Everything You Need to Know About Owning a Vacation Rental Business

Written by Inna Shevchenko, Chief Marketing Officer at iGMS

Being a vacation rental owner has become a sought-after profession. The demand is continuously increasing, while the supply is lacking, especially in popular places. This is precisely why you should consider investing in a short-term rental property. However, just like with any other business, there are certain pros and cons. Moreover, this type of business isn’t suitable for everyone, which is why you should consider all the factors before making a decision. 

The Advantages of Owning a Vacation Rental Business

Decent Rental Income

Are vacation rentals profitable? Yes, owning a vacation rental business can be quite lucrative. Although most hosts dive into this industry wondering whether they’ll be making any money with vacation rentals. Soon after, in many cases, this becomes their main source of income. If approached correctly, this type of work can be very rewarding. In fact, some would argue that short-term vacation rental business is actually more lucrative than working with long-term rentals.

Tax Breaks

This is one of the main perks that comes with owning a vacation rental. Since holiday rentals are considered to be an actual business, you will be eligible for some significant tax breaks. Some expenses you might be able to deduct include the following:

  • Mortgage interest
  • Property taxes
  • Insurance
  • Housekeeping
  • Restocking
  • Property management

Bear in mind, though, that each state has different tax break laws. Before diving into this industry, make sure to check local laws, rules, and regulations concerning short-term rentals.

Dual-Use of Property

Another great benefit of owning a vacation rental is the fact that you can always use it for personal reasons. In the long run, this ability will save you a lot of money on your own holiday expenses. Not only that, but you can also share your rental with friends and family during the offseason, or organize unforgettable gatherings and parties. 

Ability to Automate Routine Tasks

One of the top Google searches in regards to owning a vacation rental business is “How can I increase my vacation rental income?” The problem with running this type of business is usually a lack of time. There are so many logistical aspects to take care of, that sometimes, hosts are left with no time to focus on other essential tasks and scaling of their business. Luckily, short term rental business has progressed immensely in the past couple of years. Now, you can find a wide variety of productivity automation tools, such as iGMS, that will take care of those boring, repetitive tasks. These tools come with an impressive set of features which include:

  • Multi-platform synchronization
  • Managing all properties from different OTAs
  • Automated smart messaging
  • Cleaning and team management
  • Automated guest reviews
  • Key management automation
  • Financial Reporting

Another great benefit of using these tools is the fact that they’re beginner-friendly. You don’t have to be particularly tech-savvy to learn how to use them. Moreover, using automation software will reduce a lot of other business-related expenses, such as hiring property managers, or personal assistants.

The Disadvantages of Owning a Vacation Rental Business


Because this particular industry has been booming in recent years, a lot of states have started updating certain rules and regulations. To make the matters worse, not all states nor cities follow the same regulations. While some places are completely rental-friendly, some have strict laws. Hence, before diving into this industry, make sure to research everything thoroughly and avoid investing in heavily regulated areas. 

Property and Repair Expenses

Property and repair expenses are an unavoidable part of being a host. Holiday rentals host a lot of people every year. Consequently, damages are bound to happen. As a responsible host, you should always take care of all repairs promptly, which costs money. However, by continually investing in your property, you can eventually increase the price, and bring in more income.

Guest Cancellations

The whole vacation rental industry is dependent on guests–who would rent these homes if it weren’t for them? However, sometimes things happen, and they have to cancel their stays. This is inevitable, and you might face it more frequently than you’d like. You can easily fix this issue by creating stricter cancellation policies, though. Another good idea is to create a well-rounded rental agreement that will cover booking cancellations too.

How to Overcome The Obstacles?

Prepare a Thorough Business Plan

This is the single most important thing to do before starting your vacation rental business. Having a comprehensive vacation rental business plan in place will ensure that you stay on top of everything at all times. When devising a business strategy, make sure to ask yourself the following questions:

  • What are the most profitable vacation rental locations?
  • Who is my target audience? 
  • Where should I list my vacation rental?
  • What kind of pricing strategy should I use? 
  • What are the marketing techniques should I implement? 
  • What is my financial plan? 

These six questions should be the basis for your business plan. Research different platforms to see which one is a better fit, and make sure to purchase a home in a sought-after area. 

Purchase Proper Insurance

As we have briefly touched on before, vacation investment properties host a large number of people every year. Things can and do happen, which is precisely why you should think ahead and invest in proper insurance. While some platforms offer integrated insurance, such as Airbnb, it might be smart to buy actual business insurance from third-party insurance companies. There are different types of insurance for different purposes – general liability, business owners policy, homeowners policy, short-term rental insurance, among others. When it comes to the cost of insurance, there are several factors to consider – property location, deductibles, amenities, and booking frequency. Make sure to do your research beforehand. 

Use Automation Software to Increase Efficiency

Lastly, don’t be afraid to use technology to enhance your business model. In fact, most of the hosts are already using it. Automated tools will help with saving both time and money while putting lots of your routine tasks on autopilot.  By using  vacation rental software, you will be able to automate communication between your team and guests, cleaning, key exchange, repairs, and many other activities.


Starting a vacation rental business might seem nearly impossible. There is so much research to do, money to invest, and things to learn. However, even though the beginning is difficult, as soon as you get the hang of it, it will become fully manageable. All you need to do is to approach the matter responsibly. Before diving into this industry head first, make sure to devise a comprehensive business strategy to support and enhance your efforts. After that, you will reach the top in no time.


Inna Shevchenko

Chief Marketing Officer at iGMS

Inna has over 12 years of experience in marketing and content writing specifically. Currently, she is the CMO at iGMS, a short-term rental management software company.