Being a host can be a rewarding experience, allowing you to earn extra income and meet new people from around the world. However, it's important to remember that running a rental business comes with its own set of costs. While you might be aware of some of the more obvious fees, like an OTA's percentage of your bookings, there are other fees that hosts might not remember or think about. In this post, we'll take a closer look at some of those less obvious fees so you can be better prepared and avoid any unpleasant surprises down the road.
Did you know that many cities and states have occupancy taxes that apply to stays? These taxes can range from just a few percent to more than 15% of the total booking amount, so they can really add up over time. Some cities, like San Francisco and Paris, require OTAs to collect and remit these taxes directly, while in other locations it's up to hosts to handle the payments themselves. Make sure to research the taxes in your area and plan accordingly.
Of course, it's no secret that cleaning you can set a cleaning fee for your space. Beyond that, there are often additional costs that hosts might not consider. For example, you may need to purchase cleaning supplies, replace linens and bedding regularly, and pay for occasional repairs or upgrades. Do some research into average costs for these items in your area so you can set your cleaning and maintenance fees appropriately.
One thing that many hosts overlook is the cost of insurance. While OTAs do offer some protection for hosts, it's important to remember that this coverage may not be enough depending on your situation. For example, if a guest causes damage to your property that exceeds your security deposit or an OTA's coverage limits, you could be on the hook for the rest. Look into adding liability insurance and property damage coverage to your policy to ensure you're fully protected.
Credit Card Processing Fees
When guests book through an OTA channel, their payment is processed by a third-party credit card processor. While this might seem like a minor detail, the fees charged by these processors can add up quickly. Depending on the payment method used, you could be paying anywhere from 2-4% of your booking total in processing fees. Some hosts choose to pass these fees on to guests, while others simply factor them in to their overall pricing strategy.
Local Regulations and Permits
Finally, it's important to remember that many cities and towns have regulations and permit requirements for short-term vacation rentals. These can include things like zoning restrictions, noise ordinances, and health and safety inspections. Failure to comply with these regulations can result in fines, penalties, or even the loss of your license. Make sure to research the requirements in your area and work to stay in compliance at all times.
Hosting on OTAs can be a fun and rewarding experience, but it's important to be aware of all the costs associated with running this type of business. By keeping these less-obvious fees in mind and planning accordingly, you can ensure that your vacation rental stays profitable and sustainable in the long run. Do your research, keep good records, and always stay on top of the latest local regulations and requirements. With the right mindset and a little bit of preparation, you can set yourself up for vacation rental success!