5 Ways Reduce Your Top Vacation Rental Expenses

Sep 25th, 2023

When it comes to managing vacation rentals, one of the biggest headaches that property owners, whether they self-manage or use a professional rental manager, must account for is the overall expense of managing their properties. The more expenses you incur, the more it eats into each booking’s potential profit. How can you minimize vacation rental expenses in order to keep more money in your pocket?

If you want to maximize cash flow for your properties, here are the top five ways to save on vacation rental expenses.

1. Offset Payment Processing Fees

Guests love the ability to pay for vacation rentals with their preferred method, but unfortunately the cost of acceptance can quickly eat into your margins. Luckily, there are a few routes to offset or reduce payment processing fees. You might be able to leverage surcharges, convenience fees, and cash discounts to help you minimize this huge expense.

Many property managers prefer to implement a surcharge, since payments via credit card are the most common. With a surcharge, you can avoid credit card processing fees by passing those costs onto your guests instead. The surcharge is only applied when a guest pays with a credit card, so this can incentivize them to pay with a non-surcharge option, such as a debit card or ACH bank transfer.

No matter which method you choose, it’s crucial that you follow the rules and regulations associated with it. We recommend working with your legal counsel to ensure your decision is compliant with all federal, state, and local laws.

At Ascent Payment Solutions, this is our area of expertise. We offer clients AscentZeroCost, which is a smart way to protect your margins while still offering guests flexibility to choose their payment method. Our 100% compliant solution will add a surcharge at checkout when guests choose to pay with their credit card, then offer other payment options if they wish to avoid it.

2. Schedule Proactive, Routine Maintenance

How much time, money, or effort do you put into the maintenance of your rentals? Some property owners try to cut costs by only spending money when something goes awry, but this can be a costly mistake. Fixing and maintaining things before they completely break down can actually save you money in the long run.

Paying to inspect and tune up the air conditioning units at all of your properties at the start of the summer will certainly incur a cost. But if you can catch some needed repairs early, you can shop around for the best deals and avoid rush fees when the unit breaks down while a guest is renting the property.

It can be much more costly to deal with things once they officially break down or are beyond repair. Replacing a single part of that air conditioning unit is far less expensive than replacing it entirely.

Proactive inspections and maintenance can also help you reduce the need for emergency, after-hours maintenance – and the associated cost to call in 24/7 repair services. While emergencies are not 100% avoidable, reducing their likelihood can save you on costly repairs and provide guests with a more consistent and enjoyable stay.

3. Negotiate Contracts

Think of everything that must be done to run your business: property cleaning, property management, maintenance, bookkeeping, and insurance, just to name a few.

One way to reduce these vacation rental expenses is by negotiating bulk rates or long-term contracts that come with a better bottom line. You benefit from a lower cost, and your service provider benefits from the stability of a long-term contract. Larger vacation rental businesses with 50+ properties can benefit from this the most, as you will have more leverage to negotiate the best rates.

If you feel that any of the services are too costly or do not meet your standards, don’t be afraid to shop around. Some may even offer enticing introductory rates and discounts that let you save even more for switching service providers. Just remember that if you are already locked into a long-term contract, you may have to wait until it ends or pay a fee to break the contract early, depending on the service’s policies.

If you are self-managing, all these tasks are on your shoulders. Handling these yourself can certainly cut your financial expenses, but it will also cost you valuable time that could be spent scaling the business at a higher level. Paying for a service to handle it on your behalf allows you breathing room to perform more advanced tasks, like researching new markets, scouting potential new properties, and strategizing the next stage of your business plan. Aim to transition some of these tasks to others as you expand and purchase additional properties.

4. Think Energy Efficient

Some guests are bound to be more wasteful with the utilities, especially since they aren’t the ones who will ultimately foot the bill.

Energy-efficient installations and fixtures can help curb the costs that you might incur. For example, you may want to upgrade to energy-efficient appliances, LED bulbs, and even programmable thermostats. Install water-saving faucets and showerheads to reduce the water bill, even if your guests take extremely long showers. These improvements can be worked into any property remodels and refurbishments you already have planned across your properties.

In addition to reducing water and electric consumption (and by extension, the utility bills overall), some utility companies may offer incentives and rebates for these more efficient fixtures. Be sure to check with utility companies in the areas where you rent and see if your properties can qualify for any programs.

You should also make an effort to reseal doors and windows. Especially in older properties, these new seals can make a big difference when it comes to keeping the interior cool in the summer and warm in the winter. Check for gaps in the seals where outside air comes into the property and quickly seal them up.

Keep thorough records of these property upgrades and improvements, as they may be depreciable or deductible as a business expense. Just be sure to consult with your CPA to ensure that you are properly reporting everything you’re eligible for.

5. Maximize Tax Deductions

At the end of the year, you want to keep as much money in your pocket as possible. The IRS may be eager to take their chunk of the profits from your vacation rentals, but there are a few savvy ways you can keep more money in your pocket with tax deductions.

You’re likely already writing off as much as you can, but here are a few opportunities to double check:

Property taxes
Repairs
Utilities (electric, water, gas, and internet)
Insurance costs
Mortgage loan interest
Property management fees
HOA fees
Supplies, appliances, and furniture
Cleaning and maintenance
Legal fees or accounting fees
Advertising
Depreciation
Transportation (traveling to and from the rentals for maintenance and repairs)

Work with a licensed CPA who can help identify and claim the opportunities you qualify for. Also, make sure to keep detailed records of what you spend on your property each year. Organization is key to maximizing your tax deductions and minimizing your out-of-pocket expenses at the end of the year.

Choosing the Right Payment Processor

Whether you have a few beachfront rentals or need an independent hotel payment processor, Ascent is here to help. Your choice of payment processor can have a powerful impact on your expenses – not just in the fees you pay, but also in the security features and ongoing support that keep your business running smoothly. With support from the right partner, you can focus your time and attention on scaling your business.

Reach out today to learn more about the solutions we offer to keep more money in your pocket.