Rental websites like Vrbo are giving hotels a run for their money. Since the emergence of rental websites, more and more travelers are opting to rent homes when they travel.
This is good news for those with an investment property or second home. Renting out your home while away (or maybe your vacation home that you only visit a few times a year), is a great way to gain passive income to pay down debt, fund a home improvement project or save for retirement.
In fact, if you live in or near a major city or in a location where popular events happen, you could even earn up to $100,000 renting your home.
If your primary home or a vacation home is vacant during the week, here’s everything you need to know about renting your home, with insights from Bill Furlong, VP HomeAway, Americas.
Why Rent Out Your Home?
In the humblest of estimates, renting your home can provide a little extra cash on the side for savings, but when done right, partners could cover their monthly mortgage payments or even make enough money to pay off their home entirely.
According to a study in 2017, Vrbo discovered that their top partners were making over $110,000 renting out their homes1 with over 50% of Vrbo owners using their rental income to cover at least 75% of their mortgage payments.2
They found that the factors that most impacted a rental home’s potential earnings were the location of the rental, the number of beds and baths in the home and the frequency in which the house was on the market to rent.
“The frequency with which you are willing to rent out your home is a major driver of rental income,” Furlong explained.
To get an idea of you what can expect when renting your home, you can use a rent potential calculator that can give you a preliminary estimate of what you could earn before you list your home or optimize your current listing by comparing it to the local market.
Financial Considerations Before You Rent
Even with the potential to earn enough money to retire early or pay off your mortgage, there are still a few financial aspects you should consider before you rent your home.
Depending on where you live, what type of home you own and how long you plan on renting, there might be legal restrictions for renting your home. If you’re considering renting your home the best thing to do is to check your local municipal or administrative code, usually found on your local government’s website. Some rental services even include a resource to check restrictions for short-term rentals.
There’s also the cost of carrying an insurance policy, which is not required but highly recommended when renting your home. Many homeowners insurance policies don’t cover damage sustained as a result of short-term renting, although Furlong mentions that you can add on policies that roll into your existing coverage.
“Carrying an insurance policy on your home that covers the activity of renting is very important,” Furlong said. “While damage to your home is highly unlikely, accidents do happen, and it’s never a bad idea to carry insurance for when they do.”
There’s also start-up and recurring costs that you need to consider when renting your home. You might already have basic furnishings in your rental, like furniture and appliances, but you should also consider buying amenities that will enhance your guests’ stay (we’ll talk more on that later in the post) like Wi-Fi or cable box.
Beyond your recurring mortgage payments, you should also expect monthly utility and internet expenses up front. Additionally, there’s the cost of cleaning fees and replacing certain amenities, like toiletries.
Marketing Your Rental Home
The most profitable rental owners know how to market their home. Even if you’re not living in a high-traffic vacation destination, there are other ways to get your rental on the market.
Establishing a Listing Amount
First, establish a listing amount for your rental. You’ll want to set a reasonable rate that’s competitive with local rentals and enough to make the effort of renting out your home financially worthwhile.
Research the cost of comparable rentals in your area. Be sure to find those that have a similar location, number of beds and baths and other amenities. This will give you a better idea of what your home is worth.
“By viewing the average nightly rates around your property, you can make more competitive decisions around your listing’s rate per night,” Furlong said.
Lastly, if you live in a desirable vacation destination or location that’s popularity varies by season, decide if you want to set pricing based on factors like peak travel times and local events.
“You don’t have to live in an expensive vacation spot to see a return on your rental,” Furlong explained. “Take advantage of peak travel times in your area. Does your city have a popular art fair, music festival or annual sporting event that draws visitors from out of town? That’s the perfect opportunity to market your home to travelers.”
You’ll want to make sure that the amount you list your rental home also covers the cost of keeping your rental home on the market. If you’re still having trouble determining a listing amount, some rental service websites like Vrbo provide tools that estimate your property’s rental potential.
Marking Your Rental Home
Once you establish a listing amount, it’s time to spread the word about your rental home. The right marketing strategy and the use of Vrbo’s tools such as MarketMaker, can take an average listing to a fully booked vacation hot spot.
“At a high level we encourage homeowners to focus on three key things when building their listing to attract the best travelers: headlines and descriptions, photos, and competitive rates,” Furlong advised.
Set yourself apart from your competition by taking high-quality photos of your rental home. If you own a decent camera (like a DSLR) and know how to use it, you can take these yourself. If not, consider hiring a professional photographer. It might cost you some money out of pocket, but it’s worth it when you’re looking to attract renters.
“Photos are a key deciding factor for many travelers looking for the perfect place to stay,” Furlong said. “Show off every room of your property with well-lit, clear photos that feature any unique amenities, special spaces or fabulous views.”
The photos might initially attract renters but having a good headline and detailed description will make or break your listing. Be sure to include as much information as possible, including background information about yourself, the property and the surrounding area. Look up common FAQs that people might ask about your rental and answer them in your description.
“Write a headline that will grab attention and tell potential guests what makes your property special,” Furlong said. “A great example is, ‘Stunning ocean view with a wraparound porch. Perfect for families!’”
Lastly, stay competitive in your market by keeping an eye on local rental rates. Depending on if your rental is a seasonal vacation destination or close to larger-scale annual events, you may want to adjust your rates accordingly.
“Research what rental rates other people are charging in your area and set your rates accordingly to make your rental competitive with the homes around you,” said Furlong said.
Attracting and Maintaining Renters
Whether you’re expecting overnight guests or travelers on an extended vacation, you can attract renters by providing amenities that set your rental apart.
“When it comes to providing travelers with everything they expect from a stay in your home, simply imagine yourself in their shoes,” Furlong advised. “What would you need to have for an easy and enjoyable stay so that you come back with a five-star review and recommend the property to your friends?”
Furlong suggested a few essentials to get started like fresh linens, quality cookware, enough plates, cups and utensils to accommodate the maximum number of guests your home can host and toilet paper and other basic amenities.
“Small considerations like making sure your furniture is in good condition, the beds are comfortable, and the internet is easy to use can go a long way and help get you that five-star review,” Furlong said.
Create a small hub by the entryway in your home or in your kitchen (somewhere that is easily noticed by guests) and leave information about the rental, passwords to the Wi-Fi, local attractions and contact numbers for emergency use.
How Do You Get Started?
If you want to make renting your home a reality, Vrbo can help get you started.
Are you currently renting your home? Share your tips of the trade in the comments below!
1 Based on the annual rental income for the top 2% for rent by owner homes in the US in 2017.
2 Vrbo Vacation Rental Marketplace Report, June 2018, 754 owners surveyed.
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