Creating a budget for your holiday rental

May 2024

Managing a holiday home is just like any other job. It not only requires time but also organisation and planning. If you’ve invested in this sector, it’s important to know the costs involved, especially so you can compare them with the other side of the coin, i.e., the profits. Only then will you know how much profit it generates.

Additionally, it’s essential to set the right price, both for staying in the property and for its services. We’ll address this topic later, along with the overall costs of maintaining healthy financial management. We’ll also see how to create a budget.

On the other hand, if you’re into renting out a holiday flat, you’ll need to reach for the calculator. The great advantage of owning a second home is that it’s a tangible asset and could bring in interesting economic benefits. To boost this aspect, Holidu encourages you to improve the appearance of your rental property and carry out regular maintenance.

How to create a budget for a holiday rental?

Creating a budget for a holiday rental is a straightforward task, although it takes a bit of time to complete. However, the great advantage is that you only need to do it once by yourself. After that, it’s just a matter of updating it from time to time, in case you’ve taken on or eliminated certain expenses. So, what information should be included in a holiday budget? Everything related to expenses and income. Let’s review the key points below.

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House refurbishments and maintenance

Among the expenses of holiday rentals are those related to house refurbishments and maintenance. Few hosts take these into account, but they do incur some expenses. Refurbishments and maintenance are important if you want to provide a pleasant stay for your guests. And, realistically, every few years, some minor refurbishments, painting, or furniture changes are necessary.

Community expenses

How to manage a holiday rental? In addition to considering what was explained earlier, you’ll also need to include in the budget the expenses for maintaining the community of neighbours. These cover services like concierge, pool maintenance, stair cleaning, and common area upkeep… Even if it’s a small fee, you should add it to your budget.

Commissions from your holiday rental listing

Any holiday rental website will charge you a small commission for their services. Not for registering with them, but for each booking you get through their platforms. It’s logical since their websites build trust with users and act as a bridge between hosts and guests. Consider this fee when setting your holiday rental rate.

Internet

These days, a holiday home must offer its guests a good internet connection. Just by lacking this service, a guest might discard staying in your house and opt for another where there’s wifi. Holidu recommends offering this service and also ensuring it works properly. The connection should be fast and stable.

Costes recurrentes en un piso vacacional

Recurring costs in a holiday home

To begin with, we must consider that there are two types of costs, fixed and variable. Fixed costs must always be paid regardless of whether the property is vacant or occupied:

• Cleaning
• Home insurance
• Holiday rental taxes
• Management fees
• Community expenses
• Internet connection

On the other hand, variable costs are not stable and vary depending on different factors such as the following:

• Maintenance
• Utility costs (electricity, water…)
• Marketing activities

These should be added to the commissions from the holiday rental portal, which can be fixed or variable, depending on how frequently your property is booked. The great advantage of advertising your holiday home on these portals is the visibility you gain, and users access these pages because they consider them reliable, and by extension, they will also trust your property.

How can I evaluate my holiday rental to set the price?

The ideal price is one that fits the characteristics and services of the property. However, before renting out your holiday home, you should calculate the fixed and variable costs we mentioned to set the holiday rental rate. If, after doing the math, you see that holiday rental is worthwhile, great! Now you just need to set a fair price.

First and foremost, calculate the average monthly expenses. Make sure the rent you want to set covers all those costs. Variable expenses are trickier to calculate, but you can make a monthly estimate.

We also recommend forecasting the occupancy time and checking out the competition: what prices do your competitors set? Also, assess your property, whether it’s located in the city centre or outskirts, the size of the house, its services, and proximity to tourist attractions, supermarkets, restaurants, etc.

Tips to optimise expenses and maximise earnings

The key is to set an appropriate rental price and maintain flexible financial management. It’s not advisable to keep the same price throughout the year; instead, adapt it to dates, seasons, and occupancy levels. Also, don’t forget to advertise your property on Holidu if you want to increase your number of bookings.

So, how can you maintain efficient and profitable financial management? Keep your accounts up to date and don’t leave this task until the last minute. Monitor expenses and, at least once a year, review electricity contracts, holiday rental insurance, and others to see if it’s still profitable to maintain those contracts or if you should look for a cheaper company.

Finally, if you want the financial management of your holiday rental to be efficient and profitable, remember to interact with potential guests. Answer their doubts and questions and show yourself approachable. This will make your property gain followers. And to reduce expenses, nothing better than embracing new technologies. In this regard, home automation would be a great ally.

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