- Business

Is a Vacation Rental Business a Sound Investment?

Many vacation rental owners claim to make three times more in a year!

For the majority of us, starting a new business venture can be both exciting and challenging. In today’s information era the internet’s World Wide Web has made almost anything possible. That is the case with the huge number of people currently running short-term rentals a.k.a. vacation rentals using an online business model.

Property rentals have always been a lucrative market even when property prices are down. As long as the owner is making money from the rental fees, then the property value is not always the be all and end all factor involved when running a vacation rental business. Those that rent their properties out on yearly leases may need to adapt to the property price fluctuation simply because yearly rental prices are often associated with property values in the area.

However, in the vacation rental business, property prices are rarely a concern

If the property owner’s vacation rental is in a popular area frequented by outside travellers, then the owner can make up to five times the amount a yearly rental contract would bring in. This is thanks to the daily rates that can be charged rather than a flat monthly fee.

Adding to this are the fact that there are not that many property management businesses that deal with leases under 1 year. Therefore, if someone is looking to rent on a short-term basis, the area’s yearly rental rate is not a factor that needs considering. The price of a daily rent is more closely tied to the prices of a local bed and breakfast or hotel as this is the market vacation rental property owners will not be entering.

Prices can be levied against a local bed breakfast or short stay hotel

If a local bed and breakfast is $40 per night, then a vacation rental can charge $30 a night. The property will then bring in a $900 a month income. This is a great return if you would have only received $500 a month in rent.

Of course, when you are renting out a property on a short-term basis to many different people, there is much more work involved compared to renting the property to one person or family for a year plus contract.

If you are looking to rent your property or properties out using a short-term vacation lease model, then before you do, read our guide below:

Running a Successful Vacation Rental Business Over the Internet

It may seem very straightforward enough renting out a property to people that want to stay for a short vacation, but there is actually more to it than meets the eye. Before you consider short term leases as opposed to long-term leases, you will need to weigh up the pros and cons.

Advantages to Short Term Vacation Rentals:

  • Short term leases mean you can earn up to three times more per day compared to yearly leases
  • Vacation rentals are not prone to as much wear and tear compared to long term rentals
  • During in peak seasons you can increase your prices according to demands
  • In some countries you will get improved tax benefits via short term rentals
  • You get to meet new people all the time either online or at your property
  • It gives you the chance to employ people such as family members
  • Many of the tasks can be managed online

When you look at the list of advantages, the fact that there is potentially less maintenance required, improved tax incentives, and more money to be made makes this business look instantly appealing.

Disadvantages to Short Term Vacation Rentals:

  • You are taking the risk that no one will rent your place
  • With so many visitors, you may need to perform upgrades
  • There may be too many guests and no time to handle them all
  • Irrational guests can make your life very difficult
  • You will need to invest in marketing and a website
  • The competition in the vacation industry can be very high

Each one of these points should be investigated in detail before deciding whether or not to start a vacation rental business. If you do decide to go with vacation rentals instead of long term rental contracts, then the next step is figuring out how you can make the business as automated as possible, and how to make sure you are able to run the business online.

For more information see: https://www.lodgify.com/vacation-rental-guide/business/

About Leon Figueroa

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