scooter/segways
- Bikes
- Camping Gear
- Party Bus
- Party Boat
How do I get started on VRBO?
Assuming that you know whether or not that you can legally rent your property as a short-term rental and you’ve taken the necessary steps to set everything up for your future guests; as discussed previously.
Getting started on VRBO is as easy as signing up and listing your property.
Though, there are still some things you’re going to want to keep in mind.
You’re going to want to check the other properties in the area to see how they are being priced so that you can competitively price yours in response; increasing the likelihood of someone wanting to rent your property.
Next, you’re going to want to focus your attention on your photography skills.
No need to be worried about this one, you won’t need some fancy camera to achieve great pictures, your smartphone will be more than equipped at doing this for you.
Taking photos that make you want to stay there is generally a good rule of thumb when trying to figure out if the images you upload to VRBO will work in enticing future short-term residents.
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Summary
You can take your short-term rental business as seriously or as casual as you want.
You can start out with one property and never move on from that; using what you earn to allow yourself to enjoy the finer things in life.
But this isn’t for everyone, and it doesn’t have to be for you either.
You could start with a singular rental in your first year, and keep adding to your portfolio of properties.
Allowing you to further increase your profit margins, increasing the likeliness of you being able to quit your life-sucking 9-5 job.
Whatever you choose, starting a short term rental business is very easy if you own both a property and a smartphone.
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Frank Makrides
Is a former financial technology industry executive, licensed realtor, real estate investor, an award-winning speaker, has been published, holds multiple patents and is passionate about all things personal finance and entrepreneurship. He is also a proud husband and father of 2 amazing children.
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