Up until recently, the travel industry, and vacation rental markets, were really booming. Things have changed somewhat in recent weeks and months, but as things slowly start to get back to normal, you may be thinking about ways to incorporate your love of travel, and having a way to earn money. So many people are going to want to travel again, especially staying in the country, so you really could take advantage of that, and start a new business.
To start off with, you need to make sure that you do understand vacation rentals and the industry as a whole, in order to really be able to make a success of it. Here is a guide to get you started, if you’re interested in a side hustle that incorporates your love of travel.
What is a vacation rental business?
To start with, it can really help to go completely back to basics. A vacation rental refers to a private property that you rent out to tourists and travelers on a short-term basis. Some people, using sites like Airbnb, can also rent out single rooms in their home, so there are options depending on your situation and where you currently reside. The reason why vacation rentals are so popular, especially for groups traveling and families, is that they offer much more than a hotel does. With a kitchen, cooking facilities, and your own space, travelers can enjoy independence, and have their vacation just as they want it. A vacation rental business is all about acquiring the properties, if you don’t already have them, maintaining them, and then marketing the homes, and renting them out.
How do I start a rental business?
The word business can make it all sound quite scary and official, but it doesn’t need to be daunting. You can get into the business of vacation rentals without prior business experience. There are two main ways that you can approach this, though, so you need to think about what will work best for you.
- Buying and investing in properties that you will own: going down this route can be a good idea, but only if you have the means to be able to cover the costs. Of course, having travelers in each week to pay the mortgage for you can help to cover costs, and hopefully, go over and above. That being said, if you choose a property in somewhere that is seasonal, like a skiing resort or a beach location, then there could be times in the year that they sit empty. So it is a careful decision to think about.
- Managing properties for owners: This option to get into vacation rentals is somewhat less demanding, as you don’t have to find the rentals and think about mortgages. All of this is taken care of, and you just charge a fee to the owners. It can be a great way to make an income that works flexibly, while still gaining an understanding of vacation rentals, and being involved with the travel industry. All of that being said, you do need to put in the work, do your research, and become well-versed in how the day to day running of vacation rentals works.
When you have thought about which route you want to go down, you can then look into some of the specifics of each scenario, to nail down the details.
One of the first things to think about, is making sure that you will be able to have a business that is profitable. Otherwise, what would be the point? The vacation rental business is definitely proven to be profitable, with the industry as a whole yielding over $80 million last year alone. This means that on average, you could be earning over $100,000. Of course, this can fluctuate depending on the property, such as the size of it, the quality of it, the kind of service provided, and so on. There are additional costs to think about too, such as deposits for damages, and getting cottage insurance or house insurance, all the while making sure that possessions and accidental damage are covered too.
No matter what kind of property that you look to use as a vacation rental, one of the important strategies for being able to maximize your profit is to implement a pricing model that is dynamic, and that will go up and down, depending on demand and seasonality. People still visit ski resort areas in summer, for example. But they won’t want to pay peak-season prices for accommodation. So you do need to think about that. When you do that, it will not discourage any bookings during low seasons. After all, it is best to be making some money in the off-season if you can. Some locations like cities, are likely to be in demand all year round. So another thing to think about.
As has been briefly mentioned, there are some things to think about when it comes to location. If you are managing properties for someone else, then it won’t really be an important thing to consider, as you will just work where their properties are. However, if you are going it alone, then you need to consider seasonality.
If you want to have a seasonal business, where you’ll be busier at certain times of the year, and also have some slower months, then you can look at some more remote locations that will only have appeal during certain times of the year. If you want to run it all year round, then you need to think about a location that is ‘evergreen’ where it doesn’t matter what the temperature is (think an apartment in Brooklyn, for example).
Alongside your location, is important to assess what the demand is in the location that you are considering or choosing. It is important to do your research, so make sure that you are investing money into an area that has ample attractions and plenty of things for tourists to do. When there are things like this, or the location is within reach of a popular area, then you’re likely to have a regular stream of demand. At the same time, though, you will want to make a note of the number of short-term vacation rental options that are already in the area. Very ‘touristy’ locations are likely to have quite a lot, but there will always be a high demand. If you choose an area where there is less demand, then you need to have a vacation rental that stands out from the crowd, so that people can differentiate from what you offer.
There are a number of expectations that are rising from guests when you have this kind of accommodation. Team those with the complex needs of how things run with a vacation rental, and it can make having the right kind of software and technological solutions to help things to run more smoothly. You should look at what kind of software is already out there, and how it can help you to operate more efficiently. You might want to look for software that can help you to manage staff, if there will be a team of you, or to deliver automated messages to guests before they check-in, for example. Being able to manage listings with a number of booking platforms can be helpful too, especially if you’re looking to max out your marketing.
If you are going to manage other people’s properties, then it is a good idea to pitch this to homeowners if the areas that you have chosen, based on demand and seasonality. They may not have someone managing things at the moment, or if they do, you could look to undercut the price. If you’re doing it alone, then you need to be ready to go. Having a stellar plan in place, as well as strong tech solutions ready to go, you will be able to show any prospective clients what you plan to do, and that you do really mean business.
It could start with one room to rent out, or one property, but can easily grow and grow if managed well. When you have a portfolio under your wing, one of the next steps is to list your property using relevant channels, and finding ways to market it. Social media can be a helpful tool, as well as regular vacation listing sites. Some will charge fees, so do take that into consideration when you’re budgeting.
As with any new business venture, going out to start a vacation rental business is not going to be straightforward, as there are a number of things to consider. However, the business model is simple, and with some drive and passion, and a keen eye on the travel industry, you can make it work for you. It can definitely be worth your time, especially as more and more people want to get back into traveling, both at home and abroad.
Have you ever considered this as a way to travel and make money? It would be great to hear what you think.