Savvy investors recognize that when your vacation home is empty, it’s just draining your bank account. Luke Babich shares strategies to turn it into a lucrative short-term rental.

June is Investment Properties and Second Homes Month here at Inman. We’ll explore everything including top investor insights, the latest at Airbnb and Vrbo, and the surprising locales emerging as investor hot spots across the country.

This article was last updated June 3, 2024.

You may have purchased your second home as a central hub for far-flung family members or as a crash pad for your favorite getaway spot.

But savvy investors recognize that when your vacation home is empty, it’s just draining your bank account. You don’t need an MBA to unlock the potential of your second home. Here’s how to turn it into a lucrative short-term rental.

Why buy a second home?

If you have the resources, buying a second home is a great way to begin building an investment portfolio. 

You don’t need cash to buy a second home. It’s possible to capitalize on equity in your primary home to rustle up a down payment. 

People buy a second home for a wide variety of reasons, including:

  • Saving over renting in an area they visit frequently
  • Getting experience with rehabbing and flipping houses
  • Building a retirement portfolio through real estate

Potential pitfalls of a second home

As with your primary home, the hidden costs of a second home can be startling. If you buy in an area with a Homeowners Association, there’s that to consider. But don’t forget things like:

  • Property tax 
  • Lawn maintenance
  • Snow removal
  • Security features
  • Emergency repairs

If you choose not to find tenants and manage the home yourself, you’ll also need to budget for a property manager. These costs can add up.

Short-term rental considerations

Not all homes can be easily transformed into lucrative short-term rentals. Here are six factors to consider.

Where it’s located

Short-term rentals perform best in hot vacation spots (i.e., areas with a beach or with other typical vacation activities). It can be harder to rent out a second home in a landlocked state with no recreation close by. 

You might still have a market with people relocating, but those renters could be few and far between. 

How often (and when) you’ll use it

If you plan to use your beachfront property every holiday weekend and all summer long, you may not be able to make much money on your rental. If it’s possible, shift your use to a time when rentals are less in demand. Think about gathering at your beach house in the fall or spring, and leave it open for snowbirds and summer travelers.

Rental market prices

If you have yet to purchase your second home but think you might try short-term renting in the future, you’ll need to consider how much rent you can charge. Many inexperienced investors buy a house that cannot be rented for enough to cover the mortgage and expenses.

Available amenities

How many amenities can you provide for your short-term guests? These days, many vacationers expect certain features to come standard (i.e., basic kitchen equipment and cooking supplies, towels, and linens), but what can you add to make your property more attractive?

Consider adding:

  • Bikes with which to explore
  • Beach gear (e.g., dedicated towels, body boards, chairs, etc.)
  • Gaming systems

Make guests feel more welcome with gift baskets stuffed with goodies and snacks, and subscribe to the fastest wireless internet available.

The rules: laws and taxes

Because of their impact on a tight real estate market, some localities have started to ban or heavily regulate short-term rentals. There is still money to be made, but it’s important to follow all local laws — including declaring rental income. The penalties for not declaring rental income can be steep (and even include jail time). Fortunately, once you declare rental income, you can also deduct associated expenses.

Sure, you could rent outside of the major short-term rental marketplaces (Vrbo and Airbnb), but that’s a risky business. Not only do these platforms provide a calculator to determine your potential profit, but they also provide protections for landlords and renters. This helps both parties feel confident in their transactions.

How much time you have to spare

Renting a second home can bring in extra income, but it takes time. You’ll need to clean the home between tenants, manage online bookings and make repairs on a second property. Rental properties generate what is often referred to as “passive” income, but there’s nothing passive about replacing damaged carpets or cleaning up after particularly rowdy guests.

How to transform your property

If you have found a second home and are ready to put it to work for you, there are ways to easily transform it into a lucrative short-term rental property.

Make it renter-proof

Choose sturdy finishes that are easy to maintain. This is especially important in heavy-use areas, such as the kitchen. 

Buy quality furnishings

Quality furnishings last longer and hold up better under renters who don’t take as much care as your family might. Invest in well-built couches, tables and kitchenware. 

Maximize the space

When you’re shopping for furniture, consider pieces that do double duty. A pull-out couch adds another sleeping space as does a twin-over-full bunk bed for a larger family.

Minimize clutter

Another way to make the most of your space is to pare down to the essentials. Don’t crowd your second home with tchotchkes and clutter. You don’t need to make it minimalist but do remove precious family pictures or anything that has sentimental value and is not easily replaceable.

Make it comfortable

Don’t advertise a short-term rental that sleeps eight — then provide a table that only seats four. For most people, the goal of a short-term rental is to get away and relax. Give guests plenty of room to get comfortable.

Of course, it is OK to limit the number of guests. This prevents people from renting your house for big parties (and leaving all of the mess that comes with those).

Fix what’s (about to be) broken

Keep your property in good repair, taking the time for regular maintenance tasks. This prevents sudden emergencies and can also extend the life of the systems in your home.

Consider a property manager

Property management companies front-load their service charges, but once they are engaged, it can make real estate investing easier and actually save money in the long run. They handle emergency calls and organize repair services, find renters and collect money. This is a great option if your second home is out of state or if you are considering using your second home as a medium-term rental.

Your home away from home

It can be difficult to open your second home to renters, but the income it generates can be substantial. This may eventually make it possible to add to your real estate portfolio. 

It is possible to have your cake and eat it, too. To make the most of your second home, reserve weekends on the calendar for treasured family gatherings and personal vacation time well in advance. 

Get Inman’s Property Portfolio Newsletter delivered right to your inbox. A weekly roundup of all the biggest real estate investment and property management news delivered every Tuesday. Click here to subscribe.

Luke Babich is the CSO of Clever Real Estate in St. Louis. Connect with him on Facebook or Twitter.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×