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Complete Vacation Rental Business Plan

image of Complete Vacation Rental Business Plan

Creating a vacation rental business plan is more than financing or finding properties to manage.

Business plans prepare for potential problems. They let you set business development milestones. Finally, vacation rental business plans can help you get financing for growth.

A business plan takes time but doesn’t have to be intimidating. We’ll help you start or include! This comprehensive guide includes a downloadable template for creating a vacation rental business plan.

What exactly is a business plan for vacation rentals?

Vacation rental business plans outline financial, marketing, and business goals. It should help you and investors assess your short-term rental business’s profitability.

This plan should outline your goals, strategy, and tactics and guide you.

 

Vacation rental business plans: why?

A vacation rental business plan anticipates goals, milestones, and problems. A vacation rental business plan can also help you get financing, plan long-term, set clear goals, and budget wisely.

image of Vacation rental business plan

1. Get funding

If you can’t prove you’ll repay a loan, banks won’t give it to you.

A vacation rental business plan shows investors your plan to make money.

2. Plan.

Planning for business growth lets you start with scalable tools and systems. Without long-term planning, your business may outgrow the feature set of the cheap property management system (PMS) you chose without considering future growth. Planning for growth saves time and money.

3. Define objectives

Defining success and setting goals makes success easier. Setting a 60% occupancy rate in your first year to cover costs is a measurable and achievable goal. If you’re meeting some goals but not others, you’ll know where to make business changes.

4. Budget confidently

Running the numbers and having a plan for your vacation rental property investment reduces luck in real estate. A business plan with financial projections helps you budget for renovations, furnishings, decoration, software, permits, and staff.

A business plan can predict cash flow issues. As your reputation grows, your property may have fewer bookings, so you may have to pay some expenses.

Preparing a short-term rental business plan:
You should:

1. Study up.

Research local laws, property location challenges, and unit types before investing.

Local laws

Check local laws before buying a second home or starting a short-term rental business.
Investigate the market’s media coverage. Vacation rentals may soon be illegal, so you should know.

Location

Location affects rental profitability. Vacation properties in up-and-coming areas or near attractions may be in high demand. Finding cleaners and maintenance workers depends on location. A cabin in the woods is nice until no one wants to drive there to clean or fix a pipe.

Unit type

Examine the market to determine which units to manage, their challenges, and their profitability. Rent almost anything:

Treehouses
Dome and yurt glamping
Sized apartments
Lofts
Family homes
A night in your garage Tesla
Compare existing listings to similar units in your area to see how much guests are willing to pay, how much demand there is, and what amenities will set you apart.

Furnishing and remodeling

Estimate the cost and time of renovating and furnishing your unit. Find out what amenities are expected in your area and what you can add to give yourself an edge.

2. Business model selection

There are several business models for buying properties to rent rather than managing them for owners:

House Hacking. You can borrow less to buy your primary home but must live there. In that case, house hacking can reduce mortgage payments by renting your guest room or studio.
Glamping. Some countries offer glamping dome or yurt loans. It’s cheaper than buying property and profitable. Dome and yurt rentals cost $150–400 per night.
Rent it. Renting a vacation home pays for the mortgage and makes a profit.
Rent arbitrage. This STR business model requires little initial investment beyond apartment rental costs. The rental arbitrage model involves subletting an apartment on Airbnb, Vrbo, or another OTA to pay rent and profit. If approved, notify your landlord and get written consent.

3. Consider financing.

Your vacation rental business plan can attract investors. A business plan can formalize your property management company.

Your business model determines which financing options you can use. Your vacation rental business plan can be tailored to your upfront investment and target investors.

4. Calculate profit

Before buying or managing a rental property, run a competitive analysis to determine its profitability. Vrolio and AirDNA can estimate expenses, nightly rates, and occupancy. Calculate cautiously. Never guess 100% occupancy. Estimate 45–50% vacancy for your first STR.

Rob Abasolo from Robuilt, who has several successful STR properties, doesn’t estimate assuming a perfect year. “I wouldn’t calculate my numbers based on 100% occupancy,” Abasolo said. “I use an 80% occupancy rate when calculating a deal’s viability.”

Short-term rental business plan: what to include?
Your business plan is a living document with your goals and strategies. It has objectives, milestones, and a financial forecast. It details what, why, and how you’ll succeed. This can be a one-pager or a longer shareable document.

Your investors and property manager should only read this document to understand your goals and how to achieve them. Complete this list to finish it.

1. Executive summary

Your business overview should include the following:

Who are you or the property owners
Your strengths
Business experience
Your goals
Your vacation rental location (mention nearby attractions)
Your business model (house hack, glamping, second home, rental arbitrage)
Your guest’s profile
For example, a summer beach house rental.

2. Company Summary

In this section, describe your company. Discuss your mission, USP, and value proposition (more on this later).

Create those statements for your first investment property. Your business can change your plans.

image of Company Summary

3. Business goals

The first two sections of the business plan outline your company’s direction. Explain your vacation rental goals here.

Set business goals using S.M.A.R.T, H.A.R.D, or W.O.O.P. Answer these questions for inspiration:

Financial

What is your minimum acceptable CoC return?
What occupancy rate is necessary to cover costs?
Your expected monthly profit?
What percentage of revenue goes to operations and expenses?
Operational
Hire a team? How would you rate their performance?
What tools should you learn?
What business processes can be automated?
How will you improve guest experience?
Marketing
SEO-optimized listings? What’s your success metric?
Will you promote niche and popular OTAs?
How will you boost direct bookings?
Promote your listing on social media.

 

4. Guest personas

Determining your audience is crucial to property marketing. Do you want families, expats, digital nomads, or college students on your property?

Your guest persona determines your value proposition, USPs, and marketing strategy. Add their:

Demographics
Motivations
Interests
Behavioral traits
Booking habits
Favored OTA
Use niche listings like BringFido and global listing sites to attract dog owners to your pet-friendly property.

5. Value proposition

Your value proposition is how guests compare your property to others. Why should guests choose your property? Your advantage?

You could offer a museum discount or flexible check-in. Write down your value proposition—how you’re improving the guest experience.

6. Competitor analysis

Analyze your competitors and industry to determine what makes your property unique and how to market it as a USP. Your value prop differs. The value proposition improves guest experience, while the USP differentiates your property and listing when selling.

Your value proposition might be soundproof windows and a memory foam mattress guaranteeing a good night’s sleep. Your unique selling point is offering one free night to three-day guests.

You can use Zillow and AirDNA to research your local competitors and decide if your property is better because:

Improve the location
Public transportation?
Is it near the beach or downtown?
Downtown?
Charge less.
Does the price-value ratio beat the competition?
Are there weekday discounts?
Affluently purchased
Better amenities?
Is it fresh?
Professionalize your listing.
Its copy converts?
Is the description clear?
Professional photos?
Define which listing sites your competitors use and see if you can improve.

7. Operations and teams

Your operation plan details how you’ll run your business, its costs, and the tools you’ll use. Tasks to list:

Stock control
How will you inventory your property?
How will you replace lost or broken items?
Inventory checks how often?
Staff
Do you employ a full-time property team?
Did you hire a cleaning and maintenance agency?
Software
Software for Airbnb management?
How do you handle distribution channels?
Use Hostfully for property management.
Bookkeeping
Can you track your accounting?
Do you outsource it?
How do you track escrow, insurance, and taxes?
Smart devices
Are you installing smart keyless locks, plugs, and lightbulbs to save time and power?
Guest interaction
How do you talk to guests?
Automate anything?
Automating guest messaging with Hostfully?

8. Expenses

Include all fixed and variable costs:

Mortgage payments
Any staff
Property management, channel manager, and dynamic pricing are hospitality tools.
Water, power, internet bills
Furnishings on credit cards
Taxes, insurance
Research and profitability analysis should provide that information. You set your minimum and maximum nightly rates based on your total expenses and a safe estimated occupancy rate.

Your monthly expenses are $2,300, and your occupancy rate is 60%. You expect your property to be booked at least 18 days per month. The minimum nightly rate is $128. If your rate is too high compared to similar properties, consider a different market, cutting costs, or offering a premium experience.

9. Revenue and pricing

Vrolio can automatically set your base nightly rate based on expenses and competitors. Launching with a low nightly rate will attract attention, momentum, and reviews.

Having a pricing strategy for your vacation rental lets you start with a low nightly rate and adjust it once you get positive reviews that make your listing more accurate. Dynamic pricing tools help match prices to demand. Hostfully integrates with:

Wheelhouse
Rented
NightPricer
DPGO
PriceLabs
Beyond

10. Scale-up financial plan

Investors want this section. It determines STR’s business investment value. Even if this document is personal, this section is essential for setting milestones and tracking cash flow issues.

Managing personal or business finances shows your past. Answer these questions now:

How are you financing your home?
Are you borrowing? Interest rate? Fixed or variable?
Any savings?
Do you share costs?
What’s your 12-month profit forecast?
Annual ROI?
Expected CoC return?
Cash flow forecast?
What is your expected monthly income after expenses?
Loss estimate?
What’s your 3-5-year financial growth plan?
What are your annual business goals?
How are your expenses changing year-round?
Cost analysis?

11. Marketing, distribution,

Market your property like any other business. Vacation rental companies must market and distribute. OTAs and listing sites have different audiences. Vrbo targets families, while Airbnb targets millennials and freelance business travelers.

Answer these marketing plan questions:

Your guest persona searches for lodging where?
Do your guests choose destinations or properties? (Are your guests staying because of the location or your cool property?)
How are you marketing online? Paid, social, SEO?
Listing in niche and global OTAs? What ones?
Is your listing copy catchy?

12. Appendix

Every business plan needs an appendix. Add relevant documents, graphs, calculations, and pictures here. Include additional background or business experience information.

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