Short-Term Rental Operating Expenses
Owning a short-term rental can create an opportunity to generate rental income, but revenue is only one part of the investment equation. Short-term rental operating expenses can have a major impact on your property’s overall profitability.
Cleaning, maintenance, utilities, supplies, insurance, taxes, management fees, and other costs all need to be considered when creating a rental budget.
Understanding these expenses before purchasing or operating a property can help you build realistic financial projections and make better investment decisions.
What Are Short-Term Rental Operating Expenses?
Short-term rental operating expenses are the ongoing costs involved in keeping a property available, maintained, and ready for guests.
Some expenses remain relatively consistent each month, while others change depending on occupancy, property size, guest activity, and maintenance needs.
Common expenses include:
- Cleaning and turnover
- Utilities and internet
- Maintenance and repairs
- Guest and household supplies
- Property management fees
- Insurance
- Property taxes
- Local permits and fees
- Landscaping and exterior maintenance
- Pest control
- Furniture and appliance replacement
The exact costs will depend on the property, market, operating strategy, and management arrangement.
Common Short-Term Rental Operating Expenses
Knowing where your rental money goes is an important part of managing a short-term rental. The following are some of the most common expenses owners should consider.
Cleaning and Turnover
Short-term rentals typically require cleaning between guest stays. More bookings can therefore mean more turnover expenses.
Costs may include:
- Cleaning services
- Laundry
- Restocking supplies
- Replacing damaged or missing items
- Preparing the property for the next guest
Cleaning expenses can vary considerably based on the property's size, number of turnovers, and cleaning requirements.
Utilities and Internet
Owners generally need to account for utilities because guests are using the property as a fully functioning living space.
Depending on the property, expenses may include:
- Electricity
- Water and sewer
- Natural gas
- Trash service
- Internet
- Streaming or entertainment services
Utility costs can also change seasonally and with occupancy.
Maintenance and Repairs
Every rental property requires ongoing maintenance. Short-term rentals may experience additional wear because different guests use the property throughout the year.
Maintenance can include:
- Plumbing
- HVAC service
- Electrical repairs
- Appliance repairs
- Smart-lock issues
- Furniture repairs
- Exterior maintenance
Owners should also consider setting aside funds for unexpected repairs rather than budgeting only for routine maintenance.
Our guide What Does a Short-Term Rental Management Company Do? provides a closer look at the responsibilities a professional management company can handle.
Fixed vs. Variable Expenses
Short-term rental expenses can generally be divided into fixed and variable costs.
Fixed Expenses
These costs tend to remain relatively consistent regardless of how many bookings you receive.
Examples can include:
- Property taxes
- Insurance
- HOA fees, where applicable
- Certain software subscriptions
- Some management fees
These expenses may continue even during slower booking periods.
Variable Expenses
Variable expenses can increase or decrease based on occupancy and property usage.
Examples include:
- Cleaning
- Laundry
- Guest supplies
- Utilities
- Maintenance
A property with more bookings may generate more revenue but can also require more cleaning, supplies, and maintenance.
That is why gross rental revenue alone does not tell you how profitable a property will be.
What Short-Term Rental Expenses Can Owners Control?
Not every expense is within an owner’s control, but some costs can be managed through better planning and operations.
Owners may be able to reduce unnecessary expenses by:
- Comparing vendors and service providers
- Scheduling preventive maintenance
- Choosing durable furnishings
- Monitoring supply inventory
- Reviewing utility usage
- Avoiding unnecessary replacements
- Evaluating management services
- Using technology to improve operations
However, reducing costs should not mean cutting necessary maintenance or lowering the quality of the guest experience.
The goal should be to operate the property efficiently while maintaining a comfortable and well-maintained rental.
How to Estimate Expenses Before Buying a Short-Term Rental
If you’re considering purchasing a property for short-term rental use, estimate its operating expenses before making an investment decision.
Start by identifying expected costs for:
- Cleaning and turnover
- Utilities and internet
- Maintenance
- Supplies
- Insurance
- Property taxes
- Management
- Local permits and fees
- HOA fees, if applicable
- Other property-specific expenses
Then compare those costs with realistic revenue expectations.
Avoid building your projections around a best-case occupancy scenario. A conservative estimate can provide a more useful picture of how the property may perform during slower periods.
Don't Forget Unexpected Expenses
Some of the most difficult expenses to predict are unexpected repairs and replacements.
A property may eventually require:
- Appliance replacement
- HVAC repairs
- Plumbing repairs
- Furniture replacement
- Emergency maintenance
- Storm-related repairs
- Lock or security repairs
- Repairs resulting from guest damage
You may not know when these costs will occur, but you can plan for them.
Maintaining a reasonable reserve for repairs and replacements can help protect your cash flow when an unexpected expense arises.
How Professional Management Can Help
Professional management does not eliminate operating expenses, but it can help owners organize and manage many of the tasks associated with them.
A management team may coordinate cleaning, monitor maintenance needs, communicate with vendors, assist guests, and oversee the property between bookings.
This can be particularly valuable for owners who live outside the area or have multiple rental properties.
Professional management can also give owners more time to focus on the investment rather than handling daily operational issues themselves.
Short-Term Rental Operating Expenses in St. Charles, MO
Local conditions can influence the cost of operating a short-term rental.
For a property in St. Charles, Missouri, owners should consider both normal operating costs and the local requirements that apply to short-term rentals.
Before purchasing or listing a property, research the rules for the specific jurisdiction where the property is located. Requirements may involve permits, taxes, occupancy limits, safety standards, or other regulations.
Local market conditions can also affect cleaning, maintenance, utilities, and other operating costs.
This is why a property-specific financial analysis is generally more useful than relying on a generic expense percentage.
How to Build a Short-Term Rental Operating Budget
A simple operating budget can help you organize your expected expenses.
| Expense | Type | What to Consider |
|---|---|---|
| Cleaning | Variable | Number of guest turnovers |
| Utilities | Variable | Occupancy and seasonal usage |
| Maintenance | Variable | Routine repairs and reserve funds |
| Supplies | Variable | Guest usage and property size |
| Insurance | Generally fixed | Property-specific coverage |
| Property taxes | Generally fixed | Actual property tax information |
| Management | Depends on agreement | Services included |
| HOA fees | Fixed, if applicable | Property requirements |
| Permits and fees | Varies | Local regulations |
Rather than using one general percentage for all expenses, estimate each major cost separately whenever possible.
What Is a Good Operating Expense Percentage?
There is no universal operating expense percentage that applies to every short-term rental.
Costs can vary based on:
- Location
- Property size
- Number of bedrooms
- Occupancy
- Average booking value
- Cleaning requirements
- Maintenance needs
- Utilities
- Management
- Local taxes and fees
For this reason, using a generic percentage can make an investment projection less accurate.
A better approach is to estimate individual expenses and compare them with realistic revenue expectations.
How Operating Expenses Fit Into Your Investment Analysis
When evaluating a short-term rental, don’t focus only on the expected nightly rate.
Your analysis should consider three major areas.
Revenue
Revenue
Consider:
- Expected booking revenue
- Occupancy
- Seasonal demand
- Average booking value
Operating Expenses
Consider:
- Cleaning
- Utilities
- Maintenance
- Supplies
- Insurance
- Management
- Taxes and local fees
Other Ownership Costs
Also account for:
- Mortgage payments
- Financing costs
- Major improvements
- Income taxes
- Acquisition costs
Looking at the complete financial picture can help you determine whether a property fits your investment goals.
If you’re considering a property and want a more property-specific financial projection, Turn Key Stays can help you evaluate the potential numbers through a Request Your Pro Forma.
Final Thoughts
Understanding short-term rental operating expenses is an important part of evaluating a rental property’s potential profitability.
Cleaning, utilities, maintenance, supplies, insurance, taxes, and management fees can all affect your bottom line. Some costs are predictable, while others change based on occupancy and property conditions.
Instead of relying on a generic expense percentage, estimate the costs associated with the specific property you are considering.
And if managing the day-to-day operations becomes difficult, professional short-term rental management can help coordinate the work required to keep the property operating smoothly.
Explore Turn Key Stays’ Short-Term Rental Property Management Services or review the Pricing options to see how professional management can fit into your overall operating budget.
Frequently Asked Questions
What are the biggest short-term rental operating expenses?
Common expenses include cleaning, utilities, maintenance, supplies, insurance, property taxes, and property management fees. The largest costs vary depending on the property and how it is operated.
How much should I budget for short-term rental expenses?
There is no single percentage that works for every property. Costs depend on location, size, occupancy, maintenance, utilities, management, and other factors. Estimating individual expenses is more useful than relying on a general percentage.
Are property management fees considered an operating expense?
Yes. Property management fees are generally considered part of the operating costs associated with running a short-term rental.
Does higher occupancy always mean higher profits?
Not necessarily. Higher occupancy can increase revenue but also increase variable costs such as cleaning, laundry, utilities, and supplies. Profitability depends on both revenue and expenses.
How can I reduce short-term rental operating expenses?
Owners can compare vendors, use durable furnishings, schedule preventive maintenance, monitor supplies, and improve operational efficiency. Cost reductions should not compromise necessary maintenance or the guest experience.
Should I keep a reserve for short-term rental repairs?
Yes, maintaining a reasonable reserve can help cover unexpected repairs and replacements without creating a major disruption to cash flow.
Do short-term rental expenses vary by location?
Yes. Utilities, cleaning, maintenance, insurance, taxes, permits, and other expenses can vary by market. Local requirements should be reviewed before operating a property.
Are short-term rental operating expenses tax deductible?
Some expenses may be deductible depending on how the property is used and applicable tax rules. Property owners should consult a qualified tax professional for advice specific to their situation.