How to turn a home into a vacation rental

Do you want to convert your home into a short term rental? Follow these steps.

Vacation rentals have risen in popularity in recent years. In fact, 2021 was the best year in Airbnb history. Reservations are up nearly 50% compared to 2019, and new hosts alone have made nearly $2 billion over the past year.

If you're a homeowner, you might consider getting into the business on your own—especially if rising inflation has frustrated you.

According to data platform AirDNA, a typical short-term rental made a record $56,000 per year last year — a 35% jump from early 2020. Can money like this help you stay afloat? Here's how to turn your home into a vacation rental — and ensure its success.

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1. Check local ordinances

The first step is to make sure that short-term rentals are actually allowed in your city, as many have banned or severely restricted them. Elsewhere, there may be some red tape that needs to be worked out - such as getting a business license or registering with the city.

“Regulations are a big topic in the short-term rental world, and it is absolutely essential that you check — before you start renting — what local laws are,” says Alex Haler, executive director of strategic accounts at AirDNA in Denver.

"Regulations can mean anything from registering for a different tax rate to an annual fee for obtaining a license to specific restrictions on properties that can be rented - and fines can be high for those who don't follow the rules."

You should also check with your homeowner's union if it is in your neighborhood, as that often prohibits short-term rentals as well.

“This is not a case of 'asking forgiveness is easier than asking for permission,'” says Glenn Schurm, a real estate investor and president of VistaPro. “You don't want to invest your time and money just to close the property too soon.”

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2. Market research

Next, you should research your local market - specifically, how to order it. Is there a strong demand for short-term rentals in the area? Are you near a big city, a beautiful beach, a local college, or some other amenities that might attract visitors?

"Do some market research, and dig into the data to build a solid business case for your property," Haller says.

From there, consider the competition - whether in your city, or in your region or community specifically.

"Look for your direct competitors," Haller says. “What do they do well? Does any of them have a certain advantage or advantage that helps them outperform the others? Keep track of this group of competitors because it will help you set the right price, measure your performance and stay ahead of the curve.”

3. Equip the house

Once you are sure that there is real potential in the market, you can move on to setting up the property. First, depersonalize the place, and be sure to remove anything of particular value.

“When guests check in at your vacation rental, they want to see a blank slate for their own experience—not your family photos or mementos, so much as heart-warming,” says Daned Kirkham, senior property manager at Vacasa. . "It's best for homeowners and guests alike if you collect and store your personal items in a private locker or outdoor shed, which can be locked and marked as prohibited."

You should also make any necessary repairs and fix any long-forgotten "quirks," as Marcus Ryder, CEO of Hostaway's vacation rental management solution calls it.

"Every home is unique, but unfortunately, the quirks you're accustomed to—think noisy doors, lousy bathrooms, or refrigerators that don't lock with one click—can make for a poor guest experience," says Ryder. "Fix these before you rent your house to strangers."

Finally, think about the experience you want to offer your guests. You may want to update furniture or decor, install new technology, such as smart thermostats or smart locks, or add a workstation to help you market the property to remote workers.

“A lot of people are now working remotely and taking work vacations,” says Rachel Black Johnson, a real estate agent with CENTURY 21 Gavish in Las Vegas. "You should also have a separate WiFi for guests, if possible."

4. Get the right insurance, and talk to your neighbors

Obtaining a short term lease carries risks. Guests can damage your home and property, and there is an additional liability to consider as well.

For these reasons, most homeowners' standard insurance policies won't extend to short-term rentals—at least those you plan to rent regularly.

"Almost all types of housing insurance are not applicable to short-term rentals," says Ryder.

Although platforms like Airbnb and VRBO offer some built-in insurance for hosts, says Räder, "there are many instances where this falls short." To ensure your protection, consider adding a short-term rental policy, landlord insurance or business insurance your insurance agent should be able to point you in the right direction.

You can also talk to your neighbors about your plans, as they can help offset some of the risks as well.

"It's best to let the neighbors know about the situation and give them a way to reach you in the event of an emergency or other situation," says Black Johnson. “Ask them to call you at the first sign of a problem.”

5. Create your own systems and processes

Equipping your property is only the beginning. You also need systems to manage it. How will you deal with reservations? How about cleaning and storing property among guests, or dealing with questions and concerns?

“It comes down to the time, effort and resources the landlord is willing to dedicate to the success of their vacation rental,” Kirkham says. "If you're self-managing, in addition to hiring a housekeeper, don't forget to connect with local maintenance and repair professionals who can be on call and available to help when things go wrong for guests."

If you don't have the time to manage the property yourself, you can also bring in a property manager to handle matters for you. These come with a fee, but it may be worth it depending on your schedule and how often you book your accommodations.

"Providing hospitality and getting great customer service can be a full-time job, so it's worth considering if you have the ability to do it yourself or if you should hire a property manager to do it for you," Haller says.

6. List and market your property

Finally, it's time to show your possessions to the public. To get started, you'll need photos of your property; Ideally and professionally. According to Airbnb, professional photos can generate up to 20% more bookings and 20% more profits.

You'll also need to create a listing description, choose the platforms you want to use — popular options include Vrbo, Airbnb, and Booking.com — and set your own price.

“There are a lot of factors that have to go into determining your rates, including what day of the week it is, the seasonality of the destination, whether there is a holiday or event happening, the lead time — how far the date is, and of course your costs that you need. to its coverage,” Haller says. “Even your cleaning fee should be carefully considered. There may be good reason to reduce it, as having a low cleaning fee can increase your occupancy. On the other hand, high cleaning fee can actually be justified if you are armed with good reviews ".

Speaking of reviews, Räder says this is often your best marketing tool, especially in the early days of your rental.

"With your first guests, do everything you can to earn those five-star ratings," Ryder says. "They are the single biggest point of failure or success."