How to Sell a Vacation Rental Business (and Maximize Payout)

You’ve devoted countless hours to building, running, and scaling your vacation rental business.

Now you want to make sure you’re honoring all your hard work, investments, and relationships—by making the best sale possible.

With little information available on how to do it right, it can be hard to know what to pay attention to in this unique process, what buyers want, and where to start, to achieve your optimal outcome.

We’ve created this step-by-step guide on how to sell a vacation rental business to help you throughout the sales process and highlight the ways you can maximize payout.

Build strong relationships with guests AND get a bigger payout—by using a guest communication platform to automate and improve your communications. Supercharge your operation (and valuation) with RueBaRue.

What big buyers are looking for

Buyers of all sizes want proof of business viability—but big buyers also want a healthy number of listings they can acquire to build up their own property portfolio and scale their business.

No matter the buyer, they need their criteria met. Understanding those criteria, and putting yourself in the mind of the buyer, will help you better meet their needs and make the sale.

Possible big buyer criteria include:

1. The number of units: According to Airbnb rental mogul Julie George, having a vacation rental business with 10+ units puts you in direct sight of big names in the business looking to scale. The bigger your portfolio, the bigger, hungrier fish you’ll attract.

2. Integrated tech: Big buyers already have a lot on their plates and want to invest in a business that has a streamlined, integrated tech stack—including vacation rental automation—enabling a seamless transition with no downtime. Making sure automation and operational processes are as solid as possible will help get the highest payout when selling your vacation rental business.

3. Proof of profit: You’ll need to provide proof of profit and a sustainable business structure in your financial documents, contracts, and reports, to showcase your business’ success and prove financial viability.

4. Portfolio fit: Buyers want to be sure your listings are easy to roll out into their current portfolio, and that they make sense for them.

5. Active management plan: Having a management document that outlines the aims and objectives of your business (and how you plan to achieve them) helps potential buyers visualize its future potential and how they can incorporate those goals into their own plan.

Remember, each buyer will have their own set of criteria. You’ll still need to group the types of potential vacation rental business buyers out there to help you understand the nature of the transaction you want to complete.

Let’s explore some possible buyer types below.

Determine your buyer

Different buyers have different criteria for evaluating their interest in acquiring your organization—which directly influences how you pitch and present your business throughout the sales process.

consider the following buyer types to know how to better position your business by appealing to their specific needs and interests:

Competitor buyer

Your local competitor might see this as the perfect opportunity to expand their business offering and build a stronger presence in your community—but that doesn’t mean they’re the right fit for your business.

When dealing with local competitor buyers, make sure they not only have the budget but also the capacity and skills to take on your organization. You want to do what’s best for your homeowners and team, so ask yourself if they add value to your business or subtract from it.

This type of buyer probably won’t have as big of a cash payout as other buyers and might prioritize great guest reviews and a sustainable business structure to help bolster their side of the business. So it’s important to think about why your homeowners chose you over them in the first place, and if they’ll keep up the level of excellence you provided.

Community buyer

A community buyer is someone within your community or organization (a friend, team, or family member) who might be a great fit for buying your business if you prioritize safeguarding and upholding what you’ve built.

While a community buyer might not have the working capital of a cash-flow buyer or private equity firm, they have a stronger relationship with your business and what you’ve achieved.

When dealing with a community buyer, it’s important to be as transparent as possible (on both sides) and evaluate whether they have the ability to remain competitive and provide excellent returns for homeowners.

Better position your business by appealing to buyers’ specific needs and make that sale a reality

Source: Maria Ziegler on Unsplash

Cash-flow buyer

The cash-flow buyer, i.e. private equity companies, is the most profitable type of buyer and is likely to highly value your vacation rental business.

When dealing with cash-flow buyers it’s important to note that while they might provide a high payout, it might be a more difficult, less personal transition for your team, homeowners, and business.

Cash-flow buyers prioritize hard data and scalability, so make sure you have a well-documented, repeatable process and business structure if this is your ideal buyer type.

Industry buyer

Vacation rental industry buyers are bigger, well-established organizations (i.e. Vacasa, Guesty, Sonder) looking to expand their business and listings in a new market.

Great industry buyers will take over your business with the intent of taking good care of your listings, homeowners, team, and community. They’re genuinely interested in learning from you and applying your success strategies in your given area or market.

This type of buyer will likely prioritize a strong brand and social media presence in the community to reach more people, and a solid active management plan to analyze or replicate success.

Review your business structure

It’s critical to create a clearly organized and efficient business structure for prospective buyers so they can easily understand and recognize its sustainability and profitability.

To do this you’ll need to review the breakdown of your business and how it’s organized: including key positions and tasks, ownership structure, taxes, and profit distribution.

An organization reviewing its business structure to prepare for STR buyers

Source: Scott Graham on Unsplash

A well-organized business structure includes:

• Clearly defined employee positions, tasks, and role-based KPIs
• Predetermined protocols
• Reliable bookkeeping and record-keeping systems
• Organized financial records and profit distribution history
• Structured ownership and leadership

Integrate tech solutions and automate your processes

The use of tech solutions helps make your business operations more efficient, resulting in better guest communication and services, and a better brand reputation.

All of which leads to a bigger payout for your vacation rental business. Here’s how:

• Get glowing reviews: Increase your reviews and direct or repeat bookings with software that makes it easy for guests to leave smashing reviews. You’re more likely to get a bigger payoff when you can prove your financial plausibility through past bookings and guest satisfaction rates.

RueBaRue makes it easy to access and share stellar guest reviews

Source: RueBaRue

• Heightened guest satisfaction: Helping guests contact you quicker, and receive faster responses, directly impacts guest satisfaction and their likelihood of raving about their experience online and growing your presence. Use guest communication and automation software to answer questions before they arise, and check-in with guests about their stay for a personalized touch guests will appreciate.

RueBaRue’s guest messaging platform simplifies the guest communication process so guests’ needs never slip through the cracks

Source: RueBaRue

• Enhanced guest experience: Create digital guidebooks and send them to guests in advance, with personalized information like arrival times, door codes, local area guides, and house rules. Guest communication and automation software help you provide everything your guests need, and maximize vacation rental income , by creating a highly personalized guest experience.

RueBaRue’s digital guidebooks feature helps personalize the guest experience from start to finish

Source: RueBaRue

• Increased team communication: Guest communication platforms can help align your team around common objectives and add to their ability to better solve problems and serve guests.

Get the homeowners on board

Homeowners will have their own questions and concerns throughout the selling process, and it’s your job to answer or appease them.

That’s why it’s important to keep communication levels high by being transparent about potential buyers and getting ahead of their questions.

One way of doing this is to immediately address:

• Whether local teams will remain the same
• If contracts will remain the same or if there will be changes to the vacation rental management agreement

Staying on top of homeowner communication throughout the sales process will increase your chances of getting homeowners on board with the sale, and add to a more enjoyable experience for everyone involved.

Prepare your business valuation

The financial information you provide prospective buyers will form the basis for the deal structure, offer, and timing. So make sure to prepare for your valuation by providing the most complete, accurate data to assure buyers you’re not a risk. Here’s what you’ll need to do:

1. Review capital and perform an audit: Compile a list of your tangible and intangible assets based on your org chart. Then, perform a full systems audit by listing all the tech and tools you use to run the business on a spreadsheet.

2. Organize sales bookkeeping: By detailing past fees, rental charges, and commission structures for each unit.

3. Go over income and contracts: Create a spreadsheet detailing your 12-month base rental income (including cleaning fees, booking fees, and taxes). Then, review your contracts to make sure everything’s in order for the new business owner.

4. Finalize your finances: Create mockups of two profit and loss statements including all your company costs (i.e. HOA fees, licenses, and office supplies). Then calculate your earnings before taxes, interest, depreciation, and amortization.

A man preparing financial documents for the valuation of his STR business

Source: Scott Graham on Unsplash

Contracts and legal work

Now that you’ve prepared your business for valuation, make sure to speak with your attorney and accountant to finalize your legal documents and make sure everything’s in order. Note: You can use information from your valuation to inform your contracts and paperwork.

Types of legal documentation include:

• Purchase agreements
• Non-disclosure or confidentiality agreements
• Financial statements
• Inventory lists
• Transaction terms
• Buyer’s due diligence

Focus on guest communication to secure a bigger payoff

When selling your vacation rental business, your main goal should be to demonstrate how viable and attractive your business is to buyers. This includes:

• Figuring out what big buyers are looking for
• Determining your buyer
• Reviewing your business strategy
• Integrating tech solutions
• Getting homeowners on board
• Preparing your business valuation
• Finalizing contracts and legal work

You’ll also need to build a solid brand reputation by providing top-quality guest communication that minimizes guest questions and builds a stronger internal communication network.

When you automate communication with a powerful guest communication platform like RueBaRue, you’re increasing the chances of a higher payout by positively impacting how guests perceive your business and having more time to focus on the organizational changes that drive impact.

Frequently asked questions about selling a vacation rental business

How much is the vacation rental industry worth?

The vacation rental industry has projected revenue of US $81.14 billion in 2022.

What is a good profit margin for vacation rentals?

A good profit margin for vacation rentals is around 10-20%.

What are some things to consider when selling a vacation rental business?

Some things to consider when selling a vacation rental business are:

• Figuring out what big buyers are looking for
• Determining your buyer
• Reviewing your business strategy
• Integrating tech solutions
• Getting the homeowners on board
• Preparing your business valuation
• Finalizing contracts and legal work

You’ll also need to build a solid brand reputation by providing top-quality guest communication that minimizes guest questions and builds a stronger internal communication network.