If you’re running a short-term rental, you know how important it is to keep your unit economics in check. The unit economics of a short-term rental unit can vary depending on various factors, such as location, property type, rental rates, occupancy rates, operating expenses, and management fees. 

In this blog, we explore what to consider when evaluating your rental unit’s profitability and pricing, along with how you can use used furniture to your advantage.

The unit economics of a short-term rental

These are some key elements to consider when evaluating the unit economics of a short-term rental unit:

1. Rental Revenue: The primary source of income for a short-term rental unit is the rental revenue generated from guests. The rental rates, in turn, are affected by factors like seasonality, local demand, and property features. Analyzing historical rental data or market research to estimate the average rental revenue per night or per booking can help you figure out the most suitable approach.
2. Occupancy Rate: The occupancy rate represents the percentage of time that the unit is occupied by guests. Higher occupancy rates generally lead to increased rental revenue. Seasonal fluctuations, market demand, and the property’s attractiveness can impact these.
3. Variable Expenses: These are the expenses directly correlating with the number of bookings and guests the short-term rental gets. They may include cleaning fees, guest supplies, utilities (electricity, water, internet), consumables (toiletries, kitchen supplies), and commissions paid to booking platforms or property managers. It’s essential to estimate these costs accurately to understand their impact on unit economics.
4. Fixed Expenses: These are the expenses incurred regardless of occupancy and typically include property taxes, insurance, mortgage or rental fees, property maintenance, repairs, and marketing costs. Consider these fixed expenses to determine the profitability of the short-term rental unit.
5. Management Fees: If you engage a property management company to handle bookings, guest communication, check-ins, cleaning, and maintenance, they typically charge a management fee, which is a percentage of the rental revenue. This fee will impact the overall unit economics.
6. Capital Investment: The upfront cost of acquiring or furnishing the property, as well as any ongoing capital investments required for maintenance or upgrades, need to be factored into the unit economics. These expenses affect the return on investment and the overall profitability of the short-term rental.

By considering these factors, analyzing historical data or market research, and conducting a thorough financial analysis, you can assess the unit economics of a short-term rental unit. It’s crucial to remember that these factors can vary significantly depending on the specific property and market conditions, so it’s important to evaluate each case individually.

How Used Furniture For Short-Term Rentals Helps You Increase Returns

There are a few ways that utilizing used furniture can help you expand your returns on a short-term rental unit.

• Cost savings: One of the biggest advantages of using used furniture is cost savings. Buying new furniture can be expensive, but you can find great deals on high-quality used furniture at consignment shops or online marketplaces. If you want a true turnkey experience with high-end furniture, you can also work with Inhabitr’s enterprise business team to help you source furniture for short-term rentals at an extremely reasonable cost. This can free up your budget to invest in other important aspects of your rental, such as marketing or property management.
• Aesthetic appeal: Used furniture can add a touch of character and charm to your rental unit. This can make your unit more appealing to guests and help you charge higher rates. When choosing used furniture, look for pieces that are in good condition and that match the overall style of your rental unit.
• Durability: Used furniture is often built to last. This means that you won’t have to replace it as often as new furniture, which can save you money in the long run. When choosing used furniture, look for pieces that are made from sturdy materials and that have been well-maintained.
• Sustainability: Buying used furniture is a great way to be more sustainable. It reduces the amount of waste that goes into landfills and helps to conserve resources. If you’re looking for a way to reduce your environmental impact, using used furniture is a great option.

Of course, there are some nuances with using used furniture in a short-term rental unit. For example, because each piece may be variable in quantity, each unit will have a unique look and feel. This will add to the character of the units and allow your guests to feel right at home! Check out our b2b furniture offerings to learn more.