How to Write a Short Term Home Rental Business Plan
The short-term rental industry has enjoyed significant growth over the last several years. A driving reason for the substantial growth in the short-term rental industry is thanks to digital marketplaces such as Airbnb, Vrbo, and Hometogo. These marketplaces allow short-term rental business owners to place their properties or rooms for rent in the marketplace where tourists and other visitors are able to review to see if it meets their needs. As the popularity of short-term rental sites and usage grows, the need for a short-term rental business plan, regardless if it’s for funding or operations, will become more and more needed. Because of increased demand for short-term rental business plans, our business plan writer has outlined some tips and tricks that may be utilized when writing this type of business plan.
Executive Summary for a Short Term Home Rental Business Plan.
The executive summary section for a short-term home rental business plan should briefly describe all aspects of your operations. The section should include how you will advertise your short-term rental business, third-party vendors utilized for daily cleaning, and processes you will follow to ensure the company follows local and city ordinances related to the ever-changing market of rental properties. Further, the short-term rental business plan executive summary should also include a brief description of the financial highlights as well as the dollar amount needed to start your endeavor.
The company information and location section for this type of business plan should start with identifying the home office location for the rental property company. Next, make sure to describe the property location, or locations, of the short-term rentals. Further, in the company and location section, highlight the nearby amenities or driving reasons why visitors may choose your rental property for their short-term needs. Important needs may include close proximity to tourist destinations, high demand for corporate use, or an excellent stopping point for cross-country travels. Regardless of the reason for the need for property usage, make sure to fully explain it in the segment.
Service Description and Competitive Advantages
In the service description and competitive advantages, short-term rental property owners often take an internal/external approach to the section. What I mean by this is that property owners, especially for the competitive advantage section of a short-term property rental business plan, will describe the amenities of the property. Common amenities may include the number of bedrooms and baths, whether it has a full kitchen, a pool, or even a gated yard for pets. As for the external aspects, this is often where business plan writers will then highlight the nearby amenities for the location like close to beaches, theme parks, area shopping, and more. By following the internal/external approach, business owners are able to capture the full scope of the competitive advantages as compared to other short-term rentals.
One of the most important sections of the company segment of the business plan for a short-term rental business plans would be the target market. When a short-term rental business owner knows their target market, they can structure their competitive advantage section, advertising section, and even their financial protection section to best align with expectations. For the most part, the target market section of a business plan for short-term rentals would either be tourists or corporate clients. In the event of a tourist-target market, make sure to align your competitive advantage section by describing how you can best help this market. Examples would include discussing shopping locations near the property, proximity to major thoroughfares, etc. As for corporate client target markets, here is where you may choose to disclose how far the property is from major employers in the area.
Industry research for a Short Term Home Rental Business Plan
For the industry research section of the short-term home rental business, business owners may choose to explore her research the bed-and-breakfast industry or the hotel/motel industry. This industry is a blend of the two so both or either industry segments would suffice. For example, if I were to write a business plan for a short-term home rental business, I would focus more on the bed-and-breakfast industry. In this industry, revenues for the last year exceeded $1.7 billion. In the next five years, industry experts anticipate a 5% annual growth rate for revenues. This is well above most mature industries. As for profits, organizations such as these have exceeded profits of $94 million. There are over 7900 businesses competing in this industry. These are just some of the industry statistics that may be included for the basis of your industry research.
The owner and management section for a short-term rental business plan should start with disclosing the owners of the organization or property. After this, make sure to discuss professional achievements or previous jobs that have allowed the owner to hone their management/advertising skills. Common previous work histories may include management positions, advertising positions, or even construction-related job holdings. Once the foundation for experience has been set, adding in educational achievements is an excellent supporting activity. Try to identify degrees related to business, marketing, or terrorism. Also, any type of volunteer work related to tourism or management would be helpful as well.
Funding Request for a Short Term Home Rental Business Plan
The funding request section for a short-term home rental business plan should start with stating precisely how much funding is needed to start the company. Next, make sure to describe how the funding will be spent. Popular needs for a short-term home rental would include purchasing the property, making renovations, an advertising budget, and substantial working capital. Finally, in the segment, rounded off with describing how the loan or investor funding will be compensated. For the most part, business owners will pay back loans through excess cash flow. However, future funding may also be an excellent exit strategy.
The final section of the business plan should discuss the financial projections of the short-term rental property business. In starting the section, I always like to introduce highlights related to the company. Financial highlights may include expected first-year revenues, anticipated first-year costs, profit margin expectations, and subsequent year profits. Once this is outlined, I then describe the assumptions used in the financial projections. Assumptions may include the number of properties at the start of the company, advertising budget monthly, average property rental rate per night, and the number of employees. Next, I then filled in the financial model that will be usable for the business plan as well as in operations.
Hopefully, these insightful tips and tricks for writing a business plan were helpful. As always, if you need help with a business plan or financial projections, just send us an email or give us a call.
Author: Paul Borosky, Doctoral Candidate, MBA., Author