Lucrative Ways to Build Your Vacation Rental Business
By Katie Conroy
Photo courtesy of Unsplash
More than half of all travelers prefer to book vacation rental properties instead of hotel accommodations these days. From spacious lofts in stylish neighborhoods to pet-friendly homes with free wi-fi and a pool, there are many reasons why guests would crave the comfort and amenities of a short-term rental to a hotel chain.
Thanks to short-term rental sites, it’s easier than ever for homeowners to make some extra income by offering their properties to travelers. Before buying a rental property or opening your home to a stranger, however, there are some logistics you should consider.
Here are some tips for preparing to turn your home into a lucrative vacation rental property.
Formalizing Your Rental Business
To start your rental business, you need to establish it as a business entity with your local state government. By separating your business from personal property, you can protect your assets and reduce personal liability in case of legal action being taken against your business. That’s why we recommend forming a CO business. Once a business account is established, you can start earning money and begin the bookkeeping process.
Consider whether you’ll maintain the property yourself or hire a professional property manager. A qualified property management company can be a huge help for your Colorado rental. They’ll greet guests and be available 24/7, coordinate with professional contractors like cleaners and handymen, and keep bookings up-to-date so you’ll always know who’s staying in your home and when.
When it comes to earning income from a short-term rental property, such as a vacation home, some properties have more potential than others. Start by choosing a location wisely. Ask yourself the following questions:
- Does the area get much tourism or visitor traffic?
- Do local laws and neighborhoods allow vacation rentals?
- What city permits or other legal requirements must you meet?
- If the property has a homeowners’ association, does the association allow short-term vacation rentals? If so, is there an additional fee?
Try to invest in an affordable property in a popular neighborhood. And remember to research the local application and licensing fees for short-term rental properties.
Thinking you can skip these fees and operate your rental property under the radar? Think again. Many cities shut down vacation rental properties that fail to comply with local laws. It might take a little extra money and effort upfront, but staying legal always pays off in the long run.
Your vacation rental property is a business, so you’ll want to keep it legal. That means creating a business plan, setting up a separate business bank account for your vacation rental income, and paying taxes on the money you earned.
Additionally, the IRS charges lodging taxes and an additional tax when you sell a rental property. To avoid any surprises down the road, talk to a certified accountant or tax professional before starting your vacation rental business.
Once you’ve chosen the perfect property, it’s time to decorate it, snap some photos, and begin marketing your property to guests. Websites like Mungo offer linens and home decor designed specifically for vacation rental properties. To maximize your home’s appeal, Cottage Blogger recommends coordinating your furniture in each room, such as investing in “matching side tables and lamps.” Turn on all the lights in the room when taking photos to make your rooms look bigger and brighter. You can also add personality to each room with some colorful artwork or textured fabrics like rugs or bed throws.
Maintaining the Rental
When it comes to maintaining the property between guests, one area you'll want to focus on is cleanliness. Besides dusting, mopping, steam cleaning, and disinfecting the property, the furniture should be kept clean, too. The best way to get this job done is by hiring a professional. When researching furniture cleaning companies, know that they're not all created equal -- one company may use different cleaning tools than another company, for example. You'll also want to find out if they can work with the conditions of your furniture's warranty. And of course, the furniture cleaning company should have a good reputation, which is proof that they're reliable.
Running a vacation rental can be a lucrative way to build some extra income. However, vacation rental success depends upon your willingness to plan and do some research. You’ll want to put effort into making your guests feel comfortable and at home throughout their stay. By hiring the right property manager, running a legal business, and providing top-notch service, you can stay competitive compared to other short-term rentals in your area. If your guests have everything they need and enjoy their stay, they’ll be more likely to leave you a stellar review and return to your property again and again.