{"id":177957,"date":"2024-10-02T14:51:45","date_gmt":"2024-10-02T20:51:45","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=177957"},"modified":"2024-10-02T14:51:48","modified_gmt":"2024-10-02T20:51:48","slug":"5-steps-to-starting-a-short-term-rental-business","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/5-steps-to-starting-a-short-term-rental-business","title":{"rendered":"5 Steps to Starting a Short-Term Rental Business"},"content":{"rendered":"\n

So, you\u2019ve decided to dive into <\/span>the world of<\/span> short-term rentals\u2014whether it’s Airbnb, VRBO, or whatever acronym you want to use. Congratulations! <\/span>You\u2019re going to<\/span> be rolling in passive income and five-star reviews every single time, right? Wel<\/span>l\u2026m<\/span>aybe not at first.<\/span><\/p>\n\n\n\n

But don’t worry, I\u2019ve made all <\/span>of<\/span> those mistakes, so you don’t have to. I\u2019m here to help turn your short-term rental into a long-term success. Let\u2019s break down the five essential steps to starting your STR business and <\/span>getting ahead<\/span> in this competitive market. <\/span>Whether<\/span> you’re just starting <\/span>out<\/span> or need a refresher before acquiring your next property<\/span>, you\u2019re in the right place<\/span>.<\/span> <\/span><\/p>\n\n\n\n

1. Determine What You Can Afford and Explore Financing Options<\/span><\/h2>\n\n\n\n

First things first, set your budget. Before jumping into the Airbnb game, you need a clear idea of how much you can afford to spend on buying or <\/span>even<\/span> renting a property. Don\u2019t forget to account for additional costs like furnishing, setting up utilities, and <\/span>any<\/span> ongoing maintenance expenses. Trust me\u2014unexpected costs are guaranteed, so build <\/span>in<\/span> a cushion to keep things stress-free.<\/span><\/p>\n\n\n\n

Once your budget is in place, start exploring loan options. If buying is your goal, now is the time to talk to <\/span>investor-friendly lenders<\/span><\/a>. Look into various mortgage options, such as traditional loans, investment property loans, or specialized short-term rental products like DSCR (Debt Service Coverage Ratio) <\/a><\/span>loans<\/span>. Compare interest rates, down payment requirements, and terms to find the best fit for your financial situation.<\/span><\/p>\n\n\n\n

I always recommend shopping at least three lenders to see the different fees associated with it. <\/span>Applying for a mortgage will briefly <\/span>ding<\/span> your credit and the impact is relatively small.<\/span> With mortgages, you can have your credit report pulled by additional lenders with no <\/span>impact<\/span> to<\/span> you<\/span> as long as it\u2019s within 45 days of the first credit pull. <\/span>This<\/span> encourages shopping quotes so <\/span>that you<\/span> do not feel handcuffed to one lender.<\/span><\/p>\n\n\n\n

Finally, consider how much time and energy you have to invest. <\/span>Managing an Airbnb can be hands-on<\/span>, and if<\/span> you\u2019re short on time, you may need to hire a <\/span>property manager<\/span><\/a>.<\/span> Make sure to factor this into your financial and time commitment plan. <\/span>This<\/span> will drastically reduce your ROI but may make your investment stress-free with the right property manager in place. Self-managing has always been my first choice (you got this!), but finding a reputable PM may work better for your current situation and goals. <\/span><\/p>\n\n\n\n

2. Research the Market<\/span><\/h2>\n\n\n\n

Before signing any papers, it\u2019s essential to research the market where you want to launch your rental. Start by analyzing the demand in the area using tools like AirDNA or Mashvisor to get a sense of occupancy rates and potential earnings. Are people traveling to the area year-round? What kinds of stays are in demand? Tools like the <\/span>BiggerPockets STR Calculator <\/span><\/a>can also give you a financial snapshot of what your property could make.<\/span><\/p>\n\n\n\n

Next, get to know your audience. Are your guests likely to be families on vacation, business travelers, or adventure seekers? Knowing your target demographic will guide everything from property selection to decor and amenities.<\/span><\/p>\n\n\n\n

Also, don\u2019t forget to assess the competition. <\/span>This<\/span> may be the ultimate way to see how likely your property could profit. Look at existing Airbnb (and VRBO) listings in the area to see what types of properties are popular and which amenities stand out to guests. By doing this, you\u2019ll know how to differentiate your rental. Look into the bookings that are coming, how much they charge for cleaning fees, how much their rates shift, and most importantly, the reviews. <\/span><\/p>\n\n\n\n

I tend to see that for<\/span> every three guests that stay<\/span>, one leaves a review<\/span>.<\/span> Now <\/span>this<\/span> is not scientific but drawn purely <\/span>off<\/span> experience and could be closer to every two guests.<\/span> If you see months have gone by with no reviews, there is a good chance that the property is not getting the occupancy you may desire. On the other hand, if you see reviews every few days or per week, you might be in the right area to dig in even more. <\/span><\/p>\n\n\n\n

3. Choose the Right Property<\/span><\/h2>\n\n\n\n

Location is everything. Ensure the property you pick aligns with your criteria for accessibility and appeal. A great rule to follow is the 60\/30\/10 rule\u2014find a property 60 minutes or less from a major city, 30 minutes from tourist attractions, and 10 minutes from essential services like gas stations or grocery stores.<\/span><\/p>\n\n\n\n

Consider the property type as well. Whether buying, renting (with permission to sublease), or converting a space you already own, think about what will resonate with your target market. Do you want to invest in a cabin, a glamping structure, or a home in a popular destination? The more unique the house, the easier the marketing. The flip side is the resale value for these types of homes may struggle to keep up with others. Finding a mix of visual appeal and an equitable asset is the secret sauce for STR investors everywhere.<\/span><\/p>\n\n\n\n

Most importantly, check local laws and regulations before committing to a property. Some areas may have restrictions on short-term rentals or require permits. Make sure your investment is legally sound from day one. If you don\u2019t know where to find out the regulations, calling the local county permitting or zoning department could help you gain the clarity you need. <\/span><\/p>\n\n\n\n

4. Prepare and List Your Property<\/span><\/h2>\n\n\n\n

Once you\u2019ve secured a property, it\u2019s time to make it guest-ready. Focus on furnishing the space thoughtfully, targeting comfort, practicality, and your guests\u2019 needs. Essentials like Wi-Fi, high-quality bedding, and kitchen appliances are non-negotiable. If your budget allows, consider adding standout features like a hot tub or fire pit to elevate your listing. Look into the amenities nearby at successful STRs and try to keep pace with them if they are at your <\/span>same<\/span> price point. Amenities don\u2019t always bring in a huge ROI, but they can increase occupancy rates in some markets.<\/span><\/p>\n\n\n\n

Safety should also be a priority. Install smoke detectors and carbon monoxide alarms, and ensure your property meets all local safety standards. Disclosed outdoor cameras are allowed and recommended for the front entrances at a minimum. Don\u2019t be that host who watches every move on the camera, though. You will thank me later! Also, remember to secure the right insurance for short-term rentals.<\/span><\/p>\n\n\n\n

When it\u2019s time to list, invest in professional photos to make your property shine. I can\u2019t stress enough that paying $200-$1000 for breathtaking <\/span>photos<\/span> will make your marketing, bookings, and life much easier. A well-written, engaging listing description highlighting your property\u2019s best features will draw attention. Use market research or dynamic pricing tools to ensure your pricing stays competitive.<\/span><\/p>\n\n\n\n

5. Develop a Management Plan<\/span><\/h2>\n\n\n\n

We need to start thinking about the brains of your operation, aka your property management software. Managing your rental\u2019s day-to-day operations can quickly become overwhelming. I highly recommend checking out <\/span>Hospitable<\/span><\/a>, even if you only have one property <\/span>to start<\/span>. They can help you handle everything from booking management to automation features that will make your hosting life a breeze. Their AI capabilities are far beyond others. <\/span>You can have a unified inbox across all channel managers, financial reporting, task management, and <\/span>the list goes<\/span> on<\/span>.<\/span><\/p>\n\n\n\n

Be sure to create a cleaning, maintenance, and restocking system between guests. You can either do this yourself or hire a team, but either way, make sure <\/span>you\u2019re prepared<\/span> for the time commitment\u2014especially during busy seasons.<\/span><\/p>\n\n\n\n

Finally, consider guest communication. You\u2019ll need to be available to answer inquiries and handle any issues <\/span>that arise<\/span>. Consider using automated messaging for check-ins and check-outs to streamline the process, but always stay responsive for those last-minute guest needs. Hospitable can help with tools to <\/span>streamline<\/span> your whole process and give a 5-star review-worthy guest experience.<\/span><\/p>\n\n\n\n

We have tons of resources available at BiggerPockets for short-term rental owners, including a brand-new short-term rental newsletter written by yours <\/span>truly<\/span>!<\/span><\/p>\n\n\n\n

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\n \"\"\n <\/div>\n <\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"

So, you\u2019ve decided to dive into the world of short-term rentals\u2014whether it’s Airbnb, VRBO, or whatever acronym you want to use. Congratulations! You\u2019re going to be rolling in passive income […]<\/p>\n","protected":false},"author":613755,"featured_media":144950,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7271],"tags":[],"class_list":["post-177957","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-short-term-rentals"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/177957","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/613755"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=177957"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/177957\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/144950"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=177957"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=177957"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=177957"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}