Financial Housekeeping Tips to Keep Your Budget: Guide for Short-Term Rentals

Year after year, the data demonstrate — short-term rentals break all records and become increasingly popular. For instance, the global vacation rental market was valued at $91.2 billion in 2021 and is expected to reach an impressive $315 billion by 2031. The 2020 AirDNA report also showed that vacation rentals demonstrated impressive stability and resilience, although the vacation rental industry was hit hard during the pandemic. So, are you ready for short-term rental investing?

While it can be lucrative, the vacation rental business requires careful financial housekeeping to keep your budget on track. High-quality property management encompasses a myriad of things: from accessing cleaning and maintenance costs that can strongly influence your rental price, to evolving short-term rental property regulations. With the right landlord tips and practices, you can make sure that your vacation rental business will be profitable and sustainable long term.

Our guide includes several important vacation rental owners’ tips for renting a house, such as how to balance quality rentals, how to use advanced management techniques, and how to get the most out of your investment properties.

What Are the Benefits of Short-term Rentals?

Investing in short-term rentals can bring various benefits, including a financial payoff, leading to passive income. Landlords can charge higher rates during peak tourism seasons for better profit margins and increased cash flow. For instance, a short-term rental property can potentially generate $1,000 of rental income per week compared to $900 per month for long-term tenants, particularly when renting during busy windows, such as holiday breaks.

In addition, short-term rentals offer landlords more freedom and flexibility. With this type of investment, you can block off time to use the vacation rental property throughout the year. Vacation rentals in Miami, for example, can rent out for 11 months out of the year, leaving that same unit for the owner to use for one. Prospective guests aren’t the only ones who can enjoy this investment property.

Tip 1: Sparkle and Save

With more vacation renters expecting a higher standard of accommodation, landlords must maintain their every single property competitive in the short-term rental market. Attractive online listings, high-quality photos, and exceptional tidiness of your vacation rental home.

Don’t let cleaning fees hurt your rental property’s appeal. Having an excellent cleaning service is important if you want to build a great reputation with your guests, along with getting positive reviews on your property’s Airbnb listing.

Investing in a reliable short-term rental cleaning service that will keep your property sparkling clean and your guests happy, could be a solution. A specialized cleaning service will know exactly how to clean the property well between short-term renters and how to catch potential maintenance issues before they become problems, which can translate to savings. Additionally, consider the terms of the contract with the cleaning service so that you will be protected from future issues or disputes.

However, many guests complain that the cost of cleaning is too high, leaving owners and property managers struggling to find a middle ground between rental revenue and approachability. Taking into account the type and size of your short-term rental properties (room in your vacation home or 3-floor villa), target audience (hitch-hikers, families, or luxury segment), and desired length of stay (one-day or more), you can test cleaning fees pricing strategies that will work for your specific short-term rental property.

For instance, in case you want to discourage one-nights, — include cleaning fees as a separate category of expenses not influenced by the duration of stay. And if you are looking for short-term hosts on a budget, consider including your cleaning fees in the rent, ensuring predictability of the final price for your guests, which are usually irritated by sudden total amount increases on the checkout.

Tip 2: Save Some Green While Saving the Planet

Going green can help you save some green. But how much income can you get from being environmentally efficient? As a short-term rental property owner, you could reduce your utility bills and help the environment by making a few small changes:

• Asking short-term hosts and property management companies, or even establishing house rules to turn off lights when they leave the room may not make a difference. Instead, install automatic switches to make your units more energy-efficient.
• Use energy-efficient LED bulbs to replace traditional bulbs and save up to $75 in energy costs over the bulb’s lifetime. Environmentally conscious guests will love your “green, eco-friendly rental.”
• Invest in low-flow showerheads to limit water usage while maintaining adequate pressure, wasting less water and reducing bills.

Reducing your carbon footprint can be an initial investment. However, these changes can save you money over time. Additionally, by choosing energy-efficient appliances, you can reduce your monthly bills and decrease overall carbon emissions, saving some green while saving the planet.

Tip 3: Work Smarter, Not Harder

Has running your short-term rental business left you feeling overwhelmed managing multiple short-term rental properties? Bringing on an experienced property manager or a vacation rental management company is always recommended. Streamline processes, such as creating listings online, booking guests quickly, and coordinating check-ins smoothly with enough time for maintenance between bookings, all while collecting rent effortlessly. And don’t forget to include management costs in your rental price to maintain your positive cash flow right off the bat.

If investing in a real estate manager or a financial advisor is not possible or within budget, then make sure you’re ready to handle all aspects with specialized management software like iGMS:

• Automated communication can send pre-written messages at specific times before, during, and after guests’ stays, ensuring timely information and a better experience.
• Reliable payment processing reduces fraud and disputes, while task management helps to assign and track progress and ensure quality.
• Reporting and analytics help optimize strategy, maximize vacation rental income, and minimize workload.

Prioritize quality over quantity and streamline your Airbnb listings and tasks without the tedious work involved. With iGMS, you can keep track of reservations, guest screening and communication, cleaning schedules, maintenance requests, and more all in one dashboard.

Tip 4: Keep It Separate

Keep your business and personal finances separate to maximize profits and minimize headaches. Open a dedicated bank account for your short-term rental income and expenses. Having a separate account can help you track your expenses more accurately. You can monitor your spending and see where to cut costs or make adjustments to increase your profits. Keeping your accounts separate is not only important for tax benefits but can also help with identifying potential fraudulent activity and protecting personal funds.

According to Airbnb, hosts who set up a dedicated business account earned 19 percent more income on average than those who didn’t. Plus, keeping your personal finances separate simplifies bookkeeping and accounting, especially for tax time.

Tip 5: Maintain Legal Protection

Ensuring the safety and security of your rental property is crucial for protecting your investment. Here are some steps to consider:

1. Get rental property insurance to avoid unexpected financial loss as a result of accidents or damage from fires, floods, vandalism, or other unforeseen events. Proper insurance can cover major expenses if a situation arises. With the right insurance coverage, you can have peace of mind knowing that you’re protected in case of any mishaps.
2. It is essential for everyone involved — both landlord and guests — to understand the terms, conditions, rights, and responsibilities from the beginning. A short-term lease agreement is, therefore, the place to outline all fees, charges, and policies for your rental. Specify a security deposit in the contract to safeguard against potential damage, and include detailed descriptions of furnishings and amenities to prevent misunderstandings.
   Creating a legally sound short-term lease agreement with a lawyer may be costly. However, ready-made templates from services like Lawrina can be customized to help streamline the process. Since these agreements are designed by lawyers and have been proven in practice, you can trust their validity.
3. Stay compliant with the latest short-term rental regulations and avoid penalties due to overlooking laws in your area. Remember that each state and jurisdiction has its own unique set of rules that can change over time.
   According to the New Orleans ordinance and Louisiana law, property owners were prohibited from renting property for vacation rentals unless the property was the owner’s primary residence.  In Hignell-Stark vs. the City of New Orleans, a group of short-term rental owners in New Orleans fought against an ordinance regulating vacation rentals on platforms like Airbnb and Vrbo that they considered unconstitutional and discriminatory toward non-residential property owners. They won the case.
   If you would like help with checking for regulation updates and case law, consider consulting with an attorney from your state. Services like Lawrina Match can help you find a real estate lawyer in your area to help protect yourself from costly legal battles.

Tip 6: But Still Be Prepared For Expenses

Managing a short-term rental property requires careful planning and budgeting to factor in all associated costs. From utility bills and taxes to furnishing expenses, regular cleaning services, entertainment subscriptions like cable TV or streaming platforms such as Netflix, Hulu, or AppleTV; from landscaping maintenance to repairs over time — not forgetting the basic supplies for tenants’ comfort (think toilet paper) — making sure you’re well prepared is essential for providing an enjoyable experience that will keep short-term guests coming back again.

• Furnishing. More and more vacation renters are looking for a specific aesthetic they can share in their Instagram stories, so real estate investors and vacation rental management companies need to be conscious of the ‘vibe’ provided in their online listing when choosing furniture and decor. Ultimately, quality furniture should take precedence over cost savings to ensure a longer life for each piece and create an inviting atmosphere for guests.

Although it’s tempting to save money by purchasing cheap pieces, these will need more frequent replacing; guests appreciate a unique aesthetic and feel soothed in surroundings that look great for the long haul. On tighter budgets, there are bargains waiting at real estate sales or secondhand stores — ensuring you can still create an inviting style without breaking the bank on ‘big tickets’ items such as beds and dining room tables; just don’t forget those all-important details like shower curtains and lamps!

• Maintenance and repairs. From unexpected plumbing issues to broken furniture, real estate owners often face unforeseen costs on repairs and maintenance for appliances, electrical systems, landscaping, and more. Staying ahead of the game is key; all short-term property owners must be prepared for the inevitable expenses that come with property management by adding yearly estimated maintenance and repairs costs into the rental price, and, (again) having insurance.

Accurately predicting maintenance costs for a short-term rental can be challenging, but having an estimate in place is key to being financially prepared. Many good property managers use formulas like setting aside $1 per square foot of space each year or 1.5 times the monthly rent as their basis for planning ahead and budgeting accordingly. Taking additional safety measures such as damage protection from online booking platforms may provide some coverage; however, it’s important not to rely solely on those payouts when significant damages are caused due to wear-and-tear versus guest negligence.

• Guest supplies & toiletries. If you’re renting out your property on a short-term basis, be sure to have an ample supply of linens, pillows, towels, and other essentials ready for each new guest’s stay in order to avoid earning negative reviews online. In addition to ensuring these basics are taken care of, consider providing unique amenities which will truly wow potential renters — coffee pods or local delicacies that they can sample during their stay could be a great example. Even something as small as a welcome note or gift, such as a bottle of wine, is always appreciated by those seeking quality hospitality experiences away from home!

Conclusion

Owning and managing a short-term rental can be a profitable but challenging business. However, there are ways to get maximum protection from almost every possible risk. Although some of these tips may require initial investments of time or money, the return on investment will be worth the cost. Because we can no longer rely on a handshake, be sure to utilize carefully drafted legal documents with guests, cleaning services, and all vendors.

Need more help? Try iGMS! Our software can help you manage the daily operations of your short-term rentals, as well as:

• Synchronizing reservations across multiple platforms to eliminate double bookings.
• Using the unified inbox to organize your messages into a single feed to ensure prompt replies.
• Using automated templates and triggered messaging to improve communication.
• Automating the process of guest review send-outs.
• Creating and coordinating cleaning tasks with live tracking to completion.
• Task creation and team management with access control.
• Securely processing payments via integration with Stripe.

Author Bio

Veronika Pshenychnykova is PR Manager at Lawrina. Veronika has an international law degree and hands-on experience in the legal sphere with the EU and US markets. At Lawrina, Veronika builds ties with bloggers and external sources to spread the word about Lawrina’s projects and ideas. If you’d like to contact Veronika, you can reach her via email at v.pshenychnykova@lawrina.com.