10 Key Short-Term Rental Expenses and How to Reduce Them
Your first month’s rental income looked great. Then the invoices started coming. Cleaning, repairs, platform fees, utilities that doubled because guests left the AC on all day. By the time you tallied everything up, that $3,500 in bookings became $1,800 in actual profit.
Operating costs eat up to 50% of short-term rental revenue, according to Lofty.* But with the right approach to tracking and reducing expenses, rentals still have strong earning potential.
Here’s what to expect, how to track it, and where you can actually cut costs without hurting your guest experience.
10 Key Short-Term Rental Expenses
Your expenses depend on whether you own the property and how involved you are in managing it. Small STR businesses are easier to manage, and you can handle many things yourself. As you grow, you’ll need to outsource more operations. Here are the main expenses to consider when estimating whether a short-term rental is profitable.
1. Mortgage payments
If you own the property outright, this cuts your expenses significantly. But many vacation rental properties are mortgaged and require monthly payments for decades.
In the US, the monthly payment for a 30-year mortgage equals $2,819 for a $543,300 home with a 20% down payment. A smaller option like a $337,600 home requires a $1,752 monthly mortgage payment. That’s a major addition to your monthly expenses.
Income from short-term rentals often doesn’t fully cover the mortgage, but in most cases you’ll get a small surplus. Renting your place short-term can help you pay off the mortgage and generate some income. It’s a solid long-term investment since you get stable revenue and move closer to property ownership without paying the full mortgage yourself.
2. Platform service fees
STR platforms like Airbnb charge hosts additional fees. The price ranges between 3% and 15% commissions for each booking, depending on the platform you use.
You can explore Airbnb alternatives to find better pricing, but you’ll pay fees regardless. Platform fees are part of your budget that won’t disappear unless you build a direct booking website and get repeat customers.
3. Rental downtime losses
Staying booked 365 days per year is impossible. Even top locations have low seasons, and every property needs regular maintenance. 25-27 days per month is the maximum occupancy for popular short-term rentals.
Beyond regular maintenance downtime, you’ll face emergencies and urgent repairs. Keep this in mind when estimating expenses and calculating potential income.
4. Cleaning and maintenance costs
Unless you run a single property and have lots of free time, hire a professional cleaning service. Cleaning after each guest is a major expense, ranging between $50 and $200 depending on property size and location. The shorter your stays, the more you’ll pay.
Also, budget for deep cleaning once a quarter. The price varies from $100-$200 for a 1-bedroom apartment to $200-$400 for a three-bedroom unit.
Read more about what an Airbnb property manager does and how much they charge.
5. Regular property maintenance
Things break. Sometimes because of guests, and often just from wear and tear. To keep your rental ready for new bookings, schedule regular maintenance: filter changes, thermostat checks, clogged drains, heater maintenance, electricity inspections, smart lock and camera system checks.
The newer the property, the less maintenance it needs. Maintenance frequency varies by property, though once per month for basic checks and minor repairs is recommended.
6. Utilities and WiFi
Electricity, gas, water, and internet will eat into your gross profit. Short-term guests don’t worry about efficient consumption since they’re not paying the bills. They’ll leave the AC on all day or crank the heating to maximum. Expect high utility bills.
7. Initial furnishing and capital replacements
Furnishing a regular Airbnb property costs around $15,000 to $25,000. Bigger apartments or luxury properties cost even more. Initial furnishing is a one-time expense, but include it when calculating ROI. You’ll want to cover this investment with your Airbnb income.
Also, budget for furniture and decor replacements. Every 5+ years, you’ll need to buy new furniture and appliances due to wear and tear.
8. Paid advertising and marketing
When running ads on Google, Instagram, TikTok, and other platforms, you pay every time someone clicks. Ads work well when you have a direct booking website or social media accounts, but they’ll increase your costs.
You can also invest in professional photography or video to promote your listing. This usually costs up to several hundred dollars, depending on the photographer’s experience and popularity.
9. Guest supplies and amenities
Don’t forget the details that make guests feel at home: coffee, tea, cookies, and snacks in your kitchen, toiletries and hand towels, welcome boxes or seasonal decorations. Not every Airbnb includes these, but successful hosts with high occupancy usually offer at least basic supplies.
10. Software fees
If you manage multiple Airbnbs, you’ll likely use PMS software, dynamic pricing tools, and other systems to automate repetitive tasks. Each tool charges at least $20 monthly, depending on the subscription plan. Calculate these expenses and include them in your budget.
Don’t forget about taxes and licensing fees. Local regulations often require property owners and managers to get a rental permit, which usually costs $200-400 annually. Many property owners also pay HOA fees.
How to Track and Forecast Short-Term Rental Expenses
These expenses are typical for most property managers. Go through them and start tracking those that apply to your rentals. Note that most expenses vary from month to month and need ongoing tracking.
With the right tracking approach, you’ll accurately forecast expenses and improve vacation rental revenue management. Here’s how to track and forecast expenses:
1. Summarize and categorize your expenses
Create a list of all expenses and split them into categories: fixed costs (same amount every month), variable expenses (depend on occupancy), and unexpected expenses. This helps you understand what to track and choose the best tracking tools.
2. Use accounting tools or PMS software
Use Google Sheets or Excel to track expenses manually, or automate the process. Specialized software is faster and easier. You can get an accounting tool like QuickBooks or Xero, or connect a property management system with accounting functionality. Hostfully offers DIY accounting, integration, or full service. Lodgify calculates rental income and payments.
3. Gather data for several months
Track both revenue and expenses for several months to get a complete picture. Fixed expenses won’t change, but you’ll be able to predict variable and unexpected costs for your forecast.
4. Look at KPIs and trends for forecasting
Once you know your monthly and annual expenses, you can plan your budget accordingly. This prevents situations where an emergency happens and you can’t afford to fix it.
You’ll usually need 6-12 months of tracking for accurate forecasting due to seasonal fluctuations. You can still review expenses monthly to confirm your rental is profitable and spot trends.
Ways to Reduce Short-Term Rental Expenses
By reducing expenses, you’ll increase your net income and can reinvest that money into growing your rental business. Here are proven ways to reduce costs and avoid unexpected losses.
Consider tax deduction options
Local tax laws often offer deductions for property depreciation, mortgage interest, cleaning services, utilities, internet, management fees, and other expenses. Consult with a local tax advisor to know your rights. Keep detailed records of all expenses. This helps you prove you’re eligible for deductions and can save thousands of dollars annually.
Create your own website and grow social media
Avoid or minimize Airbnb charges by building your own website. People can check your availability directly and make a booking. Having a direct booking website increases your margin and reduces long-term expenses.
Dedicate some time to social media to promote your property. Instagram, YouTube, and TikTok are the most popular channels globally. A strong social media presence lets you attract more guests and save on digital ads.
Verify guests before accepting their bookings
Good guests cause less trouble. How do you know someone’s stay won’t result in a loud party, severe property damage, or crazy utility bills? Verify them. Since verification by Airbnb doesn’t cover everyone, use advanced guest screening services. Truvi provides automated ID checks, background screening, and watchlist monitoring. You can choose which types of checks work best for each property. Thorough guest verification reduces the risks of property damage emergencies and related expenses.
Get reliable damage protection
While guest screening prevents property damage, specialized STR damage protection services save you when the worst happens. They cover accidental or intentional guest damage, damage to rental contents, smoke damage, unauthorized parties, and excessive cleaning costs. You pay a small fee for each booking, and any damage gets reimbursed within days. Since the risk of guests breaking something is high with short-term rentals, reliable damage protection significantly cuts expenses.
Collaborate with a revenue manager
If you can’t curb increasing costs, consider hiring an Airbnb revenue manager. The increased income can cover their charges and then some.
You can hire an Airbnb revenue manager as a part-time consultant. They’ll audit your property management approaches and improve them. Then you can continue on your own, relying on the new strategy.
Use property management automation
Using PMS software, you can automate most typical property management tasks. It sends guest communications, updates the calendar, sets nightly rates, and runs accounting automatically. PMS software also organizes the work of cleaners and maintenance based on the booking schedule. This reduces downtime and prevents overlooked maintenance issues. Many PMS systems offer website builders that let you avoid OTA platform charges.
Install smart home systems
Smart thermostats automatically adjust the temperature based on custom settings. You can turn off the heating remotely after guests check out. Smart thermostats also learn usage patterns to offer the most balanced heating/cooling program. The initial investment pays back with 10-20% savings annually.
Another smart system to install is smart lighting. Just like thermostats, you can manage them remotely. When powered with motion or occupancy-based sensors, smart lighting turns on and off automatically. This reduces lighting costs by 35-70%, helping property owners cut utility expenses.
Set minimum stay rules
Short stays require more frequent cleaning, which adds up quickly. If you have stable demand in your location and don’t need every guest, consider setting a minimum duration of stay. Start with at least two days. For high season, you can test a three-day minimum stay. This reduces your workload and attracts guests who are looking for longer stays.
Protect your rental income
Tracking and reducing expenses is only part of the equation. The other part is protecting the revenue you’re earning from unexpected hits. Problem guests and property damage are two of the biggest unplanned expenses that can turn a profitable month into a loss.
Guest Screening catches problematic bookings before they arrive, reducing the risk of parties, damage, and excessive utility use. Damage Protection up to $1M covers you when accidents happen, with reimbursement typically within 5 business days instead of you paying out of pocket.
Reduce expenses and protect your profits
Screen guests before they book and get damage protection that covers repair costs. Keep more of what you earn.
*https://www.lofty.ai/learn/short-term-vs-long-term-rentals-profitability-breakdown
