This article was written by our expert who is surveying the industry and constantly updating the business plan for a short-term rental.
Launching a short-term rental property requires careful financial planning across multiple upfront investment categories.
From acquiring the right property with an adequate down payment to furnishing it to guest standards, each cost component directly impacts your initial capital requirements and long-term profitability. Understanding these startup expenses helps you build a realistic budget and avoid unexpected financial surprises during your first months of operation.
If you want to dig deeper and learn more, you can download our business plan for a short-term rental. Also, before launching, get all the profit, revenue, and cost breakdowns you need for complete clarity with our short-term rental financial forecast.
Starting a short-term rental property in the U.S. typically requires between $100,000 and $250,000 in initial capital, depending on your market and property type.
The largest expense is the down payment on the property itself, followed by furnishing costs and renovation work to make the space guest-ready. Beyond these visible costs, you must also budget for licensing fees, safety equipment, marketing expenses, and a contingency fund to cover unexpected repairs or revenue delays during your launch phase.
| Cost Category | Typical Range (US) | Notes |
|---|---|---|
| Property Purchase Price | $300,000 – $900,000+ | Varies significantly by location and property type |
| Down Payment | $60,000 – $100,000+ | Typically 15%–25% of purchase price |
| Closing Costs & Legal Fees | $8,000 – $20,000 | Usually 2%–5% of purchase price |
| Furnishing & Appliances | $4,000 – $50,000 | Depends on property size and quality standards |
| Renovations & Remodeling | $10,000 – $50,000 | Focus on high-impact guest areas |
| Safety Equipment & Insurance | $1,250 – $3,500 | Includes detectors, extinguishers, and annual insurance |
| Licensing & Permit Fees | $300 – $3,000+ | Varies widely by municipality |
| Utilities Setup | $150 – $500 | One-time connection fees |
| Marketing & Photography | $300 – $1,500 | Professional photos are essential |
| Technology & Software | $100 – $1,200/year | Booking systems and pricing tools |
| Working Capital (First 3 Months) | $2,000 – $10,000 | Covers cleaning, maintenance, supplies |
| Contingency Fund | $20,000 – $40,000 | Emergency repairs and revenue gaps |
What down payment do you need to buy a property for short-term rental?
You need a down payment of 15% to 25% of the purchase price to acquire a property suitable for short-term rental operations.
Most lenders require a minimum of 15% down for single-family investment properties and 25% for multifamily properties used as short-term rentals. This is higher than the 3% to 5% required for primary residences because rental properties carry more risk for lenders. If you purchase the property as a second home and meet certain occupancy requirements, you may qualify for a 10% down payment, though this scenario is less common for dedicated short-term rental investors.
For a property priced at $400,000, you should expect to provide between $60,000 and $100,000 upfront. Hard money loans or alternative financing options may require even higher down payments, sometimes exceeding 30%. The median property price suitable for short-term rentals in the U.S. currently stands at approximately $416,900, though this varies significantly by location—prime vacation markets and urban centers typically command higher prices.
Your down payment percentage directly affects your monthly mortgage costs and overall return on investment. A larger down payment reduces your loan amount, lowers your monthly payments, and often secures better interest rates, which improves cash flow during the critical first months of operation.
How much should you budget for closing costs and legal fees?
Closing costs for a short-term rental property typically range from $8,000 to $20,000, representing 2% to 5% of the purchase price.
These costs include lender origination fees, appraisal fees, title insurance, escrow services, and attorney fees for contract review. Local property transfer taxes and stamp duties vary by jurisdiction and can add significantly to your total. Some municipalities also charge recording fees and require pest inspections or property surveys before closing.
Legal fees specifically related to contract review and negotiation typically cost between $1,000 and $3,000, depending on the complexity of the transaction and local attorney rates. If you're purchasing in a market with strict short-term rental regulations, you may need additional legal consultation to ensure compliance, which can add another $500 to $2,000 to your budget.
You'll find detailed market insights in our short-term rental business plan, updated every quarter.
What does it cost to furnish and equip a short-term rental property?
Furnishing a short-term rental property costs between $4,000 and $50,000, depending on the property size, quality standards, and target guest profile.
A basic one-bedroom apartment can be furnished for $5,000 to $10,000 with essential furniture, linens, kitchenware, and basic décor. This budget covers a comfortable bed with quality mattress, sofa, dining table, basic kitchen appliances, dishes, glassware, and initial sets of towels and linens. For mid-range properties targeting families or business travelers, expect to spend $15,000 to $25,000 on higher-quality furniture, multiple bedroom sets, upgraded appliances, and more comprehensive décor.
Luxury properties or large four-bedroom vacation homes require $30,000 to $50,000 or more to meet guest expectations. These properties need premium furniture, high-end appliances, designer décor, outdoor furniture, and additional amenities like smart home technology or entertainment systems. Beyond the initial furniture purchase, budget an additional $1,000 to $10,000 for bulk purchases of guest supplies including cleaning products, replacement linens, toiletries, coffee, and other consumables that guests expect upon arrival.
The quality of your furnishings directly impacts your ability to command premium nightly rates and receive positive reviews. Investing in durable, attractive furniture pays off through higher occupancy rates and fewer replacement costs over time.
How much do renovations cost to make a property guest-ready?
Renovation costs for a short-term rental property typically range from $10,000 to $50,000, representing 5% to 15% of the property value.
Most properties require some level of renovation to meet guest expectations and compete effectively in the short-term rental market. Basic improvements include fresh paint throughout, updated light fixtures, modern hardware on cabinets and doors, and refinishing or replacing flooring in high-traffic areas. These cosmetic updates typically cost between $10,000 and $20,000 for an average-sized property.
Medium-scale renovations involving kitchen or bathroom updates run $20,000 to $35,000. This might include new countertops, cabinet refacing, updated plumbing fixtures, new tile work, or improved lighting. Properties in older buildings may also need electrical upgrades, HVAC repairs, or plumbing improvements to ensure guest comfort and safety. Extensive renovations including full kitchen remodels, multiple bathroom renovations, or structural changes can exceed $50,000.
Focus your renovation budget on high-return areas that guests notice immediately: kitchens, bathrooms, entryways, and curb appeal. Avoid over-renovating beyond what your target market expects, as this rarely translates to proportionally higher nightly rates. Durable, easy-to-clean surfaces and neutral, attractive design choices typically provide the best return on investment in the short-term rental market.
What are the costs for safety equipment and insurance?
Safety equipment and insurance for a short-term rental property cost between $1,250 and $3,500 in the first year.
Required safety equipment includes smoke detectors, carbon monoxide detectors, fire extinguishers, first aid kits, and quality door locks, which collectively cost $250 to $1,000 depending on property size. Larger properties with multiple floors require more detectors and extinguishers to meet local fire codes. Some hosts also invest in security cameras for exterior monitoring, smart locks for keyless entry, and additional safety features like window locks or pool safety equipment, which can add another $200 to $500.
Annual insurance premiums for short-term rental properties typically run $1,000 to $2,500, significantly higher than standard homeowner's policies. This specialized coverage protects against guest-related damages, liability claims, and loss of rental income. Insurance costs vary based on property value, location, claims history, and coverage limits. Some markets require additional coverage types, such as flood insurance or earthquake insurance, which increase annual premiums further.
Optional safety certifications and professional inspections cost $100 to $250 upfront, with small annual maintenance fees. These certifications can differentiate your property from competitors and may be required by some booking platforms or local regulations. Investing adequately in safety and insurance protects both your guests and your financial investment in the property.
What licensing and permit fees do short-term rental operators pay?
Licensing and permit fees for operating a short-term rental typically cost between $300 and $3,000 annually, though some municipalities charge significantly more.
Most cities require a basic business license costing $85 to $300, which grants you permission to operate a commercial activity within city limits. Beyond this, dedicated short-term rental permits or operating licenses range from $300 to $2,500 per year depending on the municipality. Some cities structure fees based on the number of bedrooms—for example, charging $2,532 per bedroom annually in certain high-regulation markets.
Registration processes may also require application fees, inspection fees, and renewal fees that add to your total compliance costs. Some jurisdictions cap the number of short-term rental permits available, creating competitive application processes or requiring property owners to purchase permits from existing operators. Plan for an initial budget of $400 to $3,000 to cover all regulatory filings, inspections, and first-year compliance costs.
Regulations vary dramatically by location, so research your specific market's requirements thoroughly before purchasing a property. Some cities have recently implemented strict caps on short-term rentals or banned them entirely in certain neighborhoods, making compliance research essential during your property selection process.
How much does initial utility setup cost?
Initial utility setup and connection fees for a short-term rental property range from $150 to $500.
These one-time costs cover establishing accounts and connecting electricity, natural gas, water, sewer, trash collection, and high-speed internet service. Internet installation and equipment often represent the largest single expense, typically $50 to $200 depending on the service level you choose. Reliable, fast internet is non-negotiable for short-term rentals, as most guests expect connectivity speeds suitable for remote work and streaming.
Some utility providers charge connection fees or deposits for new accounts, particularly if the property has been vacant or if you're establishing service in your business name rather than as an individual. Budget an additional $100 to $300 for these administrative costs. In rural or remote locations, utility setup costs can be higher if infrastructure improvements or extended service lines are necessary.
Beyond setup costs, monthly utility expenses for a short-term rental property typically run $200 to $800 depending on property size, local rates, and seasonal fluctuations. These ongoing costs should be factored into your operating budget from day one, as you're responsible for utilities even during vacant periods between bookings.
What marketing and listing expenses should you expect upfront?
Initial marketing and listing costs for launching a short-term rental range from $300 to $1,500.
Professional photography represents your single most important marketing investment, typically costing $300 to $1,000 for a comprehensive shoot. High-quality photos dramatically impact booking rates and allow you to command premium pricing. Most professional packages include 20 to 40 edited images covering all rooms, outdoor spaces, and key amenities. Some photographers also offer aerial drone shots, twilight photography, or video tours for an additional $200 to $500.
Listing fees on major platforms like Airbnb, Vrbo, and Booking.com are typically free to create, though some platforms offer paid promotional features or priority placement costing $50 to $150 per campaign. If you create a dedicated website for direct bookings, expect to invest $500 to $2,000 in web design, domain registration, and hosting. Professional copywriting services for your listing descriptions cost $100 to $300 but can significantly improve conversion rates.
Some hosts also invest in printed materials, signage, welcome books, or local guidebooks for guests, adding another $100 to $300 to marketing costs. These materials enhance the guest experience and can lead to better reviews and repeat bookings.
This is one of the strategies explained in our short-term rental business plan.
What technology and software costs should you plan for?
| Software Type | Monthly Cost | Features and Purpose |
|---|---|---|
| Channel Manager | $30 – $80 | Synchronizes bookings across multiple platforms, prevents double-bookings, centralizes calendar management |
| Dynamic Pricing Tool | $25 – $100 | Automatically adjusts rates based on demand, seasonality, local events, and competitor pricing to maximize revenue |
| Property Management System (PMS) | $40 – $120 | Comprehensive platform managing reservations, guest communication, task automation, and reporting |
| Smart Lock System | $10 – $30 | Monthly subscription for keyless entry, remote access codes, and guest access management |
| Automated Messaging | $15 – $50 | Sends pre-scheduled messages to guests for check-in instructions, local recommendations, and post-stay reviews |
| Accounting Software | $15 – $40 | Tracks income, expenses, tax obligations, and generates financial reports for short-term rental operations |
| Guidebook Platform | $8 – $25 | Digital welcome guide with house rules, Wi-Fi details, appliance instructions, and local recommendations |
Most short-term rental operators invest in multiple software tools to streamline operations, with total technology costs ranging from $100 to $1,200 annually. Many providers offer discounts for annual billing rather than monthly subscriptions, reducing your effective monthly costs by 10% to 20%.
Initial setup for these systems may require additional one-time fees of $100 to $500 for onboarding, customization, or professional installation, particularly for smart lock systems or integrated property management platforms.
How much working capital do you need for the first few months?
You need between $2,000 and $10,000 in working capital to cover operational expenses during your first two to three months of short-term rental operation.
This reserve covers professional cleaning after each guest stay, typically costing $75 to $200 per turnover depending on property size. Regular maintenance expenses including HVAC servicing, plumbing repairs, landscaping, and minor fixes typically run $300 to $800 monthly. Guest supplies and consumables such as toiletries, coffee, toilet paper, paper towels, laundry detergent, and cleaning products cost $100 to $400 per month depending on occupancy rates.
Higher-turnover properties require larger working capital reserves because each guest changeover incurs cleaning costs and replenishment expenses. Properties targeting longer stays or offering weekly rentals typically have lower per-month working capital needs. You should also budget for rapid-response maintenance calls, as guest issues requiring same-day attention—such as broken appliances, HVAC failures, or plumbing emergencies—can cost $200 to $1,000 per incident.
Your working capital should cover at least two to three full property turnovers plus one emergency repair scenario. This ensures you can maintain service quality and guest satisfaction even if bookings start slowly or unexpected expenses arise during your launch phase. Insufficient working capital forces operators to cut corners on cleanliness or maintenance, which inevitably leads to negative reviews and reduced bookings.
How large should your contingency fund be?
A contingency fund of $20,000 to $40,000 is recommended for most short-term rental properties, representing 5% to 10% of the property value.
This reserve protects you against unexpected major repairs such as roof leaks, HVAC system failures, water heater replacements, or appliance breakdowns that can cost $2,000 to $10,000 per incident. It also buffers against revenue gaps during slower booking periods, local event cancellations, or seasonal downturns that may last several weeks or months. For a property valued at $400,000, a minimum contingency fund of $20,000 provides adequate protection, while $40,000 offers comfortable coverage for multiple simultaneous issues.
Many experienced operators recommend maintaining reserves equal to three to six months of total property expenses, including mortgage payments, insurance, utilities, software subscriptions, and typical maintenance costs. This approach ensures you can continue meeting financial obligations even if bookings stop entirely for an extended period due to market conditions, regulatory changes, or property damage requiring extensive repairs.
Building this contingency fund before launching operations prevents forced property sales, missed mortgage payments, or quality compromises during difficult periods. Properties in hurricane-prone regions, earthquake zones, or areas with extreme weather should maintain higher reserves—potentially 10% to 15% of property value—to account for higher repair risks and potential evacuation-related revenue loss.
Get expert guidance and actionable steps inside our short-term rental business plan.
What ongoing tax obligations affect your startup budget?
Ongoing local tax obligations for short-term rentals typically range from 5% to 15% of gross rental income, and these must be factored into your financial planning from the outset.
Occupancy taxes, tourism taxes, and lodging taxes are charged on guest stays in most jurisdictions. The specific rate depends on your city, county, and state regulations—some locations impose multiple overlapping taxes that collectively reach 12% to 15% of booking revenue. Many major booking platforms including Airbnb, Vrbo, and Booking.com automatically collect and remit these taxes on your behalf, simplifying compliance significantly.
However, you remain responsible for business taxes, income taxes on rental profits, and in some cases, quarterly estimated tax payments to federal and state authorities. Some municipalities also charge annual short-term rental business taxes or regulatory compliance fees separate from the permit costs mentioned earlier. These ongoing fees typically range from $100 to $500 annually but can be higher in heavily regulated markets.
Property taxes may also increase once your local assessor becomes aware that your property operates as a short-term rental rather than a long-term residence. Some jurisdictions apply different tax rates or remove homestead exemptions for commercially operated properties, potentially increasing your annual property tax bill by 10% to 30%. Consult with a local tax professional or accountant specializing in short-term rentals to understand all applicable tax obligations in your specific market before finalizing your startup budget.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.
Launching a successful short-term rental requires comprehensive planning beyond just understanding startup costs.
Our detailed business plan covers market analysis, competitive positioning, operational workflows, revenue projections, and risk management strategies specific to your local market. Combined with our financial forecast tool, you'll have complete visibility into expected cash flows, break-even timelines, and profit potential before making your investment decision.
Sources
- LendingTree - Down Payment for Rental Property
- BiggerPockets - Down Payment on Vacation Rental Property
- Showplace HQ - Airbnb Furnishing Cost by Room
- Go Summer - Cost to Furnish a House
- Hospitable - Rental Renovation Tips
- HostTools - Rental Remodel
- Rental Scale Up - Safety and Security Certifications
- TouchStay - Short-Term Rental Rules and Regulations
- Steadily - Utilities Caps for Rental Properties
- BuildUp Bookings - Short-Term Rental Marketing
