Want to get involved with short-term rentals but don’t know how much it costs to get started? Sometimes it can be hard to find a clear answer and that’s because its different for everyone! It depends on where you’re coming from in the process, where you physically are (location), and what resources or assets you’re starting with (i.e. do you already have a property to turn into a short-term rental?).
The Cost
Let’s be clear about this fact, some money will be needed for all of the STR strategies. If you have the money to invest in real estate, great. BUT, if you don’t have the money to buy real estate, that is okay.
Do you have enough to rent and furnish a place for STR purposes? If you do, great! If you don’t, that’s okay too. It actually doesn’t matter what your resources are or are not, it just matters that you are clear about what your options are so that you can focus on choosing the strategy that best fits your goals. For a full list of strategies click here to see which one best suits you. In addition, all the fundamental skills that you build along the way will allow you to level up to more advanced cash-building techniques as you go along.
For the lowest cost acquisition strategy (co-hosting) it only takes a few hundred dollars to get started. For the second strategy (rental arbitrage) more funds will be required and the amount will depend on the parameters you set for the property that is rented out under a traditional rental contract and subsequently leased to short-term renters. The last acquisition strategy (purchasing a property) will include the cost of purchasing a home.
If you’re buying or renting your own property to start off with there a several costs to consider:
Up Front Costs
Depending on where you are, the security deposit, down payment, and rent prices will vary greatly. If you’re looking to get a business up and running in a popular city like Chicago, IL for example, versus a smaller town like Mesa, AZ your security deposit (most often equaling 1 month’s rent) will be much more expensive in the city. If you’re purchasing a property the down payment is another cost you’ll need to consider as it won’t often have a very cheap price tag. The monthly rent or monthly payment toward that property will also be another cost to consider and will help you gauge how much you should be expecting to bring in monthly to help compensate for the cost of your stay.
Insurance
Insurance is another variable cost that will depend on your location and the insurance provider you choose. This cost will also depend on what kind of coverage you decide to get for your property, some STR services even offer coverage for their hosts. Like Airbnb’s AirCover which is free for every host and includes $1M liability insurance, $1M damage protection, pet damage protection, deep cleaning protection, income loss protection, 14-day filing window, quicker reimbursements, and priority routing for Superhosts. More often than not, hosts get their own coverage for their property through a specific insurance provider and take advantage of any free coverage offered like AirCover with Airbnb.
Utilities
The cost of the utilities is also another cost to consider. What electricity, water, gas, and city fees a property has depends on its location, and in most cases you can find out what the costs have been for a particular property before you purchase or rent either from a realtor who may be able to get the information from previous owners/tenants. Or in the case that you’ve already purchased a property when you establish an account with the appropriate service provider, you can ask for such information on the property based on that home’s history.
Furniture
A short-term rental is classified as a furnished place at the end of the day so it’s your job to furnish it! This includes everything inside an Airbnb. It’s up to you how into it you want to get, but just know the more unique, well-stocked, well-designed, and visually appealing your stay is the more likely you’ll get more action on your listing. This doesn’t mean you need to go out and buy all new stuff though. Maybe you have things in your primary residence you’ve been wanting to get rid of, repurpose them. There are plenty of second-hand furniture and decor places out there and are great options when it comes to saving some money along your journey of putting together your business.
Restocked Goods
These are costs you’ll be accruing every time you turn over your stay for the next guests. Things like toilet paper, soap, shampoo, conditioner, paper towels, laundry detergent, anything that guests would use up during their stay that you’d then have to replenish for newcomers. These are regular costs and it may take you a few stays to see just how much people use on average.
Utensils and other amenities
A well-stocked kitchen with things like silverware, cups, plates, bowls, pots, pans, etc are all things that should also be considered when starting a short-term rental. These are after all supposed to be some kind of a home away from home experience, its good practice (if your place allows it) to make sure people essentially have access to everything they could need.
Additional Services
Not every host offers additional services like Netflix, Hulu, or other streaming services but they’re becoming more and more regular. If you want to go the extra mile and leave no stone of customer service and experience unturned, it could be a beneficial addition to your stay. You may also decide that you don’t even want to take care of the turning over of the property, or the scheduling of new renters, if you’ve got the means and desire there are plenty of people out there who offer management, cleaning, booking, scheduling, and communication for your business.
Conclusion
If you’re looking for a small money investment co-hosting is the way to go, but with the little investment also means you’re not going to get the return those who engage in rental arbitrage or full-on buying a property for their own short-term rental business are going to see. Whatever your situation though, short-term rentals can offer anyone willing to get involved a great side or even full-time compensation for their work. Take advantage today and remember the costs covered so you aren’t going in blind!
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