Our venture into vacation rentals started out as a romantic pipe dream of my husband’s, a way to invest our savings into something other than the stock market. We’d never owned a home of our own — we were living in a two-bedroom apartment in San Francisco — yet we were wildly optimistic about our ability to turn this into a lucrative side hustle that we could also enjoy for ourselves once in a while.
Six years and three rental properties later, that pipe dream has turned into a real business for us. But it definitely didn’t happen overnight, and we made plenty of rookie mistakes that cost us time and money when we were first getting started.
Here are three scenarios we encountered and how we now use tech to manage our investments remotely.
Not party-proofing our place
This mistake could’ve easily put a quick end to our little vacation rental side hustle because of the two-strikes-you’re-out policy in our residential community.
Our first rental property is located in PGA West, a gated community near Palm Springs known for its world-class golf courses and resortlike grounds, which make it a highly desirable place for retirees to take up residence. Because a lot of our neighbors live there full-time, anyone operating a vacation rental like ours is already under extreme scrutiny, and it’s important that our renters are respectful and abide by the community’s quiet hours.
During our first year in business, we had a neighbor call security on one of our guests for playing loud music well into the night. The following morning, the guest assured us that they hadn’t even been outside the night before, let alone blasting any music. It turned into a he-said, she-said situation with no real resolution other than the fact that we were now one “warning” away from losing our short-term rental permit and potentially having to sell our investment property.
To prevent this from happening again, we installed a Minut noise monitor for our back patio. Unlike a baby monitor that lets you listen in on anything going on in the room, the Minut alerts you only if the noise exceeds a certain decibel level. This allows us to get ahead of any neighbor complaints by reaching out directly to the guest to lower the volume, and gives us a tangible data point to plead our case in the event that we receive another notice.
We also had an instance at our other property, in Coachella, where the renter decided to throw an impromptu party without running it by us, then proceeded to deny the entire event despite our having a Ring doorbell that had documented the onslaught of guests arriving at the doorstep throughout the night. The undeniable evidence allowed us to report the case to Airbnb and get reimbursed for the damages incurred on said wild night.
Related: Airbnb Bans Use of Indoor Security Cameras in Rentals
Giving renters free rein of the thermostats
This one seems like a no-brainer, but we were naive apartment dwellers when we first started off — utilities were included with our rent — and I’d only heard of smart thermostats from previously working at CNET.
Our very first guests left the AC blasting at a cool 65 degrees (in the middle of August), and we didn’t find out about it until two weeks later when the cleaners preparing the space for the next guests stepped into an ice chamber. The sticker shock of our first electric bill forced us to get “smarter” about our air conditioning policy and replace the dumb thermostats with two Nest thermostats.
Nest lets us control the thermostat remotely and set it on a schedule, so that even if a guest adjusts it manually, it reverts back to our preset range at certain times during the day. We also included some rules about energy usage within our rental agreement that would deter guests from unnecessarily cooling the place down to arctic levels.
We took the same approach with the pool and hot tub, which have Pentair heaters that can be controlled remotely using the Pentair app. And unlike the Nest thermostats, these heaters aren’t readily accessible for guests to control manually, so guests have to request temperature modifications to the pool and spa from the host.
Forgetting to adjust our pricing
Party-proofing aside, the single most expensive mistake we made was not adjusting our pricing on a regular basis. Starting out with no reviews on Airbnb, Vrbo or any rental platform can be tough for even the most impressive of properties, so we had to price our rental much lower than our competitors to make it more appealing.
Once our listing was getting a bit more traction, people started locking in future dates that we’d carelessly made available on the calendar for the same introductory rates we’d launched with. By the time we raised our rates, one guest had already booked the week of Thanksgiving for less than a fourth of what we had anticipated charging for those dates. We tried to cancel and readjust the pricing, but Airbnb penalizes hosts for canceling reservations; if you cancel a booked reservation, you’re required to pay a percentage of the booking, and Airbnb blocks out those dates on your calendar so no one else can book at a new rate.
That experience forced us to regularly reassess our pricing a full year in advance, taking into account the season, holidays and any major events that can increase demand. At our Palm Springs place, the two weeks of the Coachella music festival alone can bring in enough revenue to cover half of our operating costs for the year. This helps make up for those slow months in the summer when temperatures are known to remain in the triple digits overnight and the place sits empty for weeks at a time.
We’ve automated a lot of the day-to-day pricing decisions using Beyond, a revenue management platform that uses algorithms to optimize nightly rates on all your vacation rental platforms. The program takes a 1% cut of every booking and still requires a bit of oversight on our end, but with three properties and our regular full-time jobs to tend to, it’s been a worthy investment.
Perhaps the biggest lesson we’ve learned about vacation rentals is that, while they can become a significant source of revenue, they are by no means passive income. Even with experience and all the smart home gadgets and automation programs money can buy, they still require you to run them like a business if you want to make money off of them. That and you have to get at least some level of enjoyment from doing the work. Otherwise, you’re better off placing your bets on the stock market.
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