If you own a rental property nowadays, you have the option of renting it out to tenants who will stay there year-round, or you could capitalize on a higher nightly rate and rent it out for short-term stays on Airbnb, Vrbo, or one of the many other short-term rental sites that have sprung up in recent years. In order to capture that premium nightly rate, there’s a little more work involved. Owners of short-term rentals have to make sure their rental is spotless before the next guests arrive and they also have some financial obligations, like paying for utilities and WiFi, which owners of long-term rentals don’t need to worry about.
Having said that, the opportunity to earn more in a quicker timeline is a major reason why so many people have turned their properties into short-term rentals. If there’s a time of year that’s significantly more expensive in your market, short-term rentals may make more financial sense. Of course, your nightly rate will determine whether short-term renting is right for you. So the question becomes, how much should you charge for the night?
Your Pricing Strategy
A lot of your pricing will be determined by the same factors that will set the price for a year-round rental: the size of your property, the location, and the amenities available.
First, find out what comparable properties in your area are renting for. Go to AirBnb or a similar site and enter your city, or better yet your ZIP code if you’re in a large city, and pick some dates, preferably several months away. If you focus on properties that are available this weekend, you’ll likely find places that are still free because they’re overpriced.
It’s best to focus on properties that have at least ten reviews. Those properties are probably being run by experienced hosts who have arrived at their rates through some trial and error. Do a little research on their pricing and availability. How many bookings do they have for this month and the following month? How much are they increasing their prices on the weekends? Also, if the demand is seasonal in your market, you’ll want to look at the price disparity between the high and low seasons.
Other tricks of the trade
Some of you may have noticed that Airbnb has a “suggested rate” tool for hosts, but the analytics aren’t refined enough to accurately reflect the correct pricing in different submarkets. While it may be tempting to take Airbnb’s word for it, you could be leaving money on the table by blindly accepting their suggestion.
When you’re getting your feet wet as a short-term rental host, it may be worth it to discount your nightly rate at the outset. Consider pricing your unit under market value, up to 25 percent as long as you’re not operating at a loss. This is just an initial pricing to help you with your market research. As you start to receive positive reviews, raise your prices to your full market rate.
When you list your price on your rental, make sure that the rate you advertise is never higher than what you actually charge. A lot of times, either on the landing page or in the search results, a photo of your rental will appear alongside the rate. Most sites don’t display a range, so it’s best to list the lowest amount you charge. While it may feel like a bait and switch, experienced short-term renters will understand that they need to select the nights of their visit to get the actual price of their stay. No one reasonably expects an Airbnb to cost the same on Tuesday and Saturday night.
Once you’re up and running, you’ll get a better sense of what you can charge. Pricing your short-term rental is both a science and an art.
