A Complete Guide on How to Set Up Your Tiny House for Vacation Rental

Tiny house popularity and Airbnb vacation rental popularity have exploded together over the last few years, so it’s natural to try to put these two ideas together: make an amazing tiny house vacation rental, list it on Airbnb, and rake in the profits.

In this article, we explain everything there is to know about setting your tiny house up for a vacation spot: from the investment standpoint, marketing it properly, preparing your tiny house for rent, and insider vacation tips for Airbnb hosts.

Tiny House for Rent

Is Renting Out a Home a Good Investment?

There are two ways to approach this question:

1)    Are you planning to build a tiny house just to rent and earn money from it?

2)    Do you already have a vacant tiny house and want to earn extra income on the side?

We’ll start with the first option, which requires more discussion. If you have money in the bank that you would like to invest, you might be considering building a tiny house and turning it into a vacation spot. Many homeowners are turning their extra properties into vacation rentals and listing these spaces on sites like Airbnb.com. So is it worth it with a tiny house?

Before purchasing and building your tiny house real estate, you should calculate your expected return on investment, or ROI. ROI typically breaks down into the following formula:

ROI = (Net Profit / Cost of Investment) * 100

Cost of investment is simple to calculate: add up the price of the real estate where the tiny house sits (whether you bought the local land or rent it), the cost of building the tiny house, any renovations necessary before your first guest, and maintenance between your rentals.

If you are building a tiny house from scratch, you can expect the cost of the home to range anywhere from $10,000 to $50,000, with the average price of building materials alone settling at just about $25,000.

You will also need to consider the following, although some don’t necessarily apply when dealing with tiny homes:

• Financing
• Homeowner’s association dues
• Property insurance
• Property taxes
• Live vacancy (the loss of profit during times when the tiny house is vacant)
• Your time (the hours you have to spend organizing agreements through email, maintaining the house, and fulfilling special requests)

To find net profit, you will need to figure out your possible income. Tiny houses listed on Airbnb can go from anywhere from $40 per night to a few hundred dollars per night. The price depends on a number of factors, including:

• The location
• The number of other properties for rent in the area
• The quality
• Any special marketing

It’s up to you to make your back of the envelope calculations to find the ROI before investing in a tiny house real estate. Ask yourself the following questions:

• Do you like tiny houses and dealing with tenants?
• Are you in this solely for the money?
• How confident are you of keeping your tiny house rented year-round?
• How much are you willing to invest in a tiny house? A high-end tiny house can demand a higher per night rate, but will cost more to build.

However, if you already have a vacant tiny house and you are looking to make some money on the side, then renting out your home is a great investment. This is because you won’t be considering the initial cost of building and furnishing the tiny house in your ROI; just the cost to maintain the house.

Can You Airbnb a Tiny House?

Airbnb is perhaps the leading platform for renting properties, allowing anyone to put up a listing of a property they own and rent it to interested tenants, for short-term or long-term leases. There are hundreds of tiny homes already listed on Airbnb, so you can definitely Airbnb a tiny house.

One thing that people don’t consider when turning their home into rented real estate is all the extra things you will need to buy that you might not deem necessary for yourself. For example, here’s a quick list of bought items from a tiny house homeowner who converted their home into a vacation spot:

• 6 bed sheets, with 2 spares for each bed
• 4 comforters, with 1 spare for each bed
• 8 towels
• Extra blankets
• Biodegradable shampoo, dish soap, body soap, and hand soap for every new guest
• Cleaning supplies (replenish with every guest if necessary)
• Kindling and sawdust blocks for wood stove
• Emergency lights
• First Aid Kit (this is required by Airbnb)
• Exterior lighting such as porch lights
• Cooking essentials, including olive oil, salt, sugar, pepper, creamer, and coffee
• Matches
• Extra pans and pots
• Several rolls of toilet paper and paper towels
• DVD player with all necessary cables
• Outdoor broom
• Multiple chargers and extension cords

What Kind of Insurance Do I Need for Renting my Tiny House Out?

Properties listed on Airbnb are covered for up to $1,000,000 in cases of damage or loss due to vandalism or theft. You should also double check with your insurance provider as to whether or not you would personally be liable for any guest injury while they are staying on your real estate. In some cases, your tiny house insurance should already cover bodily injury to people within the property.

To further protect yourself, one trick you can do is create a limited liability company or LLC that acts as the legal host of your tiny house. This means that if you are sued or implicated for any reason by a renter of your tiny house, you can save yourself from being personally liable.

Building Your Business Plan

Ready with your tiny house? It’s now time to build your business plan, and figure out the clearest and simplest path to success. Logistics is key towards a successful landlord experience. Here’s what you need to think about:

Cost

As discussed above, cost is a huge factor in whether a tiny house rental property is worth it or not. Aside from the initial cost of building and furnishing your tiny house, there are some ongoing fees you will have to keep in mind. These include:

• Guest reservation fee: Airbnb charges a 6%-12% service fee when reserving a property
• Renter service fee: Airbnb takes a 3% service fee from every total rent cost
• Security deposit: You will be paid a security deposit by the renters to cover any possible loss or damage
• Amenities: Amenities such as snacks, water, wine, or other extras will need to be bought for every new guest

Estimated Earnings

Estimated earnings of your rented tiny house can be difficult to pinpoint, as there are a number of variables that have to be considered.

• Cost per night: As stated above, the cost per night ranges from $40 per night to several hundred dollars per night. This depends on the location of your tiny house, the density of tiny house rentals in your area, and the quality and size of your tiny house.
• Occupancy rate: Occupancy rate is the rate your land is occupied. In the ideal world, your tiny house land would have a 90%+ occupancy rate, but for many properties on Airbnb, this simply isn’t the case. While there are no numbers specifically for tiny house properties, the average occupancy rate for properties on Airbnb in major cities ranges from 60% - 80%. In smaller areas, this rate can go down to 30% - 40%. However, keep in mind that occupancy rate depends heavily on the season, as well as the uniqueness of your property.

For more information on potential earnings, check out Mashvisor’s Airbnb Profitability Calculator.

Target Market

To get your occupancy rate to its highest potential, you want to make sure your tiny house and your marketing direction is targeted to the right demographics. This means focusing on your target market, or the renters who are most likely to be interested in the tiny house experience. These demographics include:

• Couples
• Young, small families
• People who are passing by and need a place to stay the night
• Individuals who want to experience tiny house living

We go into more detail on marketing your tiny house property below.

Building and Planning Your Rental Tiny House: Questions to Keep in Mind

1) Which location would be attractive to rent tiny house out?

The great thing about tiny houses built on wheels is that you have the freedom to move them, so if you find that one location isn’t working great for your occupancy rate, then you can experiment somewhere else (as long as you can secure the property underneath).

So what should you think about when deciding on your location?

• Centrality: An easy way to attract visitors from all over your area is finding that perfect central nearness to every major location. Give visitors from various cities and towns around you an easy way to get out of the city without driving too far. You also don’t want to be too far from any grocery stores or towns, as this can spook newcomers away.
• Way Station: Some tiny house rentals successfully market themselves as a local way station. This means they try to appeal to people who are driving across state lines and want to find a unique one-night local experience during the trip.
• Stay Near Roads: While no one wants to stay curbside, it’s important that your tiny house isn’t located way off into the local wilderness. No one wants to drive up a long hilly trek with no neighbors for miles around, just to find a tiny house in the middle of nowhere.

2) What kind of experience are my potential renters looking for?

Having a successful Airbnb listing means earning a great star rating from your guests. And this means making them happy and keeping them interested for the entire duration of their stay. Try to get in their heads: what kind of experience are they looking for with the tiny home lifestyle?

They might want something family-oriented, something disconnected from the grid. So give them fun activities to do – books, board games, and maybe leave out some ingredients for s'mores they can share around a fire. You want to allow your renters to embrace the outdoorsy lifestyle, even if just for a night. Feel free to email them beforehand and ask through the email to share any special requests.

And another tip: first timers to the tiny home lifestyle might feel a bit scared or unprepared. A great way to keep them feeling safe is by being around. If your rented tiny home is near where you live, your renters will be more than pleased.

3) What unique experience can I offer to make my tiny house stand out?

The tiny house movement has grown substantially over the last few years, so the appeal of tiny home living isn’t always enough to attract renters on Airbnb. To truly stand out from any competition you might have, it helps to try to capture a unique experience.

Find an angle or a theme – cabin in the woods, fairy tale home, sleek and modern living, or any theme you can think of – and do everything you can to push that theme forward. Through the furnishing, design, bed sheets, and more.

How to Market Your Tiny House Rental

Here are some quick important tips on marketing your tiny home successfully:

• Name It: You go from “200 square foot tiny house in Portland” to “The Singing Campsite” with a single name, and all it takes is some imagination. People who are looking for a tiny home to rent want the entire experience, and they would love to tell their friends and family that they stayed somewhere with a name instead of just a tiny house.
• Video Experience: One thing that separates overbooked tiny house rentals and vacant tiny house rentals is the video experience. Many people are unfamiliar with tiny houses, so let them in and show them around. Take a fun, personable, edited video of yourself walking through the tiny house, showing off everything you have. Make it quirky, light, and not-too-long, but keep it informative and open.
• Offer Amenities: You always want to go that extra level, especially when you’re being rated with every experience. So offer amenities and extras without promising them to your guests. Everyone loves a surprise – if it’s a couple, give them a bottle of wine; if it’s a family, set up a great set of snacks. Treat your guests like friends, and they’ll reward you with awesome reviews (which is the best marketing material you can ask for).

Insider Tips

1) Airbnb Won’t Set Your Tiny House’s Value Fairly

Airbnb has its own algorithm that it uses to calculate your property’s per night value. While it makes sense most of the time, it doesn’t really account for the novelty of the tiny house experience.

Don’t settle on the calculated price that Airbnb gives you after you input your property’s details; look around, find similar properties in your area and check their prices, and price your place accordingly.

2) Renters Won’t Be Perfect

Things will break and disappear. That’s just a normal part of being a landlord, and being angry or disappointed about it will just exhaust your emotional tank.

Renters simply don’t care as much when they feel like they’re on vacation, and when they’re in a tiny house with unique appliances and space limitations, there will be plenty of cases of damage and misuse simply due to misunderstanding.

To minimize this, you can prepare a guest book (and email it to them in PDF form before they arrive), detailing everything they need to know on how to operate your tiny house. A tour isn’t enough as people won’t always be listening while you explain, so having special instructions in writing that they can refer to whenever is a great way to keep your place damage-free.

3) Be an Expert

You can’t expect to just let your guests stay at your tiny house for a night and imagine they’ll have a great time on their own. Give them some guidance. Tell them about what they can do – local hiking spots, local viewing spots – tasty local restaurants, and what else they can experience during their stay at your tiny house. This is an easy way to turn that 4-star review into a 5-star.

Renting Your Tiny Home

Renting out your tiny house might not be the best or quickest way to earn money, but to share the live tiny home experience with first-timers? That’s a treat that never gets old. More and more people want to try living in tiny homes – it’s time to give them a hand and rent your tiny home.

The post A Complete Guide on How to Set Up Your Tiny House for Vacation Rental appeared first on Tiny House Bloom.