Today, we’ll look at six ways for short-term rental investors to increase income and decrease expenses to wring every last dollar out of their investments. Implementing these techniques will be especially useful for investors on a budget who need to become profitable as quickly as possible.
A Picture is Worth 1,000 Words…
If you haven't already done so, you need to get your listing page looking spick and span. Potential guests are visual decision-makers; your photos will make all the difference in attracting their business and increasing your income. Even if you have the perfect property in a great location, it’s the photos that ultimately make the sale.
Try not to overestimate your photography abilities; if you're not a pro, you should hire one. And don’t shy away from premium prices — good photos aren’t cheap, but they will more than pay for themselves.
It's also a good idea to stage your property before taking photos to highlight its best features. Light the fire pit and turn on any water features. Capture the view of the sunset from the balcony, and maybe even set up a charcuterie board. You want to go beyond bland real estate photography and showcase the experience guests can have if they stay at your place.
…but Words are Important Too
It's also critical to get solid reviews from your guests. When researching their next Airbnb or VRBO trip, guests can be overwhelmed by the number of listings they see and will quickly weed out any properties that don’t have great reviews. With so many highly-rated properties to choose from, guests don't have much reason to gamble on a place with terrible reviews. If the reviews for your property are less-than-stellar, occupancy will take a hit, lowering your income and reducing your profitability. On the flipside, consistently high reviews will lead to consistent bookings that increase your profits.
There’s no real secret to getting consistent five-star reviews — the easiest way is simply to provide a genuinely good experience. A lot of it comes down to good management practices. You should be responsive when guests message you and spring into action if they have any problems. Make your check-in process as simple as possible, and clean the property thoroughly between guests.
The devil is in the details, and with short-term rentals, the small stuff can mean the difference between a satisfied guest and one who leaves a nasty review. Ask yourself, “Is there enough soap in the soap dispenser? Has the dishwasher been unloaded? Are there clean towels ready to go in each bathroom?”
If you have a new short-term rental, you can quickly earn glowing five-star reviews by going above and beyond for your guests. Offer to show them around town or prepare a welcome sheet that guides them to recommended restaurants and attractions. Have a snack tray, flowers, or bottle of wine waiting for them when they arrive. Don't overthink it, though — a simple, personalized touch goes a long way.
When it comes to setting your nightly rates, you need to find the sweet spot. Price your listing too high, and guests will choose your competitors, leaving you under-booked. Price too low, and you’ll be endlessly booked but without enough income for a viable business. Somewhere between these two extremes lies that ideal nightly rate that maximizes profits.
If you’re just opening a new property, start by analyzing your competitors’ nightly rates. Then, set your prices slightly lower than those of your competitors (about 10% lower should do the trick). You’ll have an easier time getting bookings and positive reviews by starting out at a lower price. Once you have a few solid reviews and are getting consistent bookings, you can slowly raise your nightly rate to make your Airbnb more profitable. If guests are raving and you’re booked solid, see how high you can push your nightly rate before the market pushes back.
Successful owners also adjust rates based on the time of year and any special events in their area. For example, if you own an Airbnb minutes away from the Coachella Valley Music and Arts Festival, you should raise rates when the festival comes to town. At other times, you may need to reduce your prices to maintain a steady flow of bookings.
If you’re just starting out, you might consider self-managing your short-term rental. You’ll learn a lot about what it takes to run an Airbnb, and you’ll pocket the money you’d typically pay to cleaners and managers. That said, we recommend that you outsource cleaning and property management as soon as you can.
Doing your own cleaning and property management is a ton of work. If you have a day job, or if you don’t live close to your investment property, you may find that hands-on management is infeasible. If you value your time and want to scale your short-term rental business, delegating management is really the only way to go.
Important: Your Airbnb should be profitable even after you pay for cleaning and management. If you must self-manage and self-clean to make a profit, you’re not really making money — you’re just moving money around!
The good news is that there is a wide selection of property management services available to short-term rental investors. Many of these services use software to automate the repetitive tasks associated with running a short-term rental. Because it’s all done by software and not a human property manager, these services can be surprisingly affordable.
A favorite among investors is the management software Guesty, which costs between 2–5% of each booking. Guesty can be programmed to send auto-messages that serve a range of functions. For example, you can have a prewritten message for every stage of the process — after a booking, before check-in, a reminder to leave a review, etc. You can also set up an autoresponse in case you are unable to reply to a guest inquiry in a certain amount of time. This keeps guests from feeling ignored.
Guesty also simplifies the process of collecting payments and will automatically adjust your pricing to maximize revenue. It also allows you to set automated reminders for cleaning and preventative maintenance. All of these automations add up to a significant savings of your most valuable resource — time.
You should create a maintenance schedule based on your property’s needs and stick to it. By tackling preventative maintenance head-on, you save yourself from a deluge of unexpected expenses down the road.
Simple things like cleaning HVAC coils, changing air filters, or checking your dryer exhaust will make your appliances more efficient and reduce the risk of a serious breakdown. If you’ve got a chimney, make sure you have it swept once a year to prevent a creosote fire. If you have a pool, covering it and having it cleaned regularly will reduce the chance of an expensive problem developing.
Keep in mind that the cost of an unexpected breakdown can extend beyond the direct cost of repairs. If, for example, the A/C in your Arizona rental breaks down in July, the property will become unlivable. You won’t be able to have guests, and your income will go to zero until the problem is fixed. If you’re serious about long-term profitability, preventative maintenance is vital.
A significant advantage of short-term rentals is that you can inspect the inside of your property between guests. Investors with long-term tenants don’t have this luxury, often going months or longer without seeing the inside of their property. Take advantage of this, and periodically check your property for leaks, cracks, or other problems.
Don’t Forget the Little Things
These final expense-reducing strategies may seem trivial on their own, but they can result in substantial savings when combined. A few examples:
- Go with efficient LED bulbs instead of power-hungry incandescent bulbs (LED bulbs last 25 times longer and use ¼ of the electricity).
- Don’t buy top-of-the-line furniture. There’s a risk of it getting trashed anyway, so you’re better off buying something nice but affordable. You can also save money by purchasing furniture that you build yourself.
- (*Don’t get carried away in your pursuit of cheapness. If all your furniture is junk, guests will likely be disappointed, and it will be harder for you to charge high rates. It’s all about finding a balance.)
- Any items you’ll need large quantities of, like soap, dishwasher pods, or toilet paper, should be purchased in bulk.
- Make sure your home is adequately sealed and insulated to help your HVAC system run efficiently.
- Look to make a bulk deal with a cleaning service. See if they’ll offer you a discount in exchange for sending them a high volume of work each week.
Putting it all Together
Creating a profitable Airbnb business isn't about one special trick or secret hack. It's about following proven strategies and best practices that boost income and lower expenses. The overall profitability of your short-term rental is not just a result of your perfect photos, your beautiful couch, your ultra-efficient management software, or your well-maintained air conditioner. Instead, it’s all these things working together that drive profitability.