There’s no denying that business is scaling for those in the vacation rental market. No matter how quickly (or slowly) your bottom line rises, any opportunity to cut your expenses is an opportunity to take! To clarify, these money-saving strategies aren’t going to diminish the value of your rental properties, business, or guests experiences. We’re here to cut costs, not corners. Every business has expenses otherwise there’d be nothing but profit. The key is in recognizing and anticipating expenses so that nothing is unexpected. It’s easier to identify rental expenses because they’ll often reflect costs you may see within your own home.
Here is a brief list of the most common vacation rental hosting expenses:
1. Maintenance / Basics
2. Amenities / Features
- High-Speed Internet
3. Added Value
- Reserved Parking
- Linens, Furniture, Towels
- Soap/Cleaning Supplies
- Rental/Listing Management Team or Software
Depending on the rental, some things you’ll offer, some you won’t. But one thing’s for sure, you’ll be paying taxes.
Understand Your Taxes
Tax is likely to take a big bite out of your vacation rental hosting income. Luckily, there are a few deductions that will make it less severe. In order to qualify for most of these deductions, you have to rent your space out for more than 14 days. Any fewer than that and it’s considered a second home.
- Repairs & Maintenance – From a leaky sink to a leaking roof and even cleaning services, you’ll be able to deduct professional service costs, including supplies.
- Insurance – That’s right, liability vacation rental insurance is tax deductible.
- Depreciation – This one’s a little more complicated, but if you’re able to calculate the depreciation value of your rental it can be deducted. Very rarely do guests damage rental property but it does happen, not interested in cleaning up their mess, consider charging a security deposit.
- Utilities & Local Taxes – Utility bills can stack up quickly every month along with the state and local taxes paid on them. These deductibles could save you thousands.
- Marketing – However you are generating leads, whether it’s a team or an online platform, these fees are tax deductible.
- Accounting Fees – Don’t attempt to do your taxes alone (unless you’re an accountant), hire a professional who will be able to advise you and discover as many deductibles possible. Their fee will also be considered tax deductible.
Create a Financial System
Minimizing your vacation rental hosting expenses must be quantifiable. No more guessing or loose budgeting. Include a financial system in your financial plan. This is the best way to approach your business finances holistically. It provides a clear picture of what’s coming in and what’s going out. Think business bank account meets financial audit. Money “events” are clearly detailed and provide the bigger picture. If you want to continue to seek opportunities to save, you’ll need to be able to see exactly what’s going on with your business’s money at any given time. Automating this system is the best way to go.
Ways to minimize expenses stemming from the physical property include getting an energy audit. This includes electricity, gas, and water. Regularly tend to the function of your rental property to ensure money isn’t accidentally being tossed out of the window. Audits aid in identifying where more resources to the rental are being provided than necessary. Optimize your properties functionality and save serious money. Keep modern appliances and look for home technology that can reduce your monthly utility expenditure. Efficiency is key!
It’s not guaranteed, but the chances of your guest renting your home in order to sit on the couch and watch cable T.V. are slim. Skip all the extra T.V. features that might have been popular 10 years ago and opt for a streaming subscription instead. Hulu and Netflix are both less than $20 a month and provide plenty of on-screen entertainment.
While you’re at it, skip the landline phone too. We’ve all got cell phones, it’s one extra bill you don’t need to pay for.
Keep Your Receipts
For all expenses, keep your proof. Download or print every digital receipt possible, even save your receipt from pumping gas on the way to a vacation rental educational seminar. Whatever it is relating to your business keep it. Not all of it will be useful, but that will be for your accountant to decide.
While the focus in your business is often on raising the bottom line, it’s important not to ignore the overhead expenses and how they can be improved. Make time in your quarterly review to address your costs and use this list to discover how you can save.