What Are the Average Costs of Owning a Vacation Rental? A Complete Guide for Smart Investors

A beautifully kept mid-range vacation rental home at golden hour, cozy and inviting with tasteful landscaping and outdoor seating

Understanding the True Cost of Vacation Rental Ownership

Owning a vacation rental can be one of the most rewarding paths toward lifestyle and financial freedom. However, smart investors know the difference between dreaming and doing comes down to understanding the average costs of owning a vacation rental. Knowing these numbers helps you make confident decisions that keep your property profitable and enjoyable.

Breaking Down the Average Costs of Owning a Vacation Rental

The average costs of owning a vacation rental go far beyond the purchase price. Here’s a breakdown of what you need to budget for:

1. Purchase Price and Mortgage Payments

The journey starts with buying your property. For example, in high-demand markets like Asheville, NC or Traverse City, MI, the average home price for a 3-bedroom vacation rental can range from $350,000 to $700,000 depending on location and amenities. Most investors use financing, so your mortgage payment will be a primary fixed expense—typically the largest single ongoing cost.

2. Fixed Expenses: Predictable and Essential

Fixed expenses are costs you pay regardless of how often the property is booked. These include:

  • Mortgage – Principal and interest if you financed the home
  • Property Taxes – Varies by location, often between 0.5% and 2% of the home’s value annually
  • Insurance – Homeowners and specialized short-term rental insurance
  • HOA Dues – If your property is in a managed community
  • Utilities – Water, electricity, gas, cable, internet, even if vacant
  • Licensing & Permits – Annual or monthly, depending on municipality
  • Yard or Pool Maintenance – Regular upkeep, often required by local codes or HOAs

These fixed costs are often straightforward to estimate. Whether your property is booked solid or sits empty, these are the non-negotiables you pay every month.

3. Variable Expenses: Tied to Bookings and Guest Experience

Variable expenses fluctuate depending on your occupancy and guest turnover. These include:

  • Property Management Fees – Ranging from 10% to 30% of rental income if you use a professional manager
  • Cleaning Fees – Charged per booking; some owners pass this entirely to guests, others subsidize it
  • Supplies & Amenities – Linens, toiletries, consumables, and welcome gifts
  • Maintenance & Repairs – From minor fixes to unexpected breakdowns
  • Booking Platform Fees – Sites like Airbnb or VRBO may charge 3%–15% per booking
  • Credit Card Processing Fees – Typically 2%–4% of booking amounts
  • Sales, Resort, or Hospitality Taxes – These are often collected on every booking and remitted to local authorities
  • Marketing & Advertising – Optional, but important for maximizing occupancy

Many of these variable costs are directly tied to your property’s performance. Higher booking rates often mean higher variable costs, but also more revenue—so these are the expenses you want to “go through the roof.”

4. Pass-Through Expenses: Reducing Your Burden

Some costs can be passed directly to guests, including:

  • Cleaning Fees
  • Credit Card Fees
  • Optional Damage Insurance
  • Local Taxes (where permitted)

This strategy can help you keep your net costs lower while maintaining a competitive nightly rate.

Case Study: Typical Numbers in Today’s Most Popular Vacation Markets

Let’s look at some real examples:

  • Gainesville, FL (3-bedroom): Home price ~$350,000. Annual gross revenue projection: ~$50,000 at around 50% average occupancy. Fixed and variable expenses (mortgage, taxes, insurance, management, cleaning, maintenance) can total $30,000–$40,000 per year depending on mortgage terms and services selected.
  • Asheville, NC (3-bedroom): Home price ~$550,000. Potential gross revenue: $58,000–$62,000. Expenses scale accordingly.
  • Flagstaff, AZ (4-bedroom): Home price ~$700,000. Annual gross revenue: $78,000. Higher property taxes and insurance, but similar expense categories.

These numbers show why it’s essential to analyze both income and costs before making an investment. Tools like Vodyssey’s STR Investment Analyzer can help you factor in all these expenses to get a clear ROI picture.

Hidden Costs and Tips for Savvy Owners

  • Furnishing and Initial Setup: Quality furnishings, décor, and amenities are vital for guest experience and reviews. Expect $15,000–$50,000 for a full setup, depending on size and style.
  • Maintenance Reserve: Set aside 1%–2% of property value annually for repairs and upgrades.
  • Seasonal Fluctuations: Budget for slower seasons and potential vacancies. Cash flow can vary by month, so reserve funds are essential.
  • Marketing: Exceptional photos, listings, and guest experiences drive higher nightly rates and occupancy.

How to Accurately Estimate Your Costs

Every market and property is unique, so the best way to estimate the average costs of owning a vacation rental is to work with local experts and use actual data. Here’s how:

  1. Consult with your real estate and property management partners for local expense averages.
  2. Analyze similar properties on platforms like AirDNA for occupancy and revenue trends.
  3. Break down all fixed, variable, and pass-through costs using tools like Vodyssey’s analysis worksheets.
  4. Plan for at least a 10% buffer for unexpected expenses or market changes.

Maximize Profitability and Peace of Mind

Understanding the average costs of owning a vacation rental is about more than just numbers—it’s about gaining the clarity and confidence to move forward. When you know your true costs, you can price confidently, maximize occupancy, and deliver an outstanding guest experience that leads to rave reviews and repeat bookings. This is the pathway to transforming your vacation home into a true lifestyle asset.

Ready to Invest with Confidence?

If you want to see exactly how the numbers work for your dream destination, schedule a call with us today. We’ll guide you through a detailed, personalized expense and revenue analysis so you can make smart, informed decisions about your vacation rental investment.

Schedule a call with Vodyssey now and take the next step toward lifestyle and financial freedom.