The short-term rental business has seen remarkable growth in recent years, and prospects for 2025 look promising. If you’ve been wondering how to start a short-term rental business, now is the perfect time to take action.
According to Grand View Research, the global short-term rental market is projected to grow at a compound annual growth rate (CAGR) of 11.4% from 2025 to 2030. This growth signals a booming market with plenty of room for new entrants.
Image via Grand View Research
The explosion of platforms like Airbnb, Vrbo, and Booking.com has made it easier than ever to turn spare rooms or entire properties into profitable rental units.
Additionally, with the rise of remote work, more business travelers are combining work and leisure, leading to increased demand for short-term rentals in diverse destinations. This is why the short-term rental market is an attractive business opportunity.
Whether you’re looking to generate passive income or build a full-fledged hospitality business, the market is ripe for newcomers who want to learn how to start a short-term rental business.
In this guide, we’ll provide you with a clear, step-by-step roadmap for how to start a short-term rental business successfully in 2025.
From market research and legal considerations to property selection and guest experience, this guide covers all the essential aspects to ensure your success in this lucrative industry.
When you start a short-term rental business, you list your properties on online platforms and showcase photos, amenities, and pricing.
Guests browse these platforms, compare options, and book directly with hosts. Communication happens through the platform’s messaging system, making the booking process efficient and convenient.
Once booked, guests gain temporary access to the property during the agreed-upon period, which is usually short-term. Starting a short-term rental business means knowing that you’ll have to ensure that the property is clean, well-maintained, and equipped with the necessary amenities.
When you start a short-term rental business, you’ll also need to budget for cleaning services, property insurance, and other operational costs. Additionally, short-term rental platforms charge both guests and hosts a service fee. These fees vary depending on the platform and rental price.
The beauty of starting a short-term rental business lies in the variety of property types you can offer to provide options for every traveler’s needs and budget:
Before you start a short-term rental business, it’s important to understand how it differs from long-term property management. Both passive income ideas involve renting out property, but they cater to distinct needs and require different management approaches.
These differences impact everything from your day-to-day operations to your financial returns and investment strategy.
Short-term rentals are typically rented out for a few days to a few weeks, with an average stay of up to seven nights. However, extended stays of up to four weeks are becoming common, especially among digital nomads and business travelers.
Long-term rentals, on the other hand, have leases that generally last a year or longer. However, some landlords offer flexible options like 6-month or 24-month leases depending on tenant needs and market conditions.
When it comes to guests, short-term rentals attract a diverse group of people—from tourists and business travelers to those just visiting family and friends. Guest expectations vary widely, and hosts must be prepared to accommodate different needs.
For long-term rentals, tenants typically treat the property as their primary residence. They expect privacy, autonomy, and fewer interactions with the landlord than short-term guests.
Short-term rentals have a higher turnover rate. That’s why they require thorough cleaning, inventory checks, and property inspections between guests. On an average, a short-term rental may need to be prepared 4–12 times per month.
Meanwhile, long-term rentals experience low turnover as tenants typically stay anywhere from one to three years. This significantly reduces the time and effort required to find and vet new occupants.
Short-term rentals require active management, while long-term ones demand far less involvement.
Short-term stays require guest communication, check-ins, troubleshooting issues, and coordinating cleaning services. Expect to spend 5–15 hours per week per property. However, automation, property managers, and the use of accounting software to keep track of payments can reduce workload.
Alternatively, managing long-term rentals typically only takes one to three hours per month per property. Once a tenant is placed, landlords usually only handle occasional maintenance requests and lease renewals.
Short-term rentals can generate two to three times the monthly income of a long-term rental during peak seasons, especially in prime locations. However, revenue fluctuates due to seasonality and demand shifts.
Long-term rentals are great for ensuring financial security even during market downturns. Why? They offer stable, predictable income with guaranteed monthly payments. However, annual earnings may be 10–30% lower than short-term rentals.
The upkeep for short-term rentals costs higher, typically including professional cleaning fees, frequent maintenance, higher utility bills, platform commissions, and property management fees.
On the contrary, long-term rentals have lower ongoing expenses, as tenants typically pay for utilities and minor maintenance. Without frequent turnovers, deep cleaning and furniture replacements are rarely needed. When hiring a property manager, their fees range from 8–12% of the rent.
Additionally, long-term rentals may benefit from additional tax advantages that help property owners save money on taxes, making them a more cost-effective option in the long run.
To attract guests, short-term rentals must be fully furnished with furniture, kitchenware, linens, toiletries, and decor. Initial setup costs range from $5,000 to $15,000 for a one-bedroom unit.
Meanwhile, long-term rentals are usually rented unfurnished. Owners don’t have to make upfront furniture investments and ongoing replacements due to wear and tear.
Among various rental business ideas, short-term accommodations have shown remarkable resilience and growth potential.
For one, the rise of remote work has made it easier for people to travel and work from anywhere. This led to an increase in demand for vacation rentals, corporate housing, and temporary accommodations.
This shift is especially noticeable in destinations that aren’t traditional tourist hubs but offer appealing living conditions, such as small towns or rural areas.
The growing interest in unique accommodations is another significant trend. From treehouses and tiny homes to luxury villas, travelers are looking for memorable, one-of-a-kind experiences.
As more people prioritize experiences over traditional hotel stays, short-term rental properties that offer something different have grown in demand.
Starting a short-term rental business can be a lucrative venture with careful planning and execution. This guide breaks down the process into manageable steps to help short-term rental owners navigate everything from conducting market research to preparing the right property.
The first step in learning how to start a short-term rental business is market research. Here are the things you should research:
Consider areas with high tourism traffic, proximity to popular events or attractions, and strong demand for short-term vacation rentals. Cities, rural escapes, and near-major airports are all potential hotspots for short-term rental properties.
Aspiring entrepreneurs learning how to start a short-term rental business overlook the importance of understanding local regulations and zoning laws.
Many cities have implemented strict rules regarding short-term rentals, including permit requirements, occupancy limits, and tax obligations.
Researching these laws and ensuring compliance can save you from costly fines and headaches down the line.
Analyzing the competition and setting competitive pricing is also crucial. Use tools like AirDNA and Mashvisor to gather data on rental prices, occupancy rates, and local demand.
These platforms can provide invaluable insights into what your competition looks like and help you set your property prices strategically.
Knowing how to start a short-term rental business also means understanding the legal and regulatory challenges.
Many cities and municipalities have specific rules for short-term rentals, including restrictions on the number of days a property can be rented out, required licenses, or taxes that must be paid.
For example, some cities require landlords to register their properties before listing them on platforms like Airbnb.
In addition to local regulations, there are tax implications to consider. Short-term rental income is generally subject to federal and state taxes. To make things easier for you, we’ve created this tax deduction cheat sheet with everything you need to know, from sales tax to tax deductions.
Many jurisdictions also require short-term rental hosts to pay transient occupancy taxes — similar to hotel taxes. Understanding the full scope of your tax obligations will help your business remain compliant and ensure you don’t incur any penalties.
It’s also essential to invest in the right insurance coverage. Standard homeowner’s insurance policies may not cover damages incurred during short-term rental stays.
Therefore, you may need to purchase additional coverage tailored for short-term rentals.
You must carefully consider the appropriate legal structure for your short-term rental business before you establish it.
Many new rental property owners choose to form an LLC (Limited Liability Company), which provides personal liability protection and tax flexibility.
The structure of an LLC helps separate your personal and business assets, ensuring that your assets are protected if your business is sued.
Alternatively, depending on your goals and the scale of your operations, you may consider other business structures like sole proprietorships or partnerships.
Each business formation comes with its pros and cons, particularly in terms of tax obligations and liability protection. Consulting with a legal professional can help you decide which structure best suits your business model.
A critical part of how to start a short-term rental business is understanding the financial commitment required. Here are things you must consider in the financial aspect:
While there are many rental business ideas to consider, short-term rentals often require significant upfront investment, with property acquisition being the most substantial expense.
You’ll need to either purchase a property or lease one with the intent to rent it short-term. In some cases, you may find financing options, such as mortgages or investor funding, to help cover these costs.
You should also consider these costs when starting a short-term rental business. Depending on the condition of the property, you may need to invest in upgrades and interior renovations like painting, flooring, and furniture.
Don’t forget about the costs for essential startup expenses like cleaning supplies, insurance, and marketing materials.
Planning for these essential costs early on will help you avoid surprises and lay a solid foundation for sustainable growth.
There are also multiple funding options available to you. Traditional bank loans, personal savings, or funding from investors are all viable routes.
If you want to scale your business quickly, you might explore crowdfunding platforms or partnerships.
Developing accurate financial projections is essential for your short-term rental business. A good way to start is by estimating your potential revenue.
Calculate your property’s expected occupancy rate and average daily rate (ADR). For example, if your ADR is $150 and your property is booked for 20 nights per month, your monthly revenue would be $3,000.
You’ll also need to account for operating expenses, such as utilities, cleaning fees, property management services, and taxes. Tracking these expenses will help you maintain positive cash flow and determine the profitability of your business.
Accounting software or budgeting apps can be invaluable tools for tracking income, expenses, and profits. Tools like QuickBooks or Mint can help you stay organized and ensure that you’re staying within your budget.
Locating the right property in an ideal area requires a certain level of discernment for anyone learning how to start a short-term rental business.
Properties near major tourist attractions, business districts, or transportation hubs tend to have higher occupancy rates. However, location isn’t the only factor to consider.
When choosing a property, look into the type of accommodation as well. Apartments, single-family homes, and vacation rental businesses offer different advantages, depending on your target market.
Additionally, look at the property’s potential for renovation and improvement. Can the space be updated to appeal to modern guests? What amenities can you add to make it stand out from the competition?
Generally, properties with pools, hot tubs, or large kitchens often attract higher-paying guests.
The next step in learning how to start a short-term rental business is to focus on property preparation. Start by furnishing the space with high-quality furniture, linens, and kitchenware.
Pay attention to the property’s design and layout to make it functional and inviting. Well-decorated and thoughtfully designed properties tend to receive better reviews and higher ratings.
Technology is also an essential consideration. Install smart locks, thermostats, and security cameras (if needed) to make the space more convenient and secure for guests.
A reliable booking system integrated into your website or listing platform is also critical for smooth operations.
Lastly, high-quality photos that highlight the best features of your property will help attract guests and ensure that your listings stand out.
The next essential step in learning how to start a short-term rental business is building a strong online presence. Here are the tools you can use to market your rental business:
Start by creating an optimized profile on booking platforms like Airbnb or Vrbo. Ensure that your listings are complete with clear, compelling descriptions and high-quality images.
Leverage social media to promote your property. Instagram and Facebook are powerful tools for showcasing your property, especially if you collaborate with influencers or local businesses to increase visibility.
This is another crucial part of your marketing strategy. Optimizing your listings with relevant keywords, such as “luxury beach house” or “family-friendly rental,” can help improve your visibility in search results.
Mastering how to start a short-term rental business involves leveraging tools that simplify and optimize your operations.
These tools not only save time but also enhance guest satisfaction, helping you stand out in a competitive market.
Running a short-term rental business means managing daily operations. This includes scheduling cleanings, maintaining the property, and handling guest communication.
Establishing clear check-in and check-out procedures is essential to ensure smooth operations. Providing a seamless guest experience will lead to better reviews, which, in turn, will drive future bookings.
As your business grows, consider creating standard operating procedures (SOPs) for all aspects of property management. This includes cleaning protocols, guest communication guidelines, and maintenance schedules.
Hiring a property management company or outsourcing tasks like cleaning or maintenance can help you scale without compromising on quality.
When deciding how to start a short-term rental business versus pursuing long-term rentals, consider these additional financial factors:
Consult with a tax professional familiar with rental property investments before you start a short-term rental business.
Choosing which model to pursue when you start a short-term rental business depends on your goals, preferences, and resources.
If you enjoy interacting with people, don’t mind more active management, and seek higher potential returns despite greater volatility, short-term rentals might be the right fit.
Conversely, if you prioritize a stable income stream with minimal time investment, long-term rentals could be preferable.
Learning how to start a short-term rental business requires a clear understanding of the potential rewards and obstacles you might face.
This comprehensive breakdown will help you evaluate whether this business model aligns with your goals.
Here are some reasons why starting a short-term rental business can be a profitable venture:
Short-term rentals often generate significantly higher income compared to long-term rentals, especially in popular tourist destinations. When you start a short-term rental business in prime locations, you can earn more through:
For example, a two-bedroom apartment that might rent for $1,500 monthly as a long-term rental could potentially earn $3,000-$4,000 monthly as a short-term rental in a desirable location, even after accounting for vacancy periods and operational expenses.
When you start a short-term rental business, you gain considerable flexibility in several key areas:
This flexibility allows you to adapt growth-hacking strategies and optimize your business model as you learn more about how to start a short-term rental business successfully in your specific market.
In many jurisdictions, short-term rental hosts benefit from favorable tax treatment:
To maximize these benefits when you start a short-term rental business, consult with a tax professional who specializes in real estate investments and hospitality businesses.
Many hosts find that the interpersonal aspects of running a short-term rental business offer unique rewards, such as:
For many successful hosts, these intangible benefits are as important as the financial returns when they start a short-term rental business.
While a short-term rental business can be highly profitable, it comes with obstacles that new hosts often underestimate. Here’s what you can expect and how to prepare.
Running a short-term rental requires significant time and effort for:
For a single property, expect to spend 7–10 hours per week on these tasks, especially when you first start a short-term rental business. While this can be reduced through automation and systems, the business remains more hands-on than long-term rentals.
Frequent guest turnover accelerates property deterioration, requiring the following:
When you start a short-term rental business, you should set aside 15–20% of your gross revenue for maintenance and replacement costs.
Many jurisdictions have complex regulations governing short-term rentals:
Before you start a short-term rental business, thoroughly research local regulations and factor compliance costs into your business plan. Non-compliance can result in substantial fines ($500–$10,000+) and forced business closure.
The diversity of guests brings both opportunities and challenges:
To mitigate these risks when you start a short-term rental business, implement clear house rules, install noise monitoring devices (while respecting guest privacy), and use security cameras (for exterior spaces only).
As short-term rentals have grown in popularity, many markets face increasing challenges:
To succeed, you need a distinctive value proposition and excellent operational efficiency when you start a short-term rental business.
When deciding how to start a short-term rental business, consider these strategies for maximizing benefits while minimizing challenges:
By thoughtfully addressing these considerations when you start a short-term rental business, you can develop a profitable, sustainable operation that balances financial returns with lifestyle preferences.
Once you master the fundamentals of how to start a short-term rental business, you can expand by acquiring additional properties.
Successful growth requires careful planning, market understanding, and operational excellence. Let’s explore the key aspects of scaling your business in greater depth.
Local governments have varying attitudes towards short-term rentals. Some cities embrace them as a way to boost tourism and economic growth, while others impose strict regulations to address concerns like noise complaints and overcrowding.
Before you start a short-term rental business in a new location, it’s crucial to research your local regulations. Contact the city’s planning department or tourism board to understand the specific requirements and obtain any necessary permits or licenses.
Furthermore, create a regulatory compliance checklist for each location you operate. It should include zoning restrictions, occupancy limits, safety requirements, tax obligations, and permit renewal dates.
Consider budgeting annually for licensing and compliance costs per property, depending on the jurisdiction.
Create standardized processes for cleaning, guest communication, and maintenance to ensure consistency across locations. Hiring a local property manager or using automation tools can streamline operations.
Expansion requires capital for property acquisition, renovations, marketing, and operational costs. Consider financing options like business loans, investor partnerships, or reinvesting profits.
Marketing your properties becomes even more crucial as you expand. Several platforms specialize in connecting hosts with guests, including:
Each platform has unique strengths. Determine which is best for your property, location, and target market. Consider creating a direct reservation website as well to reduce dependency on third-party platforms.
Many hosts make the mistake of using static pricing, resulting in lost revenue during peak seasons or low occupancy during slow periods.
Although many booking websites provide pricing tools, you may want more sophisticated options when you start a short-term rental business. Some tools can help you maximize profits by estimating variables in rental prices for specific dates or seasons.
For example, when renting an oceanside residence in South Carolina, summer prices might vary from winter rates. Tools like PriceLabs and MarketMaker™ are valuable resources for determining optimal short-term rental rates based on market conditions, helping you maximize revenue as you grow your short-term rental business.
What is the best short-term rental platform?
The best platform depends on your location and target market. Airbnb is the most popular, with a large global reach, while Vrbo is ideal for vacation rentals. Booking.com offers broader global visibility. Lastly, niche platforms like Sonder and Hipcamp cater to specific audiences and property types.
What is a good return on a short-term rental?
A good return on investment (ROI) for a short-term rental is typically 10% to 15% annually. However, this can vary depending on location, property type, and seasonal demand. Tracking operating costs, occupancy rates, and nightly prices will help determine the profitability of your short-term rental business.
How long have short-term rentals been around?
Short-term rentals have existed in various forms for decades, but they gained significant popularity in the early 2000s. Platforms like Airbnb, founded in 2008, revolutionized the industry. These platforms make it easier for homeowners to rent properties temporarily and for travelers to find affordable, non-hotel accommodations worldwide.
What is the maximum stay on Airbnb?
Airbnb allows guests to book stays for up to 28 days at a time. For stays longer than 28 days, guests and hosts can arrange extended stays, but these must be set up separately through Airbnb’s long-term rental platform. Some hosts may also offer flexible terms for extended stays.
What is the shortest time you can rent a property?
The shortest rental time varies by platform and host. On Airbnb, many listings allow bookings for one night. However, hosts can set minimum stay requirements, typically ranging from 1 to 3 nights, especially for weekends or peak seasons, to maximize profitability and reduce turnover costs.
The short-term rental industry is a lucrative field when done right.
By conducting thorough market research, understanding the legal landscape, planning your finances carefully, and creating a standout guest experience, you can set yourself up for long-term success in this industry.
Are you ready to turn your property into a profitable short-term rental? The market is waiting, and with the right strategies, you can create a business that can provide steady income and potential growth.
The best accounting software for small business owners helps track income and expenses, send invoices…
Finding the right accounting software for your organization is one of the most crucial decisions…
Have you been considering buying a CRM for your business? You’re perhaps on the right…
Thinking about turning your rental property into a reliable income source?Smart move! Before you can…
Managing customer relationships is one of the most important aspects of business. Customer relationship management…
Imagine an AI CRM software that doesn't merely recall a customer's purchase history but can…