9 Steps to Develop Your Own Short-Term Rental Management Business

by | BiggerPockets.com

Many people who own two homes — their regular home and a vacation home — decide to earn some money on the vacation home by renting it out to people either during a specific season or year round. They view their activities more as a hobby than anything else, with the money earned just a supplementary income.

But if you want to begin a career as a vacation home property owner — so that you can “quit your day job” and just work for yourself full-time — why not invest in several vacation home properties?

It’s easy to start.

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9 Steps to Develop Your Own Short-Term Rental Management Business

1. Search for a triplex in a neighborhood you like.

A triplex is a house that has been converted into three apartments — each floor must have an entrance and exit and be self-contained.

2. Ensure that local laws allow you to offer short-term rentals.

Some local governments have zoning laws against home owners offering rooms or floors in their home for short-term rent. Do your due diligence to make sure the location you choose is zoned so that you can offer vacation rentals.

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3. Move into one floor and rent out a second floor.

When you’re first starting out in the vacation home rental business, you’ll want to live in a house that isn’t costing you any money to buy. By renting out one of the floors on a year-round basis, you will have a monthly income that will pay for the mortgage on the home. So you’ll live in one floor, your full-time renters will live on another floor, and you can offer the third as a short-term vacation rental property.

Related: 6 Way to Impress Your Vacation Home Renters With Top-Notch Service

4. Evaluate the risks.

Talk to a real estate agent and your financial planner about this investment. The agent will be able to advise you on the desirability of the neighborhood, and your financial planner will be able to inform you of all the tax implications. (You must pay taxes on the income you receive from your short-term rental, as well as any income you receive from your long-term tenants.)

Depending on the location of the property and how luxurious it is, you’ll be able to charge a sufficient amount in rent that will cover your monthly mortgage. However, what happens if for some reason your long-term renter has to leave? It may take a couple of months to find another renter — and you must have enough funds to cover your mortgage for that length of time.

5. Prepare the floor to rent out on a short-term basis.

It’s OK to rent out one floor unfurnished to your long-term tenant (although it’s a good idea to have a communal washer and dryer in a basement or other easily accessible space), but the vacation rental section of the home must be furnished with quality furnishings.

It will require a refrigerator, a dishwasher, a microwave and oven, and, of course, the latest HVAC system.

You’ll need a bed in at least one room with the appropriate furnishings — sheets, blankets, pillows and pillow cases, and a comforter and/or duvet. End tables with lamps, dressers, and flat screen TVs are also necessary amenities.

In the living room, you’ll need another TV, at least one couch and some easy chairs, reading lamps, and a couple of book cases.

The kitchen will require a table and some chairs, as well as silverware and dinnerware, since your renters will expect all of this to be provided. They’ll also expect a coffeemaker and maybe even a juicer.

You can’t purchase all these things from a thrift shop, either. They should be brand new, top-of-the-line items so that your short-term guests feel like they are having a premium experience in the space.

6. Prepare a welcome packet.

Even though you’re living in the same building, it’s a good idea to prepare a welcome packet for your guests giving them information about all the amenities offered in the space. Also provide directions to the main venues in the town for both car and public transport.

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Related: 8 Evergreen Materials to Market Your Vacation Rental & Keep Guests Informed

7. Place your property on as many vacation home rental marketplace sites as possible.

Even though you will be living either above or below the space that you’re using as a short-term rental for vacationers, you will still want to accept payment only through a secure portal, which means you’ll want to place your property on one of the many vacation home rental marketplace sites. That’s the easiest and most secure way to ensure that you always receive your funds.

8. Be friendly.

Even though you’ve provided your guests with a welcome packet that tells them everything they need to know about the neighborhood and lots of things to see and do in the city, you can still make yourself available and be helpful if your guests have any questions.

9. Buy another property when you can afford it.

After enough time has elapsed such that you’ve decided you enjoy being a property owner and vacation rental property manager, consider purchasing another property — a single-family property that can be used specifically by short-term renters. And once that property takes off, purchase another one. Soon you’ll have a vacation rental property empire!

Are you building your own vacation rental management business? Where are you in the process?

Let me know your experiences with a comment!

About Author

Trey Duling

Trey Duling has been managing and marketing vacation homes in the Orlando and Disney World area since 2001. His passion is helping investors make their vacation homes more profitable. Please visit his website at http://www.orlandovacation.com/home-rentals/.

7 Comments

  1. Roslynn Jackson on

    Interesting article! Couple of quick questions, if that\’s OK. Do you ever have damage from renters that require repairs or is it just normal wear and tear repairs that occur? Also, do you think tiny home villages or communities as vacation rentals would work with your model described above? Thanks for your insight.

    Roslynn Jackson
    Ft. Lauderdale, FL

  2. Aaron Gehrig

    This was great information Trey. I am just getting started and trying to learn as much as I can and this is an avenue I am very interested in.

    A couple questions…do you have any tips for someone trying to do this from a distance? If you were to purchase Townhomes or Condos does that make things easier with an HOA providing a lot of the property management side of things? Any advice is appreciated, this is an avenue I have been considering for done time and want to learn as much as I can!

  3. Peggy Lombardo on

    This was one of the first short term rental blogs that I’ve seen on BP. Thank you for posting it. Trey, what are your thoughts regarding short term rentals that are not vacation rentals.

    I have a short term rental that is a side-by-side duplex. It is not a vacation rental, however. It is located in the largest city in NH. I decided to go this route because there was only a few short term rentals available in this city. It gives another option to customers instead of staying at a hotel. This works for businesses (for long distant employees coming to this city for training); for home owners (when closing on their newly purchased home is later than the closing on their current home, whereby they do not want to lose the sale of their current home); and also can be for a recently separated or divorced person.

    I just finished renovating this property & have it rented to a recently separated gentleman. It was perfect for him, because even though the rent is higher than the average rental, it still saved him considerable money due to the fact that he didn’t have to go out & buy all the furnishings, household supplies, etc. He loves it so much that he rented it for 3 months, and if he doesn’t get back with his wife, he wants to sign a lease for a year. Win/Win.

  4. Leanne Rivard

    I own a short term rental in British Columbia. I will say, the income in a tourist area is great. The cost to outfit, and cost to a property manager are very high. The elephant in the room is, the local government can change the laws allowing/disallowing vacation rentals very quickly. Mine is legal, but, it could become ‘”illegal” with the stroke of a pen by city officials. (This is currently happening). If mine becomes illegal, it drops the value of the property. So, MAKE SURE the local government has made a ruling on STR’s. If they haven’t even talked about it in a desirable area, don’t invest in VR unless you can easily turn it into long-term rental. Because they will be talking about it soon. And there is a lot of pressure to limit VR’s by the local community. No one cares about your investment. You are an outsider trying to “take money out of the community”. There are areas where VR’s have been welcomed. (Arizona comes to mind).

  5. Yogi Sukhi

    Very thought provoking article. However, Depending on the location of the property and how luxurious it is, you’ll be able to charge a sufficient amount in rent that will cover your monthly mortgage. It is a good to prepare a welcome packet for your prospective tenants giving them information about all the amenities offered in the space. Finally, I would like to suggest one online place for advertising rental property (Canada) . Many of my friends use http://www.ashiro.ca for advertising their rental property.

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