Everything You Need to Know About Short-Term Rentals

Thinking Airbnb? What it really takes to run a profitable short-term rental.

Short-term rentals can be a strong way to earn income and build wealth, and booking sites have made it easier than ever to rent a place to travelers. But a profitable rental doesn't happen by accident. It takes understanding the market, knowing who'll book, buying the right property and having a real plan for marketing and day-to-day operations.

This guide is for first-time short-term rental investors and for owners who want to run theirs better.

Research the market before the house

Start with demand. See how far into the future similar listings are already booked, how many visitors the area draws, what events are coming up and what kinds of properties stay busy. Then size up the competition: how many rentals are nearby, what they offer, how many guests they sleep and what they charge per night.

Just as important are the rules. Short-term rentals can be shaped by zoning, licensing and permit requirements, HOA or condo rules, state and local regulations, and taxes on short stays, and all of it varies by city, county and neighborhood. Verify the current rules for the specific property before you buy, not after.

Know who's going to book it

Who's likely to stay with you should shape the property you buy, the amenities you add and where it sits. Look at the attractions and activities nearby, study the other rentals in the area and the guests they draw, and look for gaps you could fill. Sketching out a few ideal-guest profiles based on interests and travel style can guide both the purchase and the marketing.

Make it easy to run

A few habits save a lot of time. Buy cleaning supplies, toiletries and linens in bulk. Set up saved replies for common messages like booking requests, check-in instructions and directions. Think ahead about what guests will want, like a welcome basket, a guidebook with local favorites or extra pillows and blankets, because that's how you earn great reviews. And invest in professional photos, since they're the first impression a guest gets.

If you don't have time to do it all yourself, a cleaning company or property manager with short-term rental experience can take a lot off your plate. Fees vary with the level of service, so get more than one quote.

Common questions about short-term rentals

Are short-term rentals allowed everywhere?

No. Whether you can rent a property short-term depends on the city, the county and sometimes the HOA or condo association, and those rules can change. Confirm the current rules for the exact property before you make an offer.

How do I estimate the return on a short-term rental?

Start with net operating income: expected annual rental income minus annual operating costs like maintenance, insurance, property taxes and HOA fees, leaving out the mortgage payment. Then compare that to what you've put into the property. Any projection is an estimate, not a promise, so build in a cushion and run your numbers by a CPA.

Does a short-term rental have to be a luxury property?

Not at all. A modest, practical place can work well, because plenty of travelers need one: people visiting family, interviewing for a job, waiting to close on or renovate a home, touring colleges, traveling with pets or coming in for an event.