Still haven’t found a suitable rental property yet? Then read How to Find the Best Airbnb Properties for Sale.
Step 1: Create a Real Estate Business Plan
Before you get your vacation rental business started, it’s important to know what you’re going to do and how you’re going to get there. One of the most common mistakes beginner real estate investors do is jump in and get in over their heads. In addition, one reason that they fail is that they don’t treat their investment like a business. A vacation home investment is more than just listing your rental property on Airbnb and waiting for the money to roll in. It’s a business and, just like any other business, you can’t expect to succeed without a business plan. Therefore, the first step to starting a vacation rental business is putting together a real estate business plan that outlines your goals and keeps you on track.
Here’s your guide to Developing a Real Estate Investing Business Plan for Beginner Investors
Step 2: Get the Rental Property Ready for Guests
After creating a clear business plan, real estate investors can move on to the next step which is to prepare the rental property for guests. Part of being a vacation rental owner means to keep the comfort and convenience of your guests’ in mind when furnishing the property. This includes providing large scale items (lamps, curtains, bed frames, nightstands, etc.) as well as everyday items (hangers, can-openers, tissues, hair dryers, etc.).
When starting a vacation rental business, list the items needed for your rental property. Try going through your entire day and make a list of the items you’d need. Basically, make sure you prepare your vacation home rental in a way that allows guests to feel at home. Your first few tenants will tell you the items they need and, after a few bookings, you’ll learn what guests ask for and will be able to predict what they need.
Step 3: Set an Acceptable Price
One of the challenges of owning a short term rental property is to find the right rental rate. As an Airbnb host, if you charge too high, it’ll scare guests away. On the other hand, charge too low and you may lose money on your bookings or attract the wrong crowd. One mistake that beginner property investors starting a vacation rental business usually make is setting the rental rate based on their financial standing or emotional attachment to the house. Don’t do that!
Instead, what you should do is to check comparable (similar) properties in your area to find a competitive price that guests will pay and that will make you a profit. Moreover, smart Airbnb hosts use an online real estate investment tool called the Airbnb Profitability Calculator. Among its many uses, this tool provides data for Airbnb rentals like the cap rate, cash on cash return, Airbnb occupancy rate, and expected Airbnb rental income.
As a real estate investor starting a vacation rental business, you’ll get this data on the property level AND the neighborhood level. So, you’ll be able to analyze and compare various investment properties in your location to see how profitable your Airbnb vacation home rental will be and determine the appropriate rental rate that’ll yield a good return on investment.
You can get your hands on an Airbnb Profitability Calculator right here on Mashvisor! To give our investment tool a try, start out your 14-day free trial now.
Step 4: Advertise Your Vacation Renal
Once the investment property is ready and prices are set, it’s time for the next step which is advertising. Start by listing your property on multiple listing sites like Airbnb, HomeAway, Booking.com, VRBO.com, etc. You’re bound to reach more people with these listing sites, but don’t stop there. To get the word out about your vacation home rental, you should incorporate social media into your marketing strategy. It’s a free tool for anyone starting a vacation rental business to facilitate promotion and increase visibility.
When it’s time to write a compelling property description, it’s critical to pay close attention to details. There are thousands of other short term rentals, so you need a thoughtful description that’ll get potential guests to book yours. Be creative, honest, and focus on what makes the rental property desirable for guests. Furthermore, mention the neighborhood and what’s nearby, state your focus on the guest’s satisfaction, and finish with your contact information.
Next up for advertising your vacation home rental, you need to take outstanding photos. According to Lodgify, a vacation rental software solution, guests typically click through 2-3 images before deciding to move on to another property listing. Some don’t even look at a property if there are less than 10 photos. So the more, the better. But, as a real estate investor starting a vacation rental business, choose quality over quantity. If you’re taking the pictures yourself, take your time to highlight your home’s best features, make sure the rental property is free of mess, focus on lighting, and prevent blurry pictures. If you can get a professional to take pictures of the property, by all means, spend the money to do it!
Step 5: Manage Bookings and Inquiries
As you start getting bookings for your short term rental property, you need to keep updating your calendar to prevent renter frustration and scheduling conflicts. This could be a daunting task when you’re starting a vacation rental business. However, today’s property investors and hosts use a number of tools that make this smoother and free of headaches. There are a number of vacation rental software that allow you to automate all aspects of your real estate business from listings, bookings, management, payment, etc.
When it comes to inquiries, you should respond to them within 24 hours by phone. Why? Because your initiative will get you more bookings. As a short term rental host, set up an automated response following an inquiry to inform potential guests that you will get back to them shortly. This will give you some time before you actually respond in person and guests will feel valued.
Step 6: Maintain Your Vacation Rental
When you get to this step, you’re basically ready for business. Of course, there will be twists you need to work out and systems you need to set up. For example, when it comes to maintaining the vacation rental property, some issues you’ll need to address are:
- Will you manage the investment property yourself or hire professional property management?
- Who will clean the vacation rental before and after each guest?
- Who’s going to be responsible for handling repairs on the property?
- Who will take care of the accounting side of the vacation rental business?
- How will your guests get their keys? (Lockbox, key pickup, mail keys, etc.)
You want to make sure all of this is figured out when starting a vacation rental business not only to make maintaining the property easier for you but also to provide a better experience for your guests. Owners of short term rental properties understand that experience is important for guest satisfaction and positive reviews.
You’re Ready for Starting a Vacation Rental Business!
If you’ve been tossing around the idea of starting a vacation rental business, it’s time to go for it! Not only is it fun, but it’s also a profitable property investment that brings a lot of rewards. After reading our guide, now you have the knowledge of how to start a short term rental business in 6 steps in addition to the best tools that you’ll need as a real estate investor.