The short-term vacation rental business offers a great opportunity to make money, and successful hosts know that the key to making the most of their business lies in the effective marketing and management of their vacation rental(s). But even if you put in every effort to be a fabulous host there are still a few pitfalls to be aware of. Here are the top 5 risks faced by vacation rental hosts:
Damage to Property
Whilst you should expect general wear and tear to your property, and a few minor breakages along the way e.g. a smashed glass or two, you need to make it clear that there will be consequences should any major damage occur.
Unfortunately, not all guests will respect your property. We’ve heard unsettling stories of guests blatantly breaking house rules by throwing riotous parties, smoking indoors, leaving the property unsecured, breaking items, and generally making an unholy mess! Set house rules, communicate them clearly, and consider asking for a security deposit — this will allow you to request compensation for damages.
Violation of Regulations
As a host, it’s your job to abide by regulations. Unfortunately, keeping up with what you can and can’t do is a chore in itself! Many cities have responded to the popularity of Airbnb by decreeing new rental laws and zoning regulations to impose limits on short-term vacation rentals. For instance, in certain areas, you will require a business license to operate your property rental.
As they say, knowledge is power — so if you want to avoid getting squeezed out of the rental market (or getting penalized for rule-breaking), you need to stay abreast of the regulations affecting the vacation industry.
It’s every host’s worst nightmare — discovering that their much loved and lucrative vacation rental has been taken over by squatters. It’s disconcerting how quickly squatters can get their claws into your home — exercising their “right” to stay put as “tenants.”
Unwittingly renting to squatters will cost you time and money. It’s not easy to get those uninvited guests to leave, and you can expect to become embroiled in a lengthy eviction (with extensive legal costs). Whilst you’re busy mulling the situation over with your lawyer, the squatters will be busy making themselves at home, meaning lost bookings and revenue. Add to this the fact that when you do get your unwelcome guests to leave, chances are you will have a big clean-up operation on your hands.
There’s a fine line between short-term rental, long-term rental, and tenancy. Make sure you have a rental agreement in place to ensure that line doesn’t become blurred!
Cancellations are a bit of a pest and can cause you problems as you negotiate cancellation policy in an effort to ensure you don’t lose money. As a general rule the guest has the right to cancel, without paying service or reservation fees, providing you (the host) has not accepted their reservation. Once you have accepted it, then your guest is obliged to accept the terms of your cancellation policy.
That said, if a guest complains, your vacation rental platform (such as Airbnb) will have the final say over whether or not the booking will be canceled. Keep in mind that this can happen once the guest has checked in, or even after they have checked out — and your guest could have the cost of their stay refunded.
Late-night noise, inconsiderate parking, leaving litter outside and stranger danger — all valid concerns of home-owners who live in close proximity to a vacation rental property.
Getting on the wrong side of your neighbors is not the way to go as a host. After all, a group of irate residents could set the ball rolling to advocate new local regulations — causing you problems when you try to let your short-term rental. Better to screen your guests carefully, and set clear house rules e.g. no noisy late-night parties or careless parking, in a bid to avoid upsetting the locals!
Worth the Risk?
In summary, yes there are a few risks involved when renting out a vacation property, but hey, isn’t that true of most things in life? Every venture comes with an element of risk, but there are also the rewards to consider, and if you do your utmost to protect your vacation property and manage it with integrity and diligence, you should reap the financial rewards and enjoy running a successful vacation rental business.