Vacation rentals have standard costs, which vary depending on your property:
- Property-related expenses, like mortgage payments, insurance, taxes, or condo fees
- Utility costs, like electricity, phone, cable, Internet and water
- Ongoing maintenance, like cleaning services or a property manager.
Once you have your more set costs sorted, how do you budget for the rest? A lot of owners don’t have a strict budget for their vacation rental, but we connected with three owners to find out what they prioritized — and how — as they got their rental business up and running.
Invest in marketing and photography
“I really didn’t have a firm budget in mind when I started,” said Robert Schaffhauser of his unit in The Whaler on Kaanapali Beach in Maui, Hawaii. “I was willing to invest in promotion (say, a thousand dollars or so) while I learned the ropes.”
As he learned, Schaffhauser kept tabs on the value received for his marketing dollars.
For example, search engine optimization was an expensive endeavor in the hot Maui marketplace, and he learned that the gains weren’t lasting. Money spent on listing sites, however, proved to be worth every penny. “I’ve found that the ‘platinum-type option’ pays,” he says, noting that VRBO and HomeAway have been strongest for him.
Another thing worth investing in? Spectacular photos of your property. When Schaffhauser recently replaced his original photos with images taken by a professional photographer, the ratio of bookings to inquiries took off.
“My booking success rate has actually shifted,” he explained. “The number of inquiries I receive has gone up since I posted the new photos, and I’m booking a higher percentage of those inquiries than I was before.”
“Now,” he added, “I just need to figure out how to close even more of those inquiries!”
Take advantage of the seasons in your area
When first establishing Modern Lake Tahoe, a house near Tahoe City, California, Lynn Berardo didn’t have a specific budget — but she did spend carefully. “I shopped at discount stores…for quality household items at discounted prices.”
After renting her vacation home for more than 10 years through an agency, Berardo decided to manage the property on her own a few years ago.
Her first season taught her about the cycles of the vacation rental business — and how important it is for owners to take advantage of it.
“There are distinct seasons in the rental business. [I realized that] I needed to concentrate my efforts according to this cycles, and budget time and money to do certain tasks in shoulder seasons.”
Those shoulder seasons, she notes, are a perfect time to do maintenance, repairs and any upgrades you’ve flagged to keep your rental in tip-top shape.
“I believe in most cases when guests arrive to a clean well-organized home they will make an attempt to keep it that way and hence I protect my property by keeping it in good shape.”
Know what you want — and hire a local property manager
“I worked by the seat of my pants!” Pat Luftman says of the two busy months she had between purchasing and opening Herons View, a townhome at Mallard Lakes in Fenwick Island, Delaware.
Despite being new to running a vacation rental, Luftman was prepared. “We had vacationed in the Mallard Lakes community every year for 14 years; I had 14 different townhomes to compare, and a lot of experience knowing what we paid for and what we got.”
When it comes to the “vacation rental continuum”, Luftman says you need to know where your property falls: Is it high end with new and expensive furnishings, or does its character come from flea market and yard sale treasures?
“For our location and community, I am exactly where I want to be for decorating our comfy, cozy ‘home away from home at the beach’ and I’ve chosen our furnishings to reflect that feeling.”
Her best investment, however, has been a good property manager. “The fridge gave out two months after we started,” she explained, noting that they had guests at the time — who were, luckily, friends.
“It was a challenge to buy a new fridge and arrange purchase and delivery without disrupting our guests,” said Luftman, who lives hours away from her property. “[I learned that] it’s of utmost importance to have a property manager nearby that you can trust and rely on.”
What has experience taught you about budgeting and planning for your rental property? We’d love to hear your top tips in the comments below.