How to START a Scalable Short-Term Rental Management Company
Being a property manager isn’t easy: you have to establish the value of the location, prepare a marketing plan, and manage communications with guests.
Despite all of these concerns and uncertainties that emerge when starting a new business, building an STR company can really be a unique opportunity. The U.S. vacation rental industry has become the most lucrative worldwide.
According to a recent study, short-term rental occupancy in the United States last year increased by 5% from 2020 and 10% from 2019. Managers increased rates by an additional 39% per year on average as a result of these bookings.
But when starting a short-term rental management company, it’s important to lay the foundations for scaling your business while working towards achieving an amazing guest experience. In this guide, we will look at how to start up an STR company that runs multiple units by focusing on how to:
- Meet and exceed guests’ needs
- Optimize your communications
- Automate tasks
- Build a scalable business
- Draft a financial plan
- Improve your listing site profiles
Get started with RueBaRue to build scalable processes and reduce the time you spend managing communications with guests. Book a demo now.
What are the pros and cons of managing a short-term rentals (STR) company?
Let’s start with the pros:
- You can maximize your income. Once you’ve established a successful model of operations, you can scale an STR business from a handful of properties to dozens or even hundreds of units
- Property maintenance will be easy to do. Visiting your rental property allows you to spot problems and solve them immediately.
- Short-term rentals often cause modest wear and tear on investment properties. People on vacation or business trips spend little time in the house.
As for the cons, here are the main obstacles:
- Renting a short-term property requires you to invest time and effort into it. You will have to do a general cleaning of the house after each new stay, for example, or create and define house rules.
- It is stressful. The responsibilities may be all on your shoulders, and you may feel overwhelmed at times.
How profitable are short-term rentals?
U.S. short-term rentals market could generate $17.66 billion in 2022, according to projections.
Booking.com defined vacation rentals as a “growth driver for years to come”. Investing in real estate in cities and states with lots of tourists can make the difference, for example. A single short-term rental property can generate income up to a few thousand dollars a month.
When renting out your house on a daily or weekly basis, you can charge up to 30% more than long-term renting, as reported by Reinvest24 . STR properties generate a high rental yield, especially when the property is improved and located in a desirable neighborhood.
Here are some of the key factors that will affect the potential profitability of a short-term rental property:
- Your ability to identify and market to the best target market.
- Your ability to accurately apply dynamic pricing.
- An effective marketing strategy.
Scalability over profit margins
Automating processes is essential to scaling your business. Profitability is important, but it’ll always be limited if you’re only managing a handful of properties.
If you wish to maximize profitability, you need to scale your business. Scaling occurs when revenue grows without a major increase in resources. As a result, consumers and revenue expand at an exponential rate, but expenses rise relatively minimally.
To scale your short term rental management company, you need to automate repeated manual tasks, for example:
- Guest communications.
- Cleaning process.
- Quality control.
- Follow up for reviews.
- Creating reports.
Although they may need an initial investment, those vacation rental automation solutions can help you scale your business and begin to increase revenue and profitability.
Every new property manager has many challenges when it comes to running the business. These include:
- A lack of experience
- Drafting a financial plan
- Keeping properties clean and organized
- Finding the time required to handle everything
Let’s have a look at how to deal with these issues.
Don’t do it all yourself
On LinkedIn you can find experienced professionals like Glenn Haussman. By following him, you can find many tips for improving your business.
Podcasts are also a great way to tap into the knowledge and learn from the mistakes of other business owners, like learning how to differentiate from the competition or how to improve guest experiences. This world has much to offer, and we encourage you to be a part of it, whether as a host, guest, or constant listener. Here are some podcasts worth listening to:
- Thanks For Visiting – Annette Grant & Sarah Karakaian
- Short Term Rental Secrets Podcast – Michael Sjogren & Emanuele Pani
- Slick Talk: The Hospitality Podcast – Wil Slickers
- Vacation Rental Success Podcast – Heather Bayer
- Sarah and T – The Professional Vacation Rental Manager’s Podcast – Sarah Bradford
If you want to delve further, take a look at the book “Short-term rentals, Long-term wealth” by Avery Carl, the CEO and founder of The Short Term Shop. He will illustrate how to select, buy, and manage a short-term rental from anywhere in the nation. Also, how to avoid typical traps and overcome difficulties that prevent many would-be investors from ever getting started.
Automate whenever possible
Automate guest communications to cut phone calls and messages. Source: Unsplash.
One of the main goals from day one for property managers is to figure out how to streamline operations. Also, they want to find out how to automate as many tasks as possible, thanks to management softwares.
Automation platforms prevent bottlenecks, guarantee capacity, reduce resource usage, and detect possible issues to support scalability. They make tasks infinitely repeatable, eliminate human error, and allow staff to tackle several issues, like:
- Communication with guests (SMS automation, digital guestbooks, local area guides, and guest reviews).
- Staff scheduling.
- Check-in and check-out processes.
Do you want to build a scalable STR business? RueBaRue cuts guest messages and calls by up to 70% so you can start focusing on growing your portfolio. Schedule a 30-minute demo .
Have a financial plan
The end of each month brings a good dose of stress for some property managers. Payments, bills, mortgages, and other expenses are all waiting.
Developing a financial plan will help you identify risks so you can determine the likelihood of success for your venture.
To assist you in this respect, we’ve outlined the five phases to organize your company’s financial planning.
- Understand your company’s goals.
- Calculate set-up costs.
- Prepare a budget forecast, gathering information about the company’s profit and spending estimates.
- Work out your cash-flow projections.
- Find your break-even point.
Building a good financial plan will allow you to plan expenses and improve the guest experience. For example, you can purchase tools and installations like smart locks and noise monitoring solutions.
RueBaRue is much more than a guest communication tool. It’s the key to building lasting relationships with your guests. Try it now .
Short-term rental insurance integrates different guarantees depending on specific needs. Unlike more standardized insurance coverages, a good short-term rental insurance policy covers the risks faced by:
- The homeowner.
- The property.
- The guest.
- The property manager.
Insurance plans protect your rental home’s property and liability exposure. For example, they will shield you from financial obligation if a guest is hurt on your property and sues you.
One of the ideal features of STR insurance is a thorough and consistent guest screening process in order to catch hazardous reservations. Protect your company and tourists with background screening services.
But personally vetting each reservation requires time and resources. On the other hand, automating guest screening allows you to increase your profit margin by reallocating revenue and resources to initiatives such as onboarding new homes and focusing on the guest experience.
The 6 core solutions you need in place
Keep in mind that multi-million dollar businesses require scalable solutions. Source: Unsplash.
If you’re thinking about starting a vacation rental, you’ve asked yourself, “Is it worth it?” or “How much will I be able to earn?”. But 450 million people worldwide use vacation rentals and the industry’s market value increased 22.76% from 2020 to 2021.
To run an STR company and make money, however, you need to efficiently deal with some key obstacles. Let’s see how to deal with them.
Guest communication system
For years, owners of short-term rentals have sent check-in instructions in a manual way. Messaging has changed the way people communicate. Guests will use messaging more in the next few years and 63% of millennials prefer texting to phone calls.
But you will spend a lot of time responding to the same messages and questions over and over again, and it can also lead to bad customer experiences.
As a property manager, it’s important to:
- Use text messaging and chat to improve communications and enhance service.
- Customize the communication.
- Answer guest questions by text before and during their stay.
- Automatically send digital guestbooks, local area guides, and guest satisfaction surveys.
- Live chat with potential guests.
- Capture leads for your vacation rental business.
Automate your guest messaging and cut the volume of communications. With RueBaRue you can save time and deliver unforgettable vacation experiences. Book a demo now.
With a fast and contactless check-in , you can be more efficient, even if you manage several tourist facilities at the same time. It’s a game changer for the entire guest registration process:
- Improves your customers’ experience.
- Reduces your guests’ tedious waiting during registration.
- Collects guest data and reduces errors.
Check-in is often a massive area of weakness for STR companies. Organizing a meeting for a key exchange can be time expensive, especially if you manage several apartments. To get it right, you need to address several issues related to security and scalability.
For example, you can use a lockbox with keys. Place your key inside the lockbox and enter the combination for quick check-in and checkout. You must inform your guests of the location of the key lock box and the combination code required to open it.
As an alternative, choose a smart lock to make check-in and checkout as simple as possible. Smart locks operate through an electronic system with a signal from your smartphone. All you have to do is send an invitation code to your guests ahead of time.
Are you trying to improve your website’s conversion rate and get more direct bookings? It can be frustrating to know that people book through expensive third-party channels.
Achieving a higher conversion rate on your website is not a pipe dream. You can do it by making the booking process as smooth and simple as possible.
Here are some actionable tips that will turn your website into a conversion machine:
- Support using credit cards in mobile wallets for frictionless purchasing.
- Use digital wallets to increase security.
- Optimize for mobile.
- Optimize the page experience or get dropped by Google.
- Leverage low-cost direct booking tools.
- Make use of beautiful imagery.
Also, websites that add mobile-optimized payment options experience an increase in conversions. Mostly because customers have minimal friction.
As a matter of fact, major OTAs offer users the possibility of paying with their digital wallets. Adding this type of support to your website is a great way to be more competitive.
Listing site profiles
Here are 5 ways you can differentiate your properties from the competition in popular OTAs like Airbnb, Vrbo, and booking.com:
- An appealing listing title will increase the click-through rate, which means that more users will click on your property when it appears in the search results.
- Make sure to add common guest questions into your listings: it will reduce the number of responses needed and it will save you a lot of time.
- As the cover photo, select the greatest image of your property. It should pique the user’s interest and urge them to click.
- On Airbnb, place the best four images from various locations of the property at the top of the image gallery. When a user clicks on your listing, the photo preview displays your cover photo as well as the four top images.
- Always add an external shot of the property, showing how it appears from the outside and from the street – this gives visitors a sense of comfort in the house and the surroundings.
Don’t oversell your home or guests will be dissatisfied and post negative reviews, but don’t undervalue it either or they won’t book. Reviews over the long term are more important than occupancy over the short term.
Here are four aspects of a successful marketing strategy for a fledgling STR business.
1. Focus on personalization
Customers know that you have the ability to personalize their experience. Leverage the data to improve their stay and encourage positive reviews. You can do this in several ways:
- Create guest profiles.
- Send emails before and after their stay.
- Customize packages and add-ons.
- Leave handwritten notes.
2. Use social media
If you have not yet taken advantage of Instagram, consider activating a profile.
It’s a fantastic platform for developing your brand personality, which attracts guests to increase direct bookings and persuades property owners that you can provide excellent property management services.
You can begin visual communication with a new target audience of customers. Leverage the platform for mini videos to get your tourism brand out there and close a new short term rental property management agreement.
3. Don’t target the “average” traveler
Identify your target audience and create services in line with their demands. The average traveler or tourist doesn’t exist anymore.
4. Make use of native advertising
Native advertising is a strategy that uses the same style as the media in which it appears. Examples of this are the sponsored posts on Facebook and Instagram.
Cleaning & maintenance solutions
Hygiene is one of the most sensitive issues in short-term rentals. An uncleaned property can ruin a vacation before it even begins. For hosts, it can ruin the reputation of their business.
To make sure you don’t forget anything, it is important to approach professional cleaning tasks with a plan. Structuring each task and automating it can make a difference. Here are some suggestions to improve your cleaning process:
- Hire a team you trust and build concrete repeatable SOPs around the cleaning process that you can iterate over time.
- Use home touchless vacuums, mopping robots, and cleaning sprayers to make your routine easier.
- Find a tool that will automate many of the processes for you,
- Use apps for home inventories to check your supplies.
- Track performance so you can optimize your cleans.
Boost your STR company from the start
Here are a few key elements to boost your company, as we saw in this guide:
- Starting an STR company means building automated and scalable processes.
- The STR industry is on the rise, so you can’t miss this business opportunity.
- With a timely response to all inquiries, automated messaging can boost guest satisfaction.
- Automation of cleaning and team management streamlines work and assures effective execution.
- You need to build a financial plan with measurable goals.
- Optimizing your listing site profiles and your advertising plan is key.
Successful property managers face a lot of challenges, like building effective processes or managing communications with guests.
Automation software is the best way to build a strong STR company, allowing you to minimize guest interactions and build best practices that you can operate at scale.
Reduce your workload with RueBaRue and watch your property revenues rise. Book a demo.
Frequently asked questions about starting a short term rental management company
What is the best way to promote my short-term rental property?
The best way to promote your short term rental property is to build a marketing strategy and automate tasks. For example, you can collaborate with influencers and use social media to your advantage. Price your property competitively and list on multiple websites. Make sure Google (and guests) can find it!
What are the benefits of owning a short-term rental property?
There are a lot of benefits to owning a short term rental property. You will have higher rental income potential, because STRs demand a higher nightly rate than the others. Also, guests keep moving in and out frequently, decreasing wear and tear.
What is the difference between a long-term and short-term rental?
The difference between a long-term and short-term rental is pretty clear. Short term rentals are properties rented for 90 days or less. Long-term rentals, on the other side, are those that typically have a tenant on a lease that is six months or longer.
How do I get started in short-term rental management?
Key steps to getting started in a property management company include creating a financial plan with specific goals, researching the markets, and building a property management strategy. Then, choose software to automate tasks and understand how pricing works.
What is the return on investment for short-term rentals?
While there’s no easy answer to what return on investment (ROI) a short-term rental can bring, a single short-term rental property can be expected to generate income from a few hundred dollars to a few thousand dollars a month. There are a lot of key factors to consider, but the ROI is usually higher than long-term rentals.