In any business venture, it’s a smart move to not only determine your initial and ongoing costs but to set realistic revenue goals on an annual basis. By doing so, you can make related decisions such as whether you can reduce your income, invest in other properties, or improve your current rental. 

Set aside some time on an annual basis to review your costs for the past year, make projections for the upcoming period, and research the rental horizon in your area. By keeping your finger on the pulse of the financial situation of your rental as well as the market conditions, you will set smart revenue goals for your Airbnb rental. 

 

If you are new to the short-term rental business, the first thing you want to do is to look at the other lodging options in your geographic area. Start with other short-term rentals that are comparable to yours in terms of size, amenities, and location. You can get online on sites such as Airbnb, VRBO and HomeAway and simply search for a home that is just like the one you are planning on renting. This will give you a baseline rate for certain times of the year. 

Remember that time of the year will play a large role in how your rate changes from one month to another. If you have a Lake Tahoe vacation rental where winter sports are popular, your busy times may be around the holidays. If your vacation home is in San Diego near the beach, your peak time will be in the summer. In addition, consider the difference between rental rates during the weekdays vs. the weekend, over holiday periods, and when large local events are taking place. 

Your rates may also be tied to length of stay, how far ahead the booking takes place, number of guests or other such factors. 

Besides other short-term rental properties, you will want to consider additional lodging competitors such as hotels, bed and breakfasts, and campgrounds. Think about the supply and demand, the types of visitors that will most likely come to the area, and the prices these businesses are charging. 

Several tools are available on the market today to help you set dynamic pricing every day of the year. These systems, available for a fee or through a property management company, can look at the supply and demand as well as the competitive rates on a daily basis and set your rate accordingly to maximize revenue and bookings. 

 

 

If you got into the Airbnb business as a way to earn a little extra money on a personal vacation home when you are not using it, then take a close look at your revenue and priorities. Evaluate the periods when you stayed at your vacation home and whether those were during peak or off-seasons. Consider whether it is really important for you to take a vacation during that same period in the future or if you’d prefer to make additional money renting the home during peak periods and staying in the home during the off-season. 

In addition, if you kept good records of your bookings from previous years, you can see where you were very busy and when you had a lot of vacancies. Consider ways you can increase bookings during your slow periods. You might want to reduce your minimum night stay, allow things like smoking outside your home or pets in certain areas, or offer special deals during the off-season. In the same vein, if you find that you were booked much in advance during the peak periods or when large local events were occurring, you can consider raising your rates during these periods. 

Having this information at your fingertips can help you make deliberate decisions about how you’ll move forward into the next year, whether that means adjusting your rates, reconsidering your requirements, adding amenities or even simply planning your own vacation. 

 

 

Obviously, once you have your revenue numbers, you’ll need to subtract your ongoing costs as well as the costs of any improvements you may be considering to get your real bottom line. Here are typical costs associated with a vacation rental. 

* Mortgage. If you carry a mortgage on your property, you’ll need to set aside money for principle, interest and any other associated fees. 

* Insurance. Although you may have regular homeowner’s insurance factored into your mortgage payment, you’ll want to review the coverage and make sure it’s adequate. If it is not, you’ll have to talk with an insurance agent to make sure you have enough coverage for your short-term vacation rental, both for physical damages and personal liability. 

* Utilities and Fees. Collect all your monthly bills from the past years to calculate how much items such as heat, electricity, cable, streaming, WiFi, water, trash, and homeowner’s association fees might run you. If this is your first year, you’ll have to estimate based on projected occupancy. This can be tricky because the more guests you host, the higher the bills will be. 

* Tax Requirements. Although you may be aware of state and federal property taxes as well as business-related taxes, you need to stay abreast of other local taxes that can creep into the equation over time. More and more municipalities are getting stricter about fees and taxes required from short-term vacation rental owners. You might be subject to hotel or sales tax, for instance. It may be worth the investment of an accountant or property management firm to help you stay on top of it all. 

* Updates and Repairs. Every home is going to require updates, renovations or repairs over time. If you can put together a long-term projection on big ticket items like replacing the roof, getting a new HVAC system, or putting in major appliances and plan to spread them out over a span of years, you'll have better control of expenses. If everything looks buttoned up for the upcoming year, consider adding a popular amenity like a hot tub. 

* Restocking Fees. Take a look at all those small items you burn through in a year like toilet paper, paper towels, soap, shampoo and snacks. If you have a good record of your usage, it may be worthwhile to shop around for purchasing some of these items in bulk to save you money and trips to the store. Don't forget to occasionally replace things like towels and sheets as well. 

* Business Partners. Don't forget the fees to any business partners you may rely on during the year such as a cleaning service, maintenance company, landscape or lawn service provider or property manager. Remember that without their help, you would have a lot more work or headaches to deal with on a day to day basis. It may be a good time to throw a little bonus for exceptional service as well. 


Once you have all your numbers down on paper or in a computer spreadsheet, you can look at your projected revenue minus your costs to determine your expected earnings for the year. You can also play with some numbers like adding the cost of a marketing campaign or a new amenity and calculating how much you extra you might be able to earn for the effort. Remember to track all your information as the year progresses so you will have accurate data when you do this again next year.