Home Complete List of Side Hustle Ideas Rent Vacation Homes
Earnings Vary
Start a vacation rental businesses by renting out a house or apartment to tourists and short-term visitors.
| Time to First Earnings | 1–6 months | |
|---|---|---|
| Work Location | In person | |
| Startup Costs |
$310–$20,175
|
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| Licenses & Certifications |
RequiredNone |
Optional
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An increasing number of people are racing to jump on board the rising trend of vacation rentals. The short-term vacation rental industry has a market value of $64 billion, with more than 2.4 million properties and 785,000 hosts.
Starting a vacation rental business comes with its fair share of costs and challenges, but the potential rewards are unbeatable. Here’s everything you need to know to get started.
The legal definition of a vacation rental or short-term rental (STR) varies from one jurisdiction to the next. In most cases, a vacation rental is defined as a residential property that serves as a dwelling unit for occupants for no more than 30 days.
A vacation rental business is a business in which a property owner or manager rents out a living space for short time periods, often a few days but sometimes weeks or more.
You may choose to rent out your entire house to guests, or you could just rent out a designated space or area. You could even rent out a room in your house while you’re still living there. In all cases, what you’re doing could be described as running a short-term rental business.
A report by AirDNA revealed that short-term rental property owners in the US pulled in an average annual income of over $26,000 in 2023. Their average rates fell in the range of $182–$337 per night, depending on the size of the property.
Earnings vary considerably for vacation rental businesses, and this is primarily due to the wide range of factors that influence the value of a property. Your location, the demand in your area, the time of year, and the features and size of the property you’re renting out will all influence how much money you can make from your vacation rental business.
There are countless benefits to starting a vacation rental business. The main appeal for many is that there’s very little effort involved once the property is set up and ready to go. Short-term rentals can also be incredibly lucrative.
Before you take your first steps toward setting up your short-term rental business, it’s important to understand what exactly a vacation rental business is and how it differs from other types of property management.
There are three main ways to start a short-term rental business. Here’s a full rundown of your options.
This is the route that most people choose to go down when starting a vacation rental business. If you can afford to actually buy a house to rent out on a short-term basis, then doing so affords you the greatest earning potential in the long run.
However, investing in property is a huge financial commitment. Assuming you need to get home financing, you’ll be on the hook for a large sum of money that will likely take you many years to pay off. Most importantly, you’ll be relying on your vacation rental business doing well.
Make sure you can afford to cover your mortgage bills even during periods where you have no guests. If a few negative guest reviews hurt your business or your property goes out of commission for a few months while you deal with maintenance or repairs, you’ll need to be able to cover your mortgage payments on your own.
Many people don’t realize that it’s possible to start a vacation rental business without owning property at all. If you’re renting a house or apartment that allows subletting, then you can make a profit by renting it out to guests who only want to stay for short time periods. This is known as rental arbitrage.
This is a popular option among people in major cities that experience high levels of seasonal demand. For example, if there’s a big concert, sports game, festival, or other major event happening in your area, then you can take advantage of that demand to earn a few extra bucks by renting out your place for a few days to incoming tourists.
Just bear in mind that subletting comes with a great deal of risk since you’ll be liable to your landlord if your guest causes any property damage or otherwise violates the terms of your rental agreement.
If you already have a home, then there’s no need to buy new property for your vacation rental business. You can just rent out your own house instead.
Renting out the entire property will allow you to maximize your earnings, but you’ll need to already have another property you can stay in or be able to take an extended trip out of town during each stay.
Alternatively, you can rent out a room in your house or a specific area within your home. You can charge more by creating a self-contained space with a separate entrance.
Another way to start a short-term rental business without owning a home is to manage properties for someone else. You can become a property manager for just one property owner or start a business managing properties for multiple people.
Starting a vacation rental business is relatively straightforward, but it’s important to go about it the right way to ensure you’re running your business legally and maximizing your earnings.
Depending on where you live, you may need to meet certain legal requirements before you can start your vacation rental business. This can take time and money and may influence what property you rent out, which is why your first step should be doing your research.
Any of the following regulations and requirements may apply to you:
You’ll also need to pay special taxes as a short-term rental host, such as occupancy tax, value-added tax (VAT), and goods and services tax (GST). It’s important to check your local regulations for short-term rentals to ensure you’re operating your business fully above board.
If you already own the property you plan to rent out, then this is an easy decision. However, if you’re planning on purchasing a property for your vacation rental business, then there are several factors you’ll want to take into consideration.
All of these factors can influence the potential success of your short-term rental business:
Naturally, you’ll need to do a fair bit of market research to ensure you’re picking a property that’s in an ideal location and profitable. It’s also a good idea to calculate all the potential costs involved and write out a clear business plan where you outline your budget and goals for your vacation rental business.
Once you’ve chosen a property for your vacation rental business, you’ll need to prepare the space for guests. It’s incredibly important that you do this step right.
Make sure that you provide all essential living supplies—such as kitchenware, bedding, and all required furniture. It’s a good idea to spend a couple of nights living in the property if you haven’t done so already. This will help you spot any issues or missing items and avoid disappointing guests.
Finding ways to make the space more functional or feel more welcoming can go a long way. Be prepared for it to take a bit of time (and money) to get everything properly set up.
Writing out clear rules and instructions for guests is absolutely essential for protecting your property and ensuring that everyone who stays in your vacation home has a wonderful experience.
Vacation rental platforms like Airbnb will help you get started, but consider also leaving written instructions at the property where guests will be able to easily access them.
Here are some details you may wish to clarify:
Providing helpful information can enhance your guests’ experience and minimize their need to reach out to you for help or to ask questions. Just make sure to be reasonable in terms of what you’re asking guests to do. Overly strict rules can sometimes backfire and make guests less likely to recommend your home to others.
Figuring out how much to charge for your vacation rental may seem daunting, but it’s much easier than it seems. All you need to do is research the rates of similar properties in your area.
Making sure that you don’t set your rates too high or too low will help you maximize your rental income by ensuring that you have a steady stream of happy guests coming in.
The last step to starting a vacation rental business is to advertise your property and attract guests. The easiest way to do this is to sign up for a vacation rental platform with a built-in user base.
Here are the top sites to consider when deciding where to list your vacation rental:
There are several factors to consider when choosing a rental host platform, such as the platform’s commission fees and pricing, property and host requirements, popularity among travelers, and exclusivity policies (preventing you from listing your property on more than one platform).
If you decide to go the DIY approach and not sign up for a vacation rental site, you’ll be able to potentially earn more money, but you’ll have a lot more marketing work to do. You could list your property on free sites like Craigslist or spread the word via social media.
Even if you’ve created a listing for your vacation property on one of the sites mentioned above, doing a bit of extra marketing work will help you boost your booking rates.
You have the power to build a thriving vacation rental business. It all comes down to your interactions with guests. Here are a few secrets that will help you navigate some of the challenges that hosts often face.
It happens all too often that a stellar property just doesn’t get the attention it deserves due to faults in the listing. Think of your vacation rental listing as the one and only billboard for your business.
If you saw your listing without any additional context, would you want to stay there? The answer should always be yes. Take a hard look at your listing from a guest’s perspective, and consider asking an objective third party for feedback.
The rental description should be detailed and informative but not too long. Highlight the perks for guests, and give them a sense of the space and why it’s great.
Your property photos should be top-notch. This means great lighting, clutter-free, in focus, and displaying features of the home that guests will care about the most. If in doubt, you can’t go wrong hiring a professional photographer to take your photos.
Cleanliness is a primary concern for many guests, who often expect hotel-level cleaning services. Don’t make the mistake of trying to do all the cleaning yourself.
While cleaning your property on your own after each stay can save you money, it can also seriously jeopardize your business if guests start leaving negative reviews because your cleaning job wasn’t up to their standards. It’s best to hire a professional cleaner who specializes in vacation rental cleaning.
One of the best ways to boost your income from a vacation rental is to offer add-ons and extra services that guests will love. When done correctly, this is a win-win situation. Guests will have a more enjoyable stay, and you’ll earn extra money on top of your nightly base rate.
Here are a few popular add-ons you might like to consider:
Platforms sometimes make it convenient to offer these extras. For example, you can take advantage of a feature like Airbnb Experiences to offer fun activities, such as local tours, workshops, and more.
If you’re managing several properties as part of your vacation rental business, you’ll be able to streamline business processes with the help of vacation rental management software. This type of software can integrate with various applications and help you handle tasks like scheduling, guest communication, and payment processing.
Ultimately, the most important step you can take to become a great vacation rental host is to listen to your guests and fully take their feedback on board. While some guests are simply hard to please, it’s crucial to take each guest’s feedback seriously and investigate their concerns.
Criticism can be hard to take, especially if you have a personal attachment to the property, but it’s a key part of running a customer-facing business. One of the worst things you can do is publicly argue with guests who have left you a negative review.
While you can respond, ensure that you’re courteous and stick to the facts. Prospective guests will be able to see your response, and how you deal with the situation can influence whether they want to stay at your property.
