Airbnb’s host community has exceeded 5 million hosts globally who together earned over $57 billion last year. So a quick answer to the question “Are short term rentals profitable?” is yes, they are.
Short term rentals can greatly contribute to your monthly budget or even turn into a full-fledged business. However, you need to manage rentals properly and know some basic rules on how to make money with Vrbo, Airbnb, and similar platforms.
Short term rental profitability is high but not guaranteed to everyone adding a listing. If you take bad pictures, neglect your guest’s needs, and ignore property damage, rentals may become a money pit pretty soon.
Learn ways to maximize your earnings from short term rentals, how to calculate profitability, and what affects it in our post.
Understanding the potential: Factors influencing income
If you want to invest in the property for short term rentals, you should treat it differently than when you buy it for yourself or long-term rental. Potential guests may be less interested in a calm neighborhood than staying close to top city attractions. If you ignore it at the start, short term rental profitability may suffer. More about this and other factors affecting the income below:
Location, location, location
Location is by far the most important aspect impacting an average Vrbo income and Airbnb profitability. Closeness to the beach or city center is what most people check while searching for property on booking platforms. No one wants to pay $50 for a taxi each time they go to the city center and back. And we understand them.
That’s why the cost of renting out your property will depend on:
- Proximity to the city center or beach (especially for vacation rentals)
- Availability of local events
- Overall rental demand in the area.
Realtors stress that location is one thing that is impossible to change once you invest:
“Beachfront is the best to profit in the Airbnb business even though most of those buildings have inside management that will rent the unit for you with a minimum profit to them.
If you have money to invest in properties, always look for the opportunity, only worry about location because you can always fix the property but you can never fix the location,” says Blanca Plata Cunningham on Quora.
Another reason why location matters is local regulations. You may face additional expenses on rental permissions and pay extra taxes or licensing fees. Some areas and cities like Barcelona have even banned or heavily restricted short term rentals to prevent skyrocketing rental prices for locals. There are also legal requirements for Airbnb in the UK and many other places. If you buy property there without prior research, you might be unable to rent it short term or encounter too many hidden charges.
Property type and amenities
The look and comfort of your property affect the cost of rental and, therefore, profitability. People will willingly pay more for an apartment with nice furniture and must-have amenities like Wi-Fi, washing machine, free parking, air conditioning, etc. Such listings also usually have better reviews, which additionally attract guests.
So, how much money can you make on Airbnb and other platforms depending on property type and amenities? Here are some insights:
- Luxury apartments and standalone houses are more expensive than regular flats.
- The number of bedrooms affects the rental price more than the area, even though the overall size of the property still matters.
- Extra features like a swimming pool, jacuzzi, or garden increase rental profitability.
- Properties with nice views charge more.
- Pet-friendly properties are 10–20% more expensive, but the risk of property damage is also higher.
Seasonal demand
Renting a house by the sea usually costs more in summer than winter. High demand makes guests compete for good properties, and you, as a host, can increase prices. But make sure to keep the balance and avoid inflating charges too much.
Seasonal demand not only affects your income but also shapes your rental strategy. You must find ways to keep your property busy during off-peak periods with discounts, special offers, and marketing. It’s good to calculate profitability for different seasons to understand how it changes and determine overall short term rental profitability.
Tips on how to make money with short term rentals
You may keep worrying about how to make money with Vrbo and Airbnb or take specific steps to ensure maximum rental profitability. You must develop an optimal pricing strategy, use social media marketing, get proper insurance, and follow other tips below.
Use a flexible pricing strategy
When setting the price, many look at how much do Vrbo owners make. Whereas checking the average market prices is a good idea, it’s not enough to ensure good short term rental profitability. You must develop a pricing strategy adapted to your unique conditions. The goal is to find the balance between maximizing revenue and keeping your property occupied.
Here are some tried-and-tested approaches:
- Adjust rates based on demand and be ready to slash prices during the low season.
- Mind competition and try to keep on the same level with similar properties in your area.
- Differentiate between fixed and variable costs. Variable costs depend on the number of guests and include things like cleaning fees, supplies for guests, utilities, etc. Charge additional fees for every extra guest.
- Set minimum nightly rates and minimum booking duration (usually, it’s two days)
Remember that things change. If your property was super popular five years ago, it doesn’t mean it will stay overbooked forever. Short term rentals are just as competitive as any other business niche. You must offer good value for the money. No one wants to book a shabby apartment for hundreds of dollars.
Promote your property and try to stand out
The more people know about your property, the stronger demand and the higher prices you can set. Popularity also allows you to survive the low season with less idle time.
How do you promote rentals? Make sure to create an appealing profile with high-quality pictures and a detailed description. Use social media like Instagram to regularly post content and grow your target audience. A booking platform doesn’t have to be your only source to match with guests.
Finally, make your property at least slightly better than other options in the area. An experienced Airbnb host Ruth did it years ago:
“When I started out this adventure 6 years ago, there were probably around 8 rentals in a 3-mile radius, including mine. Now there are probably more than 50.
I made my 1st listing dog friendly and that attracted a lot of guests as it also has a large secure garden and no other nearby listings accepted pets.”
Also, get some inspiration on how to get more bookings on Google Vacation Rentals.
Optimize repetitive operations
Short term rentals involve lots of repetitive operations. You must clean after every guest, refill supplies, send communications, check property damage, and more. Getting money from renting out an apartment may seem effortless, but once you start it, it becomes a part-time job.
Follow these tips to free your time and increase short term rental profitability:
- Schedule cleaning and maintenance.
- Track supplies and determine how often you need to replenish them to schedule the order.
- Use templates for all standard guest communications (like booking confirmation, check-in instructions, review requests, etc.).
- Keep an availability calendar to avoid unnecessary questions and prevent double bookings.
- Use finances and tax management software.
- Automate guest screening and verification.
Of course, you can hire a dedicated person to manage your property, but it will considerably affect your revenue. That’s why it may be better to do everything yourself with some optimization.
Don’t pour too much money into designs
Wear and tear is a big problem for short term rentals. Most guests won’t care about keeping your property intact, and even if they do, things happen. Someone will spill coffee on the couch, scratch the table, or break a cup. That’s why it’s better to create a nice, comfy design with affordable furniture and decor. It will ease the worries about financial losses and increase short term rental profitability.
Blanca Plata Cunningham, a Real Estate & Property Management graduate, shares her advice on that:
“Buy and make it look beautiful so you can rent it a high market value and fast and if you are thinking to resale in a few years, don’t put too much money into it, there are great ways to make it beautiful with little money unless the property you are buying had roof, or electrical and plumbing problems them add it up when you make the offer.”
Get a reliable insurance
Specialized insurance for short term rentals is a proven way to minimize financial losses from guest property damage, liability claims, and natural disasters. Airbnb, Vrbo, and other booking platforms do offer some protection, but it’s usually not extensive enough. That’s why we recommend partnering with an STR protection provider that has special offers for short stays.
You can get Damage Protection by Superhog to get reimbursed for accidental and malicious damage caused by guests and other types of damage. The reimbursement processing procedure is straightforward, and the protection ranges from $500 up to $5,000,000, depending on the chosen plan.
How to calculate short term rental income: Net income and ROI
To know if owning a Vrbo is profitable in your case, you must calculate it. Below, we offer simple steps you can follow to evaluate short term rental profitability.
1. Know all revenue streams and critical expenses
Start with summarizing where you get money and how you spend it. Some sources of revenue and expenses may be unexpected. Here are the main categories to track:
| Income | Expenses |
| Rental chargesCleaning feesSecurity depositsDamage waiversAdditional fees (e.g., pet fees, parking fees) | Utilities (gas, water, electricity)Property taxes and licenseRepairing property damageReplacing towels and linenCleaning feesProperty management feesSTR insurance expensesMarketing costsMortgage or rent (optional) |
2. Calculate monthly revenue
Calculate total monthly revenue by multiplying the nightly rate per booked nights and adding all other monthly expenses.
3. Subtract expenses
Deduct monthly cleaning fees, utilities, taxes, and other expenses from the total monthly revenue. The sum you get is your net operating income.
Net operating income = Total income – Total expenses
| Profitability Calculation Example Income ($): Rental charges: 2160 Cleaning fees: 500 Security deposits: 300 Damage waivers: 600 Additional fees: 200 Total income: $3760 Expenses ($): Utilities (gas, water, electricity): 250 Property taxes and license: 250 Repairing property damage: 100 Replacing towels and linen: 50 Cleaning fees: 400 Property management fees: 330 STR insurance expenses: 20 Marketing costs: 30 Total expenses: $1430 Net operating income = Total income – Total expenses ($3760-$1430) = $2330 |
To calculate the return on investment, you must know the annual net income and total investment. Divide the total money invested in the property, including purchase price, by the annual net income to learn the ROI.
ROI= (Total Investment/ Net Income)×100
Short term rentals vs. long term rentals profitability compared
Besides short term rental profitability, another popular question is “Are long-term or short term rentals more profitable?”
Short term rentals generally have much better profitability than long-term rentals since the charge for one night is much higher. Even if your property is booked 20 days per month, you are likely to earn more than with long-term rentals. Suppose you charge $110 per night while the monthly rent of a similar property is $1000. With a 20-day occupancy, you will earn $2200/month, which is more than with long-term rent.
Of course, renting short term comes with extra expenses for cleaning, utilities, and property management. The risk of financial losses is also higher, and you must consider it a factor impacting profitability.
Short term rentals vs long term rentals: Income, expenses, time, and risks
| Short term | Long term | |
| Income | Higher rates, additional charges (cleaning, pet fees, etc.) | Lower monthly rent, more stable income |
| Expenses | More expensive to maintain due to higher turnover costs, marketing and advertising expenses, property taxes, and insurance costs | Cheaper maintenance with lower turnover costs, marketing expenses, potentially lower property taxes and insurance |
| Time Commitment | More time taken by guest communications, booking management, and property maintenance | Less time taken by tenant screening, lease renewals, and maintenance |
| Risk | More volatile income, potential for guest damage, vacancy periods | More stable income, potential for longer-term tenant issues |
Find a detailed cost breakdown for short- and long-term property rentals in our previous blog post about short term rentals and long term rentals profitability comparison. And here’s a more targeted article to answer the old debate of whether Airbnbs is more profitable than long term rentals.
Superhog protects you from unexpected expenses
Superhog is a short term rental platform for property managers and OTAs. Its Know Your Guest solution provides additional protection to Airbnb, Vrbo, and other booking platforms to reimburse extra expenses. It also manages the reimbursement process and leads communication with guests.
Use the Know Your Guest toolkit to:
- Start selling damage waivers to cover wear-and-tear expenses and accumulate an emergency fund.
- Set a specific amount for damage deposits and collect them from guests stress-free.
- Get powerful damage protection with up to $5,000,000 coverage for accidental and other types of guest damage.
Book the Know Your Guest demo to learn how it can increase your short term rental profitability through better protection.
Wrap up
Short term rental profitability starts with numbers and calculations you must make to get an accurate estimate. It is affected by many factors, including your property location, seasonal demand, and amenities.
Overall, STR rentals are highly profitable if you approach this business right and take steps to manage expenses. A flexible pricing strategy considering seasonality, optimized property management operations, some marketing efforts, and good short term insurance make a difference. Your income grows while expenses decline.
Achieving high short term rental profitability is neither an accident nor pure luck. It takes careful planning from the moment you consider where to buy a property. You must also consult with local realtors to learn about any legislative nuances. Many things to mind, but we are sure you can do it and are ready to help you with insurance.
