The 2010 Census reported that 4.6 million homes in the U.S. are used on a seasonal, recreational, or occasional basis, up from 3.6 million in 2000. Add the many people who occasionally rent their living space though Airbnb, and you have a $23 billion industry. If you have a vacation rental for a bit of extra income, you may not take it seriously as a business. Rob Stephens thinks you should. Stephens is co-founder and CEO of HotSpot Tax Services (recently acquired by Avalara, the company is being rebranded as My Lodge Tax), which helps owners of vacation rentals meet tax and licensing obligations. He says if you treat your rental as a business and make smart business decisions, you can maximize your earnings and minimize headaches. Here are his tips for getting the most out of your vacation rental.
1. Keep Your Eye On Property Management Costs
Some owners of vacation properties hire a property manager to handle bookings. Property managers take a commission that Stephens says averages around 30 percent of revenue. “If you don’t mind rolling up your sleeves a little bit and getting involved,” he says, “there can be significant economic benefits to doing it all yourself.” Websites like VRBO and HomeAway allow owners to promote their properties on either a flat fee or a commission basis, usually 10 percent or less, a much lower cost than hiring a property manager. Airbnb takes care of the booking and payment process online and collects a three percent commission from the host and between six and twelve percent from the guest.
2. Invest in a Quality Listing
“People are shopping online,” says Stephens. “The biggest thing is to have good pictures [and] invest the time to write some good descriptions.” He suggests staging your property as if you were going to sell it and hiring a professional photographer to take high quality photographs for your online presence. “To pay a couple hundred bucks to have nice photos, it’s not that much in the big picture,” he says.
3. Accept Credit Cards
Stephens strongly encourages owners of vacation properties to accept payments via credit card. With the accessibility of processing services like QuickBooks GoPayment, even owners who rent their homes occasionally don’t have an excuse not to. “You’d be shocked if you sat down with HomeAway executives and they told you what percentage of their business is people sending checks through the mail,” Stephens says. The majority of travelers expect to pay by credit card, which will make booking easier while putting money directly in your bank account. Stephens sees accepting credit card payments as a way to improve the guest experience by running a healthy business.
4. Collect Lodging Taxes
Whether you rent your home a few days a year through Airbnb or lease out a second property almost every week, you are operating a business and you will owe local lodging taxes. “Any rental transaction, it’s going to trigger these taxes,” says Stephens. “It’s the same taxes a hotel would pay.” The rate is variable and averages around 12 percent, he says, adding, “Most travelers have an expectation of paying the tax,” so property owners shouldn’t worry this extra charge will lead to fewer bookings. He notes that a viable business model for any business needs to include collecting and remitting applicable local taxes and license fees.
5. Give Your Guests a Little Extra
Stephens suggests viewing your vacation rental from the perspective of your customers. “They’re on vacation,” he says. “They want a nice place, a nice experience.” Keep furniture and fixtures in good repair. Extra amenities such as cable, flat screen TVs, or a Netflix subscription will cost you a bit but will give your guests a more pleasant stay. Some owners leave a welcome gift such as a bottle of wine or fruit basket. These little touches can lead to repeat visits and positive reviews — and more visitors down the road.