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Investment Strategy, Landlord-Tenant Law

A Guide To Short Term Rental Management

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In this guide, we take a look at everything you need to know about short term rental management. Should you be renting your space out as a vacation rental on a platform like Airbnb, or should you instead be looking for long-term tenants?

On the one hand, you can expect higher rent rates with short-term rentals – however, they are often seasonal, and on top of that, the management of short-term rentals comes with a little more involvement from the landlord. People expect excellent service and quality experiences when it comes to Airbnb’s – they are on holiday after all – and one bad review can see your occupancy rates drop dramatically.

What is a Short Term Rental?

Short-term rentals are most commonly used by people either on vacation or business trips. As such, stays vary from a few nights to several weeks. A short term rental is normally a residential property, unit or accessory dwelling that is rented out to guests for no more than 30 consecutive nights at a time. However, the maximum length can vary depending on the state and jurisdiction in which the rental is located.

Month-to-month leases are generally not considered short-term if there is no specified end date.

Short-term rentals can refer to single-family houses, multi-family properties, or even individual rooms in either of these.

Is Short Term Rental Property Management Right for You?

Given that there are different risks associated with short-term rentals, it pays off to be prepared from the beginning. Before you dive in and list all of your properties on Airbnb or VRBO, ask yourself the following questions:

  1. Do you have time/ are you able to offer exceptional service?
  2. Do you live near your rental? Are you contactable?
  3. Is your property in a desirable holiday location? Eg. Downtown or near a popular tourist hotspot.
  4. Is your property right for the job? It needs to be furnished, well maintained, and clean.
  5. Can you afford higher vacancy rates?

Once you’ve decided that your property and investment style are right for the job you need to consider both the advantages and disadvantages of running an Airbnb.

Short Term Rentals vs Long Term Rentals

The Advantages of Short-Term Rentals

Make More Money

In the US, the average rate in 2021 for a private room in a house on Airbnb was $66 a night. That works out as $462 a week, or $1980 a month, for just 1 room in a house. A whole property is much more valuable.

This being said, whilst people are willing to pay a premium for vacation rentals, they also expect more for their money. An increased level of service, obviously, you need to supply it furnished and it needs to be well maintained.

All of these factors contribute to a large increase in the setup and running costs of a short-term rental (which is the reason you can and need to charge more).

Flexibility

Often, people fall into short-term rental management when they decide to rent out a second home. In this scenario, you might want to maintain a week or two in the properties calendar for you to visit on your own vacation.

During the rest of the year though, there’s no point leaving the property vacant – not only because vacant properties often deteriorate without attention, but they can become targets for thieves. It makes more sense to rent it out as a short-term rental. This will allow you and your family (with planning) to use the property as well, and it can start paying for itself as opposed to being a financial burden.

Tax Benefits

The final bonus is that with a short-term rental you get many of the same key tax benefits that come with owning a rental property. Depending on how active you are in the running of your properties you may be able to deduct up to $25,000 in expenses.

Find out how Landlord Studio helps you keep accurate records to make the most of deductible expenses →

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Disadvantages To Short-Term Rentals

Higher Vacancy Rates

One of the major disadvantages associated with short-term rental management is the increased vacancy rates for properties. As mentioned before, depending on the location of the property, it might only be fully booked during appropriate seasons.

For example, if you own a lodge near a ski resort, it will be full during the winter months, but may be more or less empty for the rest of the year. Higher vacancy rates can be costly, as they mean prolonged periods of time without rental income.

Higher Running Costs

The cost of running a short-term rental or Airbnb includes increased maintenance costs, cleaning costs after every visitor, as well as taking into account the extra time and effort that you as the landlord will need to put in. This contrasts with long term rentals where professional cleaning and maintenance is not needed as frequently.

More Time and Effort

Another demanding aspect of short term rental property management is that more time and effort is required from the landlord than when running a traditional long-term rental. Energy needs to be put in to make sure that guests leave excellent reviews and that their experience, not just the property itself, is exceptional.

Because of the customer-centric focus of vacation rentals, not everyone is suited to short-term rental management. Many people outsource to management companies which further cuts into their profits.

Short Term Rental Management Infographic

7 Tips for Effective Short Term Rental Management

1. Great Service, Great Reviews, High Occupancy

The first rule of successful vacation rentals is that they live and die on the reviews they get. Bad reviews will see your vacancy rates climb and the amount that you can charge decline.

Simple touches like recommendations for local things to do, local events, or the best restaurants will help your guests have a great time. A small welcome gift is another thing that many hosts also include.

2. Know Your Tax Laws

Being a landlord comes with some beneficial tax regulations. However, if you don’t know what they are, you could end up leaving thousands of dollars on the table.

You can rent out all or part of your home or apartment for up to 14 days per year and all the rental income you receive is tax-free, no matter how much you earn. In fact, your rental income is tax-free if, during the year:

  • you rent out your home for 14 days or less, and
  • the home is used personally for more than 14 days, or more than 10% of the total days it is rented to others at a fair rental price.

However, if you do rent it out for more than 14 days of the year you will need to file a supplemental profit and loss income form.

You can read more about filing your rental income in IRS Publication 527.

Read: Tax Deductible Expenses for Landlords

3. Be a Budget Boss

With short term rental management, there are utilities and cleaning expenses to pay for, higher and more frequent maintenance costs, and also the cut that the listing platform is going to take.

Given all of these moving parts, budgeting is an incredibly important component of short term rental property management. Every expense needs to be accounted for.

Imagine you have to explain every single expense to a business partner – suddenly that $300 you spent on cushions seems like an embarrassing investment. Whilst you want to offer your guests a high level of experience you should balance that carefully with your income to achieve a positive cashflow property.

4. Keep the Property Well Maintained

With the increased turnover of guests at a short-term rental property, there is also likely to be significant wear and tear. 

And whilst wear and tear is to be expected, guests in short term rentals are often ruthless in reviews. As such, short term rentals need to be maintained to an exceptional standard. 

Not convinced? Let’s run through a hypothetical – it’ll be fun (promise).

You’re going on holiday. It’s exciting, it’s the first time you’ve managed to get away from the office with the family for years. Plus, the Airbnb you’ve booked looks amazing in the pictures.

You drive a few hours, kids chattering in the back of the car nonsensically.

Finally, after being led astray by Google Maps several times, you arrive. There is a lockbox in with the keys. You open her up, step inside, and a feeling of depression hits you like a buffalo. Your family walks up behind you. And the excited chatter that lasted all that drive quietens to an ominous silence.

The insalubrious nature of this Airbnb has, there is no doubt, ruined your vacation. Your depression lifts, and anger takes its turn straddling your chest. You decide you are going to do everything you can to make sure this never happens to another excited holidaymaker. It is now your mission, your singular purpose, to take down the Airbnb catfisher.

For dramatic effect, this is perhaps an extreme example, but I think I made my point. Vacation guests expect excellence. Keep the property nice or suffer the wrath of displeased guests.

5. Charge Competitive Rates

One challenge that comes with short-term rental property management is setting the right rental price. A lot of things can determine the rental price, amenities, location, square footage, and more.

To determine what you should be charging may take a little trial and error, and you may also have to adjust the rental price depending on the season.

To determine your short-term rental prices you will want to do some comprehensive market research. Look at what comparable properties in similar locations are charging on platforms like those listed above and use those rentals as a guideline.

6. Be Energy Efficient

For a short-term rental, you as the landlord are going to be paying the utility bills, even when no one is staying. Investing in energy-efficient solutions for the property will keep your utility bills down and help improve your cash flow. This could mean installing smart meters or lights, to better regulate the temperature and energy usage of the property.

7. Create a stand-out listing

Wherever you decide to list your short-term rental, you are likely going to be fighting for the spotlight in a sea of comparable offerings. In order to make your listing stand out there are a few things you can do:

  • Add personality to your copy – guests at your property are probably going to be on holiday after all, so they will be attracted to somewhere that seems less professional and stuffy and more relaxed and fun.
  • Highlight local attractions, restaurants and other things to do. For first time visitors to the area, suggestions of places to go are often highly valued and appreciated.
  • Keep your listing up to date. By frequently tweaking your listings, you can appeal to a wider range of guests who may be visiting in different seasons. In the summer, for example, you might talk more about the beach but in the winter, you might focus more on other indoor activities in the area.
  • Photography matters. When it comes to reducing your vacancy periods, getting great photography is vital. It’s worth using a good camera or even hiring a professional photographer. This way, guests will know what to expect before even arriving.

Speaking of the importance of photography, here are three stats that prove just how important great photography is to online property listings:

  1. 60% of people are more likely to click on a local search if it has an image.
  2. Web pages with images get 94% more views.
  3. Renters spend 60% of their time when searching for properties looking at the images.

8. Use a Property Management Software

You can outsource short-term rental management to a professional company. This is great for people that are looking to earn 100% passive income. However, it does come at a high cost. There are several payment structures that you might choose from:

  • Fixed income, where the management company will pay you a set amount each month no matter how much income is generated.
  • Flat rate, where the management company will charge you a flat fee each month no matter how much the rental is rented out.
  • Commission, where they charge a percentage of the income. This sounds good as the expense is directly linked to the income generated. However, property management companies have been found to charge as much as 30%.

The alternative, is to take on short-term rental property management yourself. Thankfully this has never been easier than it is now with listing sites like Airbnb and VRBO, and property management and accounting software like Landlord Studio. 

Self-Managing vs Hiring A Short Term Rental Management Company

Shor term rentals in some markets can be incredibly lucrative, and in order to scale your operations you might decide to look at property management companies willing to take on the majority of the work involved. This will free up your time, allowing you to focus on finding new deals and making your income more passive.

However, since short-term vacation rental properties necessarily require greater attention to detail, with small personal touches like welcome communications, fresh flowers or gifts like chocolates and champagne, laundry facilities or services, a well-maintained private space to relax, and local tips and advice, outsourcing the management of these is often expensive. There’s no getting around paying for the time it takes to pay that level of attention.

In fact, you can expect to pay as much as 30%-50% of the total revenue. This cost is dependent on the level of service you require, with the higher end of that spectrum generally including marketing and professional management services.

A more cost-effective solution is to self-manage your short term rentals. By utilizing tools like Landlord Studio you can simplify this management, and once you’ve developed processes and found quality contractors for things like maintenance and cleaning you can streamline day to day operations.

That being said, if you’re looking to scale your portfolio, you may find that operating your short term rentals yourself is just not practical, taking up too much of your time.

Whether you choose to self-manage or outsource your short term rental property management depends on your available time, property location (it’ll be easier if you’re closer to the property), and long term investment goals.

The Best Sites for Marketing and Managing Short Term Rentals 

1. Airbnb

Airbnb is the industry staple for short term rentals. Originally designed to enable people to easily rent out rooms in their house, it has developed into a fully-fledged private short term rental platform. 

You’ll want to consider the costs of hosting—including cleaning, higher utility bills, taxes, and Airbnb’s host fee, which is 3% for payment processing. Your guests pay Airbnb’s 6% to 12% booking fees.

2. VRBO

Homeowners on VRBO can only rent out whole properties, which means you can’t use it to rent out space in your own home. This is unlike Airbnb where you may also book a room in a shared house. VRBO will handle bookings and your calendar for you. The commission that VRBO charges for pay-per-booking listings start at 8% per booking. 

3. Vacasa

Vacasa offers a more comprehensive service to the previous two on the list. As North America’s largest property management company with over 25,000 short-term rentals currently under their management. Vacasa provides a variety of services, from guest screening, helping you with taxes and permits, to 24/7 guest service.

4. Evolve Vacation Rental

Evolve Vacation Rental will primarily help you with the marketing of your property and help you fill and manage your bookings calendar. However, they also offer 24/7 support for guests, making it a good solution for landlords who want a more hands-off experience. Evolve has one of the lowest fees on the market — 10% of your Airbnb revenue.

5. Casago

Casago is a vacation rental management company operating in Southwest US and Canada. Every property managed by Casago receives an onsite property manager whose job is to ensure a perfect guest experience. This personalised and detailed property management experience will help ensure your guests have an incredible time, reviewers stay positive and your rental stays full.

Use Landlord Studio to Manage Income and Expenses for Your Short Term Rental

Hundreds of people use Landlord Studio to help them with their short-term rental property management. Landlord Studio allows them to save time managing their rentals, and stay on top of tracking their income and expenses.

This saves them a huge amount of time when it comes to filing taxes at the end of the year, as well as offering succinct and clear financial overviews of their rental portfolio.

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There are 2 methods Landlord Studio users use to keep track of income and expenses associated with their short-term (Airbnb) rentals:

Step 1: Start by setting up your property – Then Add your lease. Learn: How to add a Property, & How to Add a Lease.

Step 2: When adding the lease to your property select the date range of your guests and make sure to select under rent frequency the option for “One-time (Airbnb)”.

Step 3: You can now add the lease details as well as cleaning expenses payable by tenant etc and any other Airbnb-related expense to this guest.

Step 4: Once the guest has paid, log the payment in the app, and select the payment period as complete.

  • Repeat this process for each of your guests.
  • This method allows you to track your guests, and pair income and expenses on a guest by guest basis.

We recognize that going through this process for every guest can be time-consuming, especially if you have lots of very short-term guests. So, some of our users choose to use method 2 instead. This allows for less careful organization, however, it is quicker and easier and still allows you to keep track of income and expenses on a property-by-property basis.

Step 1: Start by adding your property to the system.

Step 2: When adding your lease either leave the end date of the lease empty or set it as a date far in the future. You can come back and change the lease end date any time you need to.

Step 3: Make sure you select “One-time (Airbnb)” for the rent frequency.

Step 4: Set the rent amount to $0.00.

Step 5: Log your expenses as you normally would.

Step 6: Create a new payment category.

Settings < General < Categories < Add a new payment category which you can call “Airbnb” or “Short Term Rental”.

Step 7: Log your first payment. Mark the payment period as complete and the lease will now show the property as green, no rent owing.

Every time you have a new guest log a new payment, selecting the payment category you created. You can make any important notes about the guests in the payment notes section.

Note: Alternatively, you can leave the payment as incomplete and this will continuously show the property as having rent owing. It depends on personal preference.

Final Notes

Short-term rental property management isn’t the right choice for everyone or every property. However, when done right, short-term rentals can be incredibly lucrative. Not to mention, the additional benefits of meeting fascinating holiday makers from all over the world and having your own accessible slice of paradise to visit when it’s finally your vacation time.

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Ben Luxon

Ben is the editor and lead writer for Landlord Studio. He has worked with real estate professionals all over the world and written educational articles on tech, real estate, and financial growth for sites such as Forbes, TechBullion, and Business Magazine.

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