One of the best ways to earn steady passive income is to invest in a rental property. However, it is not a completely hands-off investment. You need to properly maintain your vacation rental property to attract renters. Additionally, great rapport with your guests and adhering to real estate regulations in your region is essential. Besides that, there are costs associated with owning a vacation rental you need to know about before buying the property. They include:

Property taxes

Property taxes are different in every state and you need to find out how much you will pay in property taxes in the particular state your vacation rental is in. The best way to get this information is to contact the municipality to ensure the listed rates on the Multiple Listing Service are accurate. Also, inquire about the services you will be getting given the property taxes you will be paying.


You need to buy an insurance policy for your property for various risks. As per the Insurance Information Institute, the insurance premium landlords have to pay is 25% more compared to homeowner's insurance. Therefore, you need to plan for that early enough.

Insurance premiums vary based on the region the property is in as well as the calamities that are likely to happen in the area. These are discussions that should be held with your insurance representative before you sign the contract. You may even get a price reduction if you do your homework.

Association fee

You need to pay association fees that apply whether the rental is occupied or not. The rental income you get from the property can be used to settle the bills. However, you need to have an emergency fund that is large enough to cater to these bills in the event of a vacancy. Before buying a home to rent her that is part of an association ensure there aren't rules barring the owner from renting the unit. It will be a waste of money to invest in a property meant for rent only to be told you cannot when you have already paid for it.

Maintenance costs

Owning a vacation rental is not just about collecting rent. The house will require maintenance and fixing from time to time. These issues can include electrical installation, leaking roof, plumbing, hot water, and even heating. They can be mitigated by keeping the property in good-enough standards from the start. There will be maintenance work and minor fixes that come up over time, but they won't be that serious if renovations, replacements, and repairs are done professionally from the get-go.


For long-term rentals, the tenant will have to pay for electricity and gas but for short-term rentals, you will be responsible for that. On top of that, you'll have to pay for sewer services and water. You can include these in the rent if possible. Nonetheless, have the utility companies provide you with an estimated cost of these utilities per month so that you don't end up undercharging or overcharging the tenants.

Tenant search

A lot of people go on vacation during the holiday season and the warm season. Therefore, you may be making little to no money during the off-peak season. However, proper marketing skills and offering the customers just what they want can have you booked out for the whole year. Nevertheless, marketing costs money and this will be coming out of your pocket. If you wish to make more money you need to budget for marketing and advertising costs in advance. Hiring a marketing professional may be worth it if he/she will deliver more bookings.

Cleaning fee

You don't expect your short-term renters to be cleaning up the house for you unless you get good people. Nevertheless, you have to make sure the house is cleaned after each guest leaves. A lot of people think cleaning costs aren't a big deal until they check their expenses and realize how much money has gone into it.

Guests expect an extremely clean property, especially if they are paying top dollar for it. It is a level of cleanliness you may not be able to achieve by yourself. Hiring professional cleaners to do deep cleaning from time to time is highly recommended. On the same note, you need a regular cleaning service when the house is occupied unless the guests specify otherwise.

Rental properties with a high turnover require frequent cleaning and these recurring expenses can pile up. Thus, budgeting is essential. Take note of the amount you spend on the busiest season and set a cleaning budget based on that.

Replacing vs repairing

When something is faulty or broken in the vacation rental you will have to make up your mind on whether to replace or repair it. You need to consider the value of the item as well as its usefulness in order to make the right decision. If the item keeps on breaking it is time to buy a new one. If you need to do an upgrade you need to start saving for that early enough. On the same note, evaluate the long-term usefulness of any product you decide to buy for the vacation rental and whether spending extra money on it makes financial sense. Decorative pieces can be repaired if broken instead of buying new ones.

Legal expenses

If you have a vacation rental then you need legal services as well. This is one of the often-ignored hidden costs when it comes to vacation rental properties. You cannot afford to make the same mistake. You need to get legal advice in drafting your rental contract. Unless you have a law degree, this is not something you can manage on your own. Good lawyers are quite expensive but you need them to avoid future legal issues that may even cost you the property. You cannot afford to take shortcuts in such a case


There is always the risk of vacancy if you own a rental property. Thus, there are months the monthly mortgage payment, as well as other monthly bills, will be coming out of your pocket. You need a backup plan, in this case, to safeguard you from a financial crisis in case you don't get tenants. That's why an emergency fund, specifically created to cater for such, is essential.

Hidden costs will not be a bother if you plan for them in advance. When you always have money to pay for any unexpected or expected expense related to the vacation rental it will be a smooth sail for you. You'll not only enjoy being a landlord but also the chance of making great returns at the end of the year is high.