Do you own a second home or apartment in a popular vacation destination? Are you thinking about investing in real estate? If so, you might be able to make some extra cash renting out your space on VRBO. VRBO stands for “Vacation Rentals By Owner.” It’s one of the largest online vacation rental sites in the world.
Owners can use VRBO to rent out their entire vacation home, apartment, or condo. If you’re only looking to rent out a room in your home, VRBO isn’t the place for you. Give Airbnb a try instead.
Homeowners who offer short-term rentals through VRBO earn an average of $33,000 per year. Of course, those earnings aren’t guaranteed. Factors like location, property size, and occupancy rate influence how much you can earn on VRBO.
Below, we’ll cover average VRBO host earnings, common VRBO host expenses, and some tax information.
VRBO Host Average Annual Earnings
In 2018, a VRBO survey revealed that more than half of homeowners on VRBO can cover 75% or more of their yearly mortgage payments using VRBO rental income. In 2017, HomeAway, which rebranded to VRBO, found that the average homeowner who rents out their second home earns more than $33,000 in yearly revenue.
To learn how much you can expect to make as a VRBO host, we recommend using VRBO’s estimator tool. Simply input the number of bedrooms and bathrooms your home has and where it’s located. Then, VRBO will calculate your expected annual earnings based on similar nearby properties at a 75% occupancy rate.
Ways VRBO Hosts Make Money
VRBO hosts make money when a guest books their property and stays, or a guest books their property and cancels.
Bookings
VRBO hosts can charge whatever they want per night. We recommend researching the rates of nearby, similar properties to stay competitive. You should also take your expenses into account. When a guest books your listing, you earn between 95% to 100% of the booking fee minus a 3% credit card processing fee.
Hosts can also add fees to their nightly rate. VRBO lets hosts charge standard fees (extra guest fees, cleaning fees, pet fees) and 14 other custom fees. What fees you want to charge—if any—is entirely up to you.
Cancellations
VRBO also lets hosts choose from five different cancellation policies, so you can also make money when a guest cancels their stay. Just know that VRBO only offers refunds based on what the guest has already paid and not based on reservation cost. For example, if a guest put $200 down on a $500 stay and then cancels with a 50% refund, the guest would receive a $100 refund, and you would keep $100 minus VRBO fees.
Here are the cancellation policies:
No Refund: The guest does not receive a refund under any circumstances, so you keep whatever the guest has already paid.
Strict: If a guest cancels at least 60 days before check-in, they’ll receive a refund. For cancellations outside of that window, the host keeps 100% of what the guest already paid.
Firm: If a guest cancels at least 60 days before check-in, they’ll receive a full refund. If a guest cancels at least 30 days before check-in, they’ll receive a 50% refund.
Moderate: If a guest cancels at least 30 days before check-in, they’ll get a full refund. If a guest cancels at least 14 days before check-in, they’ll get a 50% refund.
Relaxed: If a guest cancels at least 14 days before check-in, they’ll get a full refund. If a guest cancels at least 7 days before check-in, they’ll receive a 50% refund.
How Much Does VRBO Charge?
VRBO gives property owners two options. Hosts can either pay a 3% credit card processing fee and an annual fee of $499, which covers unlimited bookings and inquiries, or hosts can pay a fee per booking. If you choose the per-booking option, VRBO takes an 8% commission per booking, which includes a 3% credit card processing fee.
VRBO also makes money directly from guests by charging a fee ranging from 6% to 12%.
What Affects How Much You Can Earn by Being a VRBO Host?
Earnings from short-term VRBO rentals vary greatly. Here are three factors that significantly impact your yearly earnings as a VRBO host:
Property Location
VRBO advertises itself as a short-term vacation rental site, so hosts with properties near popular vacation destinations often experience the greatest success. For example, properties near year-round attractions, major airports, beaches, or ski resorts.
The site AirDNA shows Airbnb and VRBO listings near your location, including average daily rate, revenue, and occupancy rate. All of that information can help you determine if your home is located in a worthwhile market.
Size of the Property
In general, the more bedrooms and bathrooms your home has, the more you can charge per night. VRBO offers an estimating tool that you can use to estimate how much you’d likely earn per year. Estimations are based on the size and location of your home at a 75% occupancy rate.
For example, we compared a 2 bedroom, 2 bathroom home to a 5 bedroom, 2 bathroom home. VRBO estimated we’d earn $69,000 from the 2B/2B home and $176,800 from the 5B/2B home.
Property Amenities
Guests will pay more to stay in nice properties with amenities. Hosts who have homes with pools, fire pits, Smart TVs, Wi-Fi, beach access, etc., can charge more per night.
Yearly Occupancy
Ultimately, location, property size, and amenities mean nothing in terms of earning potential if you limit how often you rent out the home. The higher your occupancy rate, the more money you can expect to make. If you’re always vacationing and never renting, you won’t make much at all.
What are Some Common Expenses for VRBO Hosts?
Most VRBO hosts rent out a personal vacation home or a second property specifically purchased for short-term vacation rentals. Expenses vary drastically, depending on the current state of the property, what you want to offer guests, and how much you want to charge.
Below, we’ll give you some examples of common VRBO host expenses:
New Furnishings & Decorations
VRBO hosts rent out entire homes, not just bedrooms. You need to make sure every room in the house is ready for renters.
You might need to purchase:
- General: Paint, area rugs, wall décor, mirrors, trashcans, curtains, fire extinguisher, smoke detectors, home security system
- Kitchen: Serveware, pots and pans, utensils, plates, cups, small appliances
- Bathrooms: Shower curtains, towels, bathmats, toilet brushes, plungers
- Living room: Coffee table, TV, couch, recliner
- Dining room: Dining table, chairs, buffet table
- Bedroom: Mattresses, bed frames, bedside tables, dressers, sheet sets, blankets, pillows
Guest Amenities
Some hosts offer amenities to attract guests and improve ratings. Amenities might include yard games, board games, beach towels and chairs, a hairdryer, local guidebooks, DVDs, books, basic toiletries, and basic kitchen items like condiments, spices, milk, cereal, and coffee.
Expenses like condiments, coffee, and toiletries will be recurring, while others are a one-time expense.
Utilities & Subscriptions
You’ll also need to account for the expense of utilities and any subscription services you want to offer guests. Common utilities and subscriptions include HOA fees, trash, sewer, electric, heating, cable or satellite television, wireless internet, and home security system monitoring.
Cleaning Service
Now more than ever, it’s important to clean the property between stays. Some hosts clean homes themselves, while others hire a professional cleaning service. VRBO does allow hosts to charge a cleaning fee, which passes the expense onto your guests.
License Fees
Depending on where your property is located, you might need to purchase a business license or permit to rent out your vacation home. Visit your local or state website for information about the licensing process and cost.
You should also know that some cities, towns, condo associations, and homeowner associations do not allow short-term vacation rentals at all.
Insurance
VRBO’s owner help section on its website recommends that VRBO hosts purchase a special vacation rental insurance policy. These policies cover the home while the owner is vacationing, rental guests stay, and the house is unoccupied. VRBO specifically recommends Proper Insurance, a leader in vacation rental insurance.
On average, vacation rental insurance costs double what you’d pay for a standard homeowner’s insurance policy. Factors like location, property size and value, and coverage affect the insurance policy cost.
Mortgage Payment
The biggest expense of renting out your property on VRBO is the mortgage and property taxes. Those costs depend on the house’s value, where you’re buying the house, and how you’re buying it. Take the monthly mortgage payment into account when setting your nightly rates.
TurnKey Vacation Rentals suggests that if you’re buying a vacation rental home as a cash-flow investment, you should aim to earn $10,000 to $12,000 in yearly rental income for every $100,000 you spend on the house.
How Does Paying Taxes as a VRBO Host Work?
Paying taxes as a short-term vacation rental property owner, whether you’re doing business on VRBO or Airbnb, is very complicated. Every situation is different from the type of property you’re renting to what services you provide guests to how often you rent out the home. If you want to become a VRBO host, contact a tax professional for specific advice.
Some IRS publications that you might want to read include:
- Publication 527 Residential Rental Property (Including Rental of Vacation Homes)
- Topic No. 415 Renting Residential and Vacation Property
- Know the Tax Facts About Renting Out Residential Property
- Tips on Rental Real Estate Income, Deductions and Recordkeeping
Is Becoming a VRBO Host Worth It?
Many people who own a vacation home use VRBO to earn passive income or to simply help offset some of the costs of owning a vacation home for personal use. Whether hosting on VRBO is worth it to you will depend a lot on your property, your property’s location, and your financial goals.
Before signing up for VRBO and readying your property, research the following:
- Local ordinances regarding short-term vacation rentals
- How much you can reasonably expect to make based on your property
- The upfront and recurring costs of renting your property
- How often you’re able to rent the property
Some VRBO hosts cross-list their properties on Airbnb to reach more guests. Check out our article on How Much Do Airbnb Hosts Make? to learn more about expected earnings and what Airbnb charges.
