Average Costs of Owning a Vacation Rental in 2025: A Comprehensive Breakdown
Understanding the True Costs of Vacation Rental Ownership in 2025
Owning a vacation rental in 2025 is a dream for many—offering both lifestyle freedom and the potential for impressive financial returns. However, before you can unlock the doors to your ideal getaway, it’s critical to understand the average costs of owning a vacation rental. At Vodyssey, we believe in transparency and smart investing. Here’s your complete, clear-eyed breakdown of what to expect in today’s evolving short-term rental market.
The Three Categories of Vacation Rental Costs
Every vacation rental owner will face three major categories of expenses:
- Upfront (Acquisition and Setup) Costs
- Fixed Operating Expenses
- Variable & Pass-Through Expenses
1. Upfront (Acquisition and Setup) Costs
Home Purchase Price: In top markets for 2025, purchase prices for a 3-bedroom vacation home typically range:
- $300,000–$350,000 (Lexington, KY, Columbia, SC, Gainesville, FL)
- $550,000–$700,000 (Beech Mountain, NC, Asheville, NC, Traverse City, MI, Flagstaff, AZ, Stowe, VT, Fredericksburg, TX)
Down Payment: Plan for 10–25% depending on your loan product (10% for second home loans, 20–25% for investment/DSCR loans).
Setup & Furnishing Costs: Budget an additional 8–10% of the acquisition price for furnishing and set-up. For a $600,000 property, that’s $48,000–$60,000.
Reserve Funds: It’s wise to set aside funds to cover 6–9 months of property expenses during the initial setup phase before revenue stabilizes.
2. Fixed Operating Expenses
These are recurring costs you’ll pay regardless of occupancy:
- Mortgage Payment: Principal & interest based on loan terms.
- Property Taxes: Varies by location—typically 1–2% of property value annually.
- Insurance: Homeowner’s insurance plus short-term rental (STR) riders—often $1,500–$4,000/year.
- HOA Fees: If applicable, ranging from $500–$3,000/year.
- Utilities: Water, electricity, gas, internet, cable. Estimate $300–$600/month.
- Licensing & Permits: Annual or one-time fees depending on local regulations.
- Pool/Yard Maintenance: If applicable, $100–$300/month.
Example: For a $600,000 home in Asheville, NC, annual fixed expenses might look like:
- Mortgage: $32,000 (assuming 20% down, 7% interest)
- Taxes: $6,000
- Insurance: $2,500
- Utilities: $6,000
- HOA: $1,500
- Licenses: $500
- Maintenance: $2,000
- Total Fixed: $50,500/year
3. Variable & Pass-Through Expenses
These fluctuate monthly based on bookings and property use:
- Property Management Fees: 15–30% of gross rental revenue if using a management company.
- Rental Commissions (OTA Fees): Airbnb/VRBO fees typically 3–14% per booking.
- Cleaning Fees: $100–$250 per turnover—can often be passed to guests.
- Supplies & Amenities: Linens, toiletries, kitchen basics, guest gifts—$100–$250/month.
- Repairs & Maintenance: Budget $2,000–$5,000/year.
- Hospitality/Sales Taxes: 5–15% of revenues (often passed through to guests).
- Credit Card Fees: 2–4% of booking revenue.
Many of these variable costs (cleaning, taxes, credit card fees) can be wholly or partially passed through to your guests, reducing your out-of-pocket expense.
What Do Average Annual Costs Look Like in 2025?
Let’s examine projected gross revenues and average nightly rates (ANR) for major markets in 2025, according to Vodyssey’s latest market data:
| Market | Avg. Home Price | ANR (Upscale) | Occupancy | Gross Revenue |
|---|---|---|---|---|
| Lexington, KY | $300,000 | $277 | ~50% | $49,788 |
| Asheville, NC | $550,000 | $288 | ~56% | $58,391 |
| Fredericksburg, TX | $600,000 | $503 | ~44% | $77,637 |
| Stowe, VT | $700,000 | $508 | ~52% | $90,082 |
| Flagstaff, AZ | $700,000 | $411 | ~52% | $78,135 |
Owners should expect fixed and variable expenses to absorb 40–60% of gross revenue, depending on management model (self vs. full-service), property condition, and market.
How Expenses Break Down as a Percentage of Revenue
- Fixed Expenses: 25–35% of gross revenue
- Variable Expenses (not passed through): 15–25%
- Pass-Through (charged to guests): 10–20%
If your property generates $75,000 in gross revenue, you could expect:
- Total Expenses: $35,000–$45,000/year
- Net Operating Income: $30,000–$40,000 before financing
Current Trends Impacting Vacation Rental Costs in 2025
- Increased Competition: Markets are maturing, requiring higher-quality furnishings and amenities—raising setup and maintenance costs.
- Dynamic Pricing: Rate-optimization technology is the norm, helping maximize ANR but also introducing more fluctuation in revenue projections.
- Regulatory Fees: More cities are rolling out permits, taxes, and compliance measures—be sure to budget for these.
- Professional Management: Owners are increasingly using full-service management to streamline guest experience and compliance, at the cost of higher management fees.
Actionable Tips to Control Your Vacation Rental Costs
- Get Accurate Data: Rely on local realtors, property managers, and current owners for detailed expense breakdowns—don’t just estimate.
- Pass Through Where Possible: Cleaning, credit card, and hospitality taxes can often be assigned to guests.
- Budget for Upgrades: Dedicate funds to keep your property competitive in your market.
- Use Professional Tools: Vodyssey’s STR Investment Analyzer helps you input all costs and revenue scenarios for a crystal-clear ROI projection.
Conclusion: Know Your Numbers, Maximize Your Returns
The average costs of owning a vacation rental in 2025 reflect a sophisticated, guest-focused industry where success comes from preparation and clarity. By fully understanding your fixed, variable, and pass-through expenses—as well as the levers you can control—you position yourself for both lifestyle freedom and powerful financial returns. Ready to take the next step in your ownership journey? Schedule a call with a Vodyssey advisor today and start building your path to vacation home success!