How to start short-term rental business: four stages

What to take away

Stage one: permission, in writing

Nothing else matters until you know you may operate at this address.

Four separate authorities govern short-term rentals, and they do not talk to each other. Start with the city or county planning, zoning, or licensing office: ask whether this address needs a short-term rental permit or registration, a business license, or zoning approval. Ask the state revenue department whether lodging-tax registration is required; local terms can include transient occupancy tax, hotel occupancy tax, or lodging tax. There is no single nationwide short-term-rental permit or tax registration form, so ask the issuing office for the exact local name and filing.

For example, Portland's Revenue Division calls its form the Transient Lodging Registration and Account Update Form; see the Portland registration form.

The building, association or homeowners' documents may prohibit the use regardless of the city, and your lease or mortgage may prohibit it regardless of both.

Ask each of them, in that order.

Keep the answer as a document, not a memory of a phone call.

Rules differ between a city and its surrounding county, so the issuing office's current written requirements control. Use the licensing and compliance guide to organize your questions, but get the exact permit, registration, and filing name from the local office.

The gate: four written answers, all of them permissive.

Stage two: one property, one guest, one stopwatch

Resist the urge to list three properties at once. List one, take one booking, and measure everything.

Before accepting a booking, confirm in writing that your insurance covers short-term rental activity. Ask about commercial general liability and property coverage for guest damage; a homeowners policy may limit or exclude business use. Coverage and exclusions vary.

Set up the entity while you wait. The IRS explains federal tax obligations, including whether you need an employer identification number (EIN) and what records to keep. If you choose an LLC, file its formation documents with the relevant state agency; the IRS does not form the entity.

To have someone read your numbers back to you before you commit, the Small Business Administration's counseling and guidance pages list local advisers who charge nothing.

Then run the stay.

Record the time from the start of the turnover until the property is ready for the next guest. That measured window is the most useful number you will collect all year.

The gate: a completed turnover with a measured window and a written list of what went wrong in it. Until you have that number, every capacity plan you make is a guess. The mechanics of the window are set out in the operations and workflow guide.

Stage three: the second and third properties

This is where the businesses that fail, fail.

One property is a hobby that pays. Two is a schedule. Three is an operation, and it is at three that same-day turnovers start colliding, that a sick cleaner becomes a refund, and that the drive between properties becomes a line in the cost model rather than an inconvenience.

Add properties in an order that respects the window: close together beats spread out, even if the spread-out one earns more per night. A second cleaner hired to cover distance costs more than that difference.

Say no to a property that would strand you on the far side of town, and say it early, while it is still a polite conversation.

Hiring belongs here rather than later, because the first hire has to be trained on a standard that already exists. What that standard contains, and how to teach it, is the hiring and training guide.

The gate: a Saturday in your busiest month, planned on paper, that works. If it does not work on paper it will not work in July.

Stage four: demand that is not accidental

Only now is marketing worth money.

Examples of listing platforms include Airbnb, Vrbo, and Booking.com. Choose a channel you can manage, verify how you will keep availability and booking details current, and include platform fees in your own cost model.

Two audiences matter and they want different things: a guest checks that photos are true and the place is clean, while an owner needs their asset safe and the truth about it every month.

Confusing the two is the most common wasted spend in this trade. The split is handled properly in the marketing and growth guide.

Whatever you write about the property is advertising and has to be supportable. The Federal Trade Commission's Advertising and Marketing on the Internet: Rules of the Road explains the general expectation, and the specific traps here are old photographs, an amenity that is usually working, and a headline rate no date is available at.

The gate: bookings arriving from somewhere you can name.

What can happen when you skip a stage

Only the first row has an entry in column three that should worry you.

Owners who reach the far side of stage four and want to keep going will find the argument about density against geography in the expansion and market guide.

Common questions

How long does each stage take?

Stage one takes as long as the offices take. Stage two is one booking. Stage three is however long it takes to find properties that do not break your route. Anyone quoting a timeline is quoting their own.

Can I skip stage two if I have run a rental before?

A long-term rental is a different job. The turnover window does not exist in it, and that window is the thing stage two measures.

Should I buy or lease the first property?

That is a capital question with a different answer for everyone, and it turns on money you have not told a web page about. What is general is that leasing to re-let requires the owner's written permission, and a verbal yes is not permission.

What if my city has no rules yet?

Then write down the date you asked and who told you, and ask again before each season. "No rule yet" is a common state, and it is not a stable one.

Do I need software on day one?

No. You need it the first time two calendars disagree. Until then a single calendar and a stopwatch will teach you more. If you later need a property-management system or pricing tool, test it against the task you need it to solve, such as keeping availability current or setting rates; do not buy before that need appears.