Around 10 million landlords have declared rental income on their tax returns, many of whom own vacation properties.
Budgeting for your vacation rental is essential for maximizing your profit and earning a steady income stream. But if you struggle to balance the books, you likely won't know where to focus your efforts.
Sounds like your situation? Luckily, we've got the answers you're searching for. Here's everything you need to know about budgeting for your vacation rental.
Create a Budget
As with any business venture, you'll only succeed if you create a budget. You can go the old-school route with spreadsheets or use vacation rental accounting software to automate the process. Regardless of the tool, estimate how much you'll earn monthly and detract maintenance and operating costs, so you know what to expect.
Set Aside Extra Funds
Create an emergency fund for your vacation rental. You never know if there will be a maintenance issue or if you need new flooring, so always be prepared. To start, set aside a chunk of your vacation rental income and use that as insurance.
Research the Market
Before setting a rate for your vacation rental, research the current market and see how much your competitors charge. It will also reveal whether short-term rentals are in high demand in your area, which you can use to your advantage. For instance, if you live near a beach, you can raise your prices during peak season to double your profits.
Open a Bank Account for Your Vacation Rental
The next step is opening a bank account dedicated to vacation rental expenses and profits. This makes it easier when managing your budget and filing vacation rental taxes. If not, your finances will be mingled with your personal account, which makes your life more difficult.
In a similar vein, open a credit card dedicated to your vacation rental. If you need to repair an appliance or fix a leaking roof, you can use a credit card without dipping into your savings and personal account.
Work With a Bookkeeper
Navigating the accounting world is overwhelming, so why not hire a bookkeeper?
These professionals will handle your vacation rental profits and offer advice on maximizing your income. If it's expensive in your area, check out sites like Fiverr to find a bookkeeper at an affordable rate.
Hire a Property Management Company
Sure, it's an initial investment, but property managers handle multiple aspects of your rental, so you needn't worry. This includes collecting payments, communicating with tenants, and using accounting software to streamline your finances. But make sure the property manager has experience with vacation rentals for peace of mind.
Tips for Budgeting for Your Vacation Rental
Now that you're an expert on budgeting for your Vacation Rental, it'll be easier to manage your finances, but hiring a property management company is still wise.
At Gulf Coast Property Management, we have worked with landlords for 20 years to understand how to run short-term rentals. If you need help to manage your vacation rental, we'd love to help. Contact us today to chat with a member of our team.
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