The Ultimate Guide to How to Make Money on Vacation Home Rentals
Properties all over the world are earning income as short-term rentals. You, by all means, can make money on vacation home rentals, too. This article will teach you how to self-evaluate your possible vacation rental for income potential. We will explore the two easiest ways to enter the vacation home rental market. Then you will analyze the G.O.A.L.S. of your specific property to determine your nightly rate.
The first thing to remember is that every vacation rental platform will give a suggested nightly rate for your property. Ignore their pricing suggestions. Every social home-sharing platform assumes your goal is to be rented one hundred percent of the time. For the purposes of our analysis, we assume your goal is actually to generate the highest profit despite how many nights the property is rented. In many situations, the route to higher profits will include fewer nights rented but an increased nightly rate. Follow this guide to determine your ideal rate.
In this article, you will learn to make money on vacation home rentals by determining above all your perfect nightly price. Analyze your property compared to other vacation homes nearby based on these five criteria.
G = Geo-Demand
The geo-demand of your property could change based on the time of year, for instance. Geo-demand is a reference to how popular your geographic area is for travelers. Mountain towns could be at peak popularity (har-har) when winter sports are in full effect. Beach cities may have higher demand when the weather reaches a certain temperature. Some cities have major events that would create a high geographic demand.
Check out local calendars of events to track when a high number of visitors will be in your area. Just because you only make money on vacation home rentals seasonally doesn’t mean it isn’t a good business. Many successful businesses have peak profit times of year that carry them through low seasons. You can set lower prices during low tourist seasons to attract some income instead of no income. Conversely, you should raise your prices during high tourist times to maximize profits when demand outweighs supply of short-term rentals.
O = Occupancy
Offering more sleeping accommodations can drastically increase your nightly rate. A home offering beds for four adults won’t be able to charge as much as a home that sleeps fifteen adults. Try adding bunk beds, sofa beds and air mattresses for the purpose of increasing occupancy. No matter how many people you can accommodate, most homeowners can make money on vacation home rentals.
When travelers are considering vacation home rentals vs hotels, they often do a per-person cost comparison. For example, a hotel room that sleeps four people might cost them $185 per night. They might do some quick math and consider $46.25 per person per night a reasonable price. If their group has 15 people, that might equate to looking for a home around $693.75 per night. There are certainly other factors to consider, like the cost savings of not eating out for every meal, but increasing occupancy will be a major factor in being able to command a higher nightly rate.
A = Amenities
Luxuries undoubtedly help you make money on vacation home rentals. Travelers are often looking for features like hot tubs, pool tables, bicycles, hammocks or fire pits. Making your home especially kid-friendly with a crib, high chair, stroller and toy collection is a huge selling point. Investments you make on amenities will result in additional income. Your goal is to make your vacation home rental feel like a luxury hotel.
Do not shy away from creating niche-specific amenities. For example, there might be an untapped hidden market for gaming groups who want to get together for group bonding. You could make your home the premier video game meeting spot. There are competitive groups who get together to play pinball against one another. You could create a pinball cave for traveling competitive pinball enthusiasts. Let your imagination run wild and find amenities that will make your vacation rental stand out, therefore allowing you to command a higher nightly rate.
L = Location
Homes located in a downtown area are able to command a much higher price than homes located in rural suburbs. Likewise, a property with an epic view is able to charge a premium over a rental in a traditional residential neighborhood. All of these locations could make fabulous short-term rental properties.
Simply compare your location’s advantages and limitations to other properties in your area to get a nightly rate range. You may find that inner-city properties in your area are actually less per night because supply is so high; conversely, more rustic properties providing solitude may be able to charge more per night. Each vacation home rental market has its own unique situation. Find the best comparables so you can accurately price your listing.
S = Supply
Some cities have particularly high concentrations of short-term rentals. The city of London has the highest concentration of vacation rental homes. Does that mean you can’t make money on vacation home rentals in London? Certainly not. However, the entire country of India, by contrast, has the lowest number of vacation homes per capita. Vacation homes in low-supply areas are able to charge a premium for being one of the only properties available in the area.
As you research short-term rentals near you, take a look at each listing’s calendar. One of the things you might notice is more professional-looking listings have more dates booked than profiles with fuzzy photos and unclear descriptions. If you are in a higher density area of vacation home rentals, keep in mind the ways that properties are setting themselves apart. Homeowners are deciding every day to leave the short-term rental business; there is always room for new hosts to make money on vacation home rentals.
Make Money on Vacation Home Rentals
Now that you understand the criteria you will be comparing, let’s look at some common scenarios. While each home will be a unique combination of elements, understanding the concept is the most important part.
Rent a Room in Your Residence
Both renters and property owners have the ability to enter the vacation home hosting area by renting an individual room. This short-term rental model means you will be sharing common areas with a paying guest. Being a people person is a must for this kind of social home sharing.
The geo-demand of your property will depend on how often travelers visit your city. Keep in mind that no matter where you live, other residents of that community will likely have visitors on occasion. Your target market could be the families of nearby community members who have smaller homes.
Occupancy of an individual room for rent will usually be quite low. Make sure you research how much it would cost a potential traveler to stay at a vacation home rental vs the hotel. You will want to price yourself competitively so travelers don’t always opt for a hotel.
Amenities do not have to be confined to items or features inside the bedroom you are renting. Add value to your potential guests by offering things other nearby vacation hosts or hotels are not offering. Having sought-after amenities will allow you to increase your nightly rate.
Location premiums are such a subjective element to travel. While most properties charge more for stunning water views, a traveler viewing that home might not care about the views. The traveler could put a low value on a view if they are considering how much time they will spend away from the property and how little time they will have to enjoy the benefit. Keep an open mind about who your typical renter might be, and price competitively to other properties with similar location specifics.
Supply and demand can work to your advantage incredibly well. Even a less-than-ideal property can list at incredibly high prices during low-supply, high-demand times. One home near the Kentucky Derby site offers itself for $10,000 per night year-round. It likely only gets booked surrounding the actual Kentucky Derby, but raking in an incredible profit a couple nights per year can make a huge difference to a homeowner.
Rent Your Entire Primary Home
Just because a homeowner only has one home doesn’t mean they can’t become a vacation rental host. One-home hosting is exactly what the Homeowner Hustle E-course is all about. You rent your entire home to travelers and your family gets a paid vacation.
Compare Vacation Home Rental Websites
The wonderful thing about geo-demand when renting out your primary home is you won’t have additional costs during low traveler seasons. You just continue to live in your home year-round like normal. Renters can come and go during high seasons, effectively covering expenses for your residence year-round. A common example used is the original Homeowner Hustler, which has a yearly mortgage of $20,220. However, renters paid $41,331 in one year over the course of 53 nights to stay at that family home.
Homes have a diverse ability to increase occupancy and therefore nightly rates. Sleeping rooms can be maximized with bunk beds, social rooms can become sleeping rooms with sofa beds and any other space can become sleeping accommodations with inflatable beds.
Luxurious amenities have value. Do not assume that comparing a per-head price for a discount hotel is going to compare to your home. Even access to a full kitchen and living room is an amenity most hotels do not offer. Look at the full range of perks a traveler receives when booking your home vs competitors in both the vacation rental and hotel sectors.
Some groups will pay a premium if your location is close to the convention center they need to be at each morning. Other groups would consider that location a downfall because they want to be close to the lake. Don’t price yourself too low because you think your location isn’t where people want to be. Even in the suburbs, there is a multitude of reasons a group would want to stay there vs a downtown hot spot.
The supply of whole-home rentals catering to large groups is scarce in most markets. Setting your home apart by being part of the few high-occupancy homes will pay off with higher profits.
How Much Can You Really Make Being aVacation Home Rental Host?
More than you are making now.
As Chris Guillebeau says, “Inspiration is good, but inspiration combined with action is so much better.”
Take a deep breath and begin your journey to make money on vacation home rentals today.