Last Updated: December 2023
Vacation rentals have been around for a long time but have recently become a very popular alternative to traditional hotels thanks to online travel booking platforms such as AirBnb. These accommodations range from high-end luxury homes to a spare bedroom in an apartment and can include homes, condos, villas, apartments and even tents or boats. Below we take a deep dive into everything you need to know about vacation rental properties.
What is a Vacation Rental Property?
Vacation Rental Property Definition
A vacation rental is the renting out of a furnished private dwelling residence such as an apartment, house, or professionally managed resort-condominium complex on a temporary basis to tourists as an alternative to a hotel.
Vacation Rental Properties Explained
Vacation rental properties are like temporary homes you can stay in while traveling. Instead of booking a hotel room, you can rent someone’s apartment, house, or even a unique space like a treehouse. This type of rental property is popular because they offer a more local and homely experience, often with the comforts and conveniences of a real home. This means you can cook your own meals, have more space, and maybe even a backyard or a pool. Many travelers prefer them for longer stays or family trips because of the extra space and facilities. It’s like moving your life briefly to a new place, making memories in a homey setting.
Short-Term & Long-Term Vacation Rentals
|Duration of Stay
|Days to a few weeks
|Several weeks to months or years
|Vacation, business trips, quick getaways
|Extended stays, work relocations, sabbaticals
|Usually per night or week
|Often monthly, with discounts
|Minimal; mostly cleanliness & house rules
|Often includes utilities, maintenance, etc.
|Less formal, sometimes just online terms
|More formal with detailed contracts
|Wear & Tear on Property
|Higher due to frequent turnovers
|Typically lower with more stable occupancy
|Income Stability for Owner
|Can fluctuate by season
|More stable, consistent income
|Usually fully furnished
|Can be furnished or unfurnished
|Often fully included
|Typically separate, paid by tenant
|Relationship w/ Owner/Landlord
|Limited interaction via platforms
|Closer, with direct communication
14 Types of Vacation Rentals
Vacation rental is a broadly used term, but within this asset class are several types of unique sub-classes that each have their own special characteristics. We explore the most common types below.
The #1 Rental Property Newsletter
Vacation Rental Property News
- U.S. News Reveals 2024 Rankings for Best Hotels
- Rent and Mortgage Rewards Company Bilt Valued at $3.1 Billion
- Zillow Launches New Credit-Building Payment Reporting
Vacation Rental Investing
Vacation Rental Investing Strategies
Vacation rental property investing has gained traction as travelers increasingly seek homely experiences over traditional hotel stays. This form of investment revolves around acquiring properties in popular travel destinations or areas with unique appeal. The objective is to generate consistent rental income and potentially benefit from property appreciation over time. Successful investing requires keen market insight, understanding tourist trends, and effective property management. Moreover, as the vacation rental industry evolves, investors continually adapt their strategies to align with changing traveler preferences and market dynamics.
Financing Vacation Rental Properties
The complexity of financing vacation rentals usually depends on how it is being purchased. If it’s purchased as a “second home” for occasional owner use, getting a loan is usually not too difficult. If the property is being purchased as a full time vacation rental business, securing an investment property loan can be more complex. Some lenders may require proof of business history, a larger down payment, and significant reserves. Interest rates are typically higher and location also matters since properties located in primary real estate markets or major tourist towns are more palatable to lenders. The good news is that lenders can start relaxing some of these requirements, once a borrower demonstrates a good track record of experience.
Managing Vacation Rentals
As mentioned above, self-managing an active vacation rental can be like a second job. If you don’t mind taking the late night “Why is the Wifi not working?” phone calls or coordinating cleaning crew schedules, then maybe self managing your vacation rental is a good fit for you. However, for those who might not have the time nor want to take on another responsibility, hiring a vacation rental property management company might be another option.
Marketing Vacation Rentals
Where to Rent Vacation Rental Properties Online?
When looking to rent vacation properties online, there are several popular platforms that help connect property owners and travelers. These platforms often offer a wide variety of unique accommodations such as urban lofts, remote treehouses, entire homes or condos. They often facilitate booking reservations, collect payments and integrate traveler reviews for future renters to make better informed decisions based on past guests’ experiences.
Vacation Rental Agreements
Vacation rental agreements have surged in significance with the rise of platforms that cater to short-term property rentals. These agreements serve as a contractual foundation between property owners and guests, ensuring clarity on terms of stay, payment, responsibilities, and more.
Vacation Rental Tools
Top Vacation Rental Companies
The largest vacation rental companies have revolutionized the way people experience destinations, providing more personalized, spacious, and often cost-effective alternatives to traditional hotel stays. They leverage technology to connect property owners with travelers, facilitating unique stays ranging from urban apartments to secluded beach houses. As the industry grows, these companies continue to innovate, offering enhanced features like flexible booking options, immersive local experiences, and increased focus on safety and cleanliness, further shaping the future of travel.
Vacation Rental Property FAQ
What Makes a Property Suitable for a Vacation Rental?
A property’s suitability for a vacation rental largely depends on its location, amenities, and overall appeal to potential renters. Ideal locations are often close to popular tourist attractions, beaches, or natural beauty spots, and offer easy access to local amenities like restaurants, shops, and public transport. Additionally, properties that are well-maintained, comfortably furnished, and equipped with modern amenities such as Wi-Fi, air conditioning, and a well-appointed kitchen tend to be more attractive to vacation renters.
What are Legal and Regulatory Considerations for Vacation Rental Properties?
Legal and regulatory considerations for vacation rentals vary significantly based on location and include compliance with local zoning laws, obtaining necessary permits or licenses, and adhering to specific safety and health regulations. Property owners must also be aware of tax obligations, such as income tax on rental earnings and potentially local tourist or occupancy taxes. Additionally, regulations may dictate the length of stays, the number of occupants allowed, and adherence to community rules in areas with homeowners’ associations or similar governing bodies.
What are the Typical Operating Expenses for a Vacation Rental?
The typical operating expenses for a vacation rental include regular maintenance and cleaning costs, utilities like electricity, water, gas, and internet, and property management fees if using a service. Additional expenses encompass insurance premiums, which may be higher for short-term rentals, and marketing costs associated with listing and promoting the property on rental platforms. Property owners should also account for periodic expenses such as repairs, upgrades, and property taxes to ensure the rental remains competitive and well-maintained.