Converting all or part of your space to a short-term rental can increase your cash flow.
A student of mine has been working there for four months and has generated an additional income of $15,000 after expenses.
If you want to turn your house into a bed and breakfast and make the most money possible, focus on these factors:
Make sure the customer experience matches the (really good) marketing you have in place
Five-star landlords make sure their tenants get what they’ve been promised. That doesn’t mean you have to have the fanciest property. This means that the listing is truthful and accurate, and that the photos and description represent exactly what guests will get. Nothing spoils an experience faster than finding out that the third bedroom is actually just a single bed sitting in the hallway.
The accuracy of your ad is a major driver for your online rating. The better your rating, the more likely your rental is to be rebooked and may fetch a higher price. If you’re a terrible writer and/or photographer, get professional help writing your ad.
Get proper lighting and keep the area clean
Cobwebs, dark corners, cat hair, smelly fridges, broken door handles and leaky faucets – if this happens in your short-term rental, you won’t be in business for long. Clean, well-lit, well-maintained spaces can be rented more expensively and will actually cost you less to maintain in the long run.
But that means you’ll have to set aside money each month for proper maintenance and cleaning. If you are a handyman or a cleaning pro, you may be able to maintain the property yourself.
Price good for booking success
The good news is that you can check the listings of everyone else in your area to see what the market rate is for your short-term rental. Just be sure to compare apples to apples; same number of bedrooms, bathrooms, solo or shared space (with you) and so on. You can charge a little more if you have superior space (eg any designer) and the location is primo (eg right next to public transit or a major attraction). Priced below the market average so you have less to offer.
My pro tip on pricing is to make sure you adjust your pricing based on the season and what’s happening in your neighborhood. For example, if you are in a hot summer location, such as cottage countryside, charge more during the peak summer months.
If there is a large conference in your city, charge more for the duration of the conference. In other words, prices should reflect the demand for your rental. During low seasons, lower the price to stimulate bookings.
Income is what you have left after your expenses
Running a short term rental has costs for cleaning, maintenance, bank charges if using cash through an independent bank account, replacing worn out towels and linens, upgrading furniture, lawn maintenance and possibly a property manager. You will also pay for advertising and your ad.
Don’t overlook insurance costs, which are unique for anyone doing a short-term rental. And, if you bought a home exclusively for the purpose of earning rental income, you’ll also need to factor in mortgage servicing costs, taxes, utilities, maintenance fees and more. Control your expenses (less than what you bring back) in order to make your short-term rental profitable.
And, if you’re unsure of all the numbers, hire a finance professional who knows real estate rentals. Setting up a short-term rental has to be financially worthwhile. You can use this money for your personal financial goals or even to set up your next short-term rental.
Maintain mutual security and confidentiality
I’ve owned long and short term rentals since I was 21 and I’ve probably had every weird tenant problem imaginable – fires, thefts, relationship disputes, threats and I’ve even had a tenant drive his motorcycle through my living room.
On the other hand, some of my tenants have been amazing. Smartly protect your privacy and security while maintaining a good working relationship with your tenants. Your tenants also need to feel safe. If you’re sharing a space directly with a tenant (my family did when I was growing up), install proper locks on doors, lock up valuables, set passwords for electronics, and be clear about expectations regarding privacy and security. I think smart home and security technologies are a very good investment as long as everyone’s privacy is respected.
I’m a big fan of testing out a B&B or short-term rental in your own home first, before investing in another real estate purchase or permanently converting your basement into a rental unit. Adjusting to landlord status takes time, and you’ll need to edit your listing multiple times to ensure you’re making the money you want while attracting the right tenants.
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