We’ve received hundreds of questions about the financial side of running an Airbnb or other short-term vacation rental. The most common: “Can you detail the expenses and fees that cut into profit? Are there hidden costs? How do rental taxes work? What about insurance?”
Whether someone was seriously considering hosting or just curious, we’re laying everything out to demystify the process and help anyone deciding if this is a viable side hustle. We enjoyed learning the ins and outs and hope this clear summary helps you plan.
There are obvious startup costs—purchasing, renovating, and furnishing a property—that will vary by project (and some hosts use their own furnished homes). This piece starts at the “I have a rental-ready house, now what?” point and covers year-over-year operating costs you can expect.
We’re sharing real numbers from our experience, but don’t use them as exact predictions for your property—costs vary widely. Our property is one duplex made up of two independent rental units (in total: 6 bedrooms, 6 bathrooms, 2 kitchens, 2 living rooms, 2 laundries, 2 backyards). If you manage a single unit or a smaller space, your expenses will likely be lower.
Utilities
Utilities are an ongoing cost that can be surprising if you don’t plan for annual totals. Unlike long-term rentals where tenants often pay some utilities, short-term rental hosts usually cover them. On our duplex we pay for:
- Water & sewer
- Electricity
- Trash pick-up
- Internet
- TV / streaming services (we provide Sling and Netflix)
Other properties may also have gas, oil, or propane, and possibly HOA or parking fees depending on the location.
Our utilities for both units total about $5,200 per year, based on the last 12 months. Utilities don’t disappear when the house is vacant—important in seasonal markets. Even with reduced off-season usage, minimum charges keep bills around $150 per month.
We explored pausing services like internet or trash during slow months, but reconnection fees often negate savings. We can pause some streaming subscriptions when the property is empty, which helps a little—just remember to restart them before the next guest arrives.
Lawn Care / Property Management
Guests commonly see a “cleaning fee” at booking; that usually covers turnover cleaning, laundry, bed-making, and basic restocking. We charge $150 per stay because that equals our cleaner’s fee, so it’s net zero for us apart from holiday tips.
Beyond the cleaning fee, regular maintenance can add up: lawn care, pool or hot tub service, or snow removal in winter destinations. We pay a local landscaping service to mow and clear outdoor areas on a reliable schedule. It’s seasonal, but during busy growth months it totals about $800 per year.
Some hosts contract separate crews for different tasks—pool service, yard work, or specialized cleaning—and those costs come out of rental profits unless passed directly to guests.
Hiring a property management company can remove much of the hands-on work—handling bookings, guest communication, and maintenance—but typically costs a percentage of each booking. In our area, rates run around 20%, though that varies by location and services offered.
Restocking Consumables
We provide consumables for guests and must replenish them regularly. Items we supply include:
- Toilet paper (6 rolls per side)
- Paper towels (1 roll in each kitchen)
- Napkins (a stack in each dining area)
- Tissues (1 box per bathroom, replaced as needed)
- Sponges (1 new sponge in each kitchen)
- Trash bags (2 per kitchen and in all bathrooms)
- Aluminum foil and resealable bags
- Shampoo, conditioner, hand soap, and body wash
- Laundry detergent, fabric softener, and stain remover
- Basic cooking supplies: salt, pepper, olive oil
- Coffee grounds, tea bags, and sugar packets
Some regions expect hosts to supply many of these items; others don’t. For us, these items help guests feel at home. This year we spent about $900 on consumables. Your costs may differ, so plan based on what you choose to offer.
Extra Linens & Towels
Our cleaner recommended keeping a complete extra set of sheets and towels per unit so turnovers aren’t delayed if laundry runs late or an item needs special treatment. For each side we purchased:
- 8 extra bath towels
- 6 extra beach towels
- 12 extra washcloths and hand towels
- 1 extra set of queen sheets, 1 queen duvet cover and insert
- 2 extra twin sheet sets and 2 twin quilts
We stored these in a locked owner’s closet and rarely needed a full set, but we used spare pieces several times. The extra linens and towels cost over $400 per side—about $800 total. We’ve replaced a few towels since then, so factoring a small annual replacement budget is wise.
Insurance & Taxes
Insurance and taxes are significant and sometimes confusing expenses you should research before you start. For insurance, short-term rentals are treated differently than full-time residences, and location factors—like proximity to water—can affect options and premiums. We use three policies:
- A vacation rental property insurance policy that covers short-term rental activity
- An additional liability policy for extra protection against accidents or injuries
- A flood policy (recommended in our coastal community)
If you rent part-time, check whether your current homeowner’s policy covers short-term guests—many standard policies do not. Consult an insurance expert to confirm adequate coverage.
Taxes vary by locality, so contact your town or county office to confirm obligations. For our duplex we pay:
- Annual county property tax
- Annual town property tax
- Quarterly county transient occupancy tax (tax on vacation rental income)
- Monthly town transient occupancy tax
- Monthly state and local sales tax
Property taxes are assessed on the house regardless of occupancy. Transient occupancy and sales taxes are calculated as percentages of rental income and require monthly or quarterly filings. In our area, combined transient occupancy and sales taxes amounted to about 11% of each booking this summer, not counting property taxes. Overall, our combined taxes and insurance for the year were about $13,400.
Airbnb Host Fee
If you list on sites like Airbnb or VRBO, remember they take a cut. Airbnb deducts a roughly 3% host fee from the nightly rate before payout, so the listed rate is split between guest charges, platform fees, and the host’s payout. We don’t include that 3% in our operating cost totals because it’s taken before we receive the money, but factor it in when setting nightly prices.
We selected Airbnb after asking other hosts about their preferences and chose not to list across multiple platforms to avoid potential double bookings and calendar management headaches.
Miscellaneous Costs
There are always unexpected items. This year we spent roughly $750 on miscellaneous expenses. Some examples: an annual business license fee and rental inspection required by local authorities, replacing small items that wear out, and installing blackout curtains in two bedrooms mid-season after guest feedback—about $250 for the curtains.
We also include a small welcome gift for guests—a handwritten note, a gift card to a local shop, and a pre-stamped postcard. It’s optional, but guests appreciate it and it supports local businesses.
To recap, combining the operating costs described above, our annual operating expenses for the duplex are about $21,750. That covers two separate rental units, so a single-unit property will likely have lower totals. The goal here is to highlight the range of costs you should consider when planning a short-term rental.
Although the expense total feels high, we were able to book enough nights in 2019 to finish the year profitable after operating costs. We aren’t yet recouping all construction and furnishing expenses, but hosting has been a valuable learning experience and a lot of fun along the way.