Owning a vacation home feels great. A place to escape, a space that’s yours. But it can be more than that, as it can be a good source of income, too. In fact, vacation rentals in the U.S. bring in billions each year. That kind of demand makes the idea of turning a second home into income hard to ignore.
The catch is, it’s not all profit. Costs, time, and effort add up. National data from 2025 shows both the upside and the risks. Knowing those helps owners see the real picture.
So, before renting out your vacation home, take a closer look at how the market works, what returns are realistic, and how to make the process easier with the right help.
Key Takeaways
- In 2025, vacation rentals in the U.S. are set to make about $20 billion, part of a global market worth around $105 billion.
- Short-term rentals usually make more than hotels, pulling in about 9% more revenue per room nationwide.
- Stays are getting longer. The average trip went from about 3.7 nights before the pandemic to over 4 nights now, and long stays of 28+ nights almost doubled.
- The typical U.S. rental makes about $162 a night after occupancy is factored in, which works out to around $3,300 a month before expenses.
- Local rules matter. In San Francisco, for example, you can only rent an unhosted place for 90 nights a year.
Vacation Rental Market Right Now
Vacation rentals are strong across the country. In 2025, the U.S. market is set to bring in about 20 billion dollars, more than any other country. Worldwide, the industry will reach roughly 105 billion dollars this year.
Bookings and supplies are growing, too. That gap pushes demand up. Smaller homes, like one- and two-bedroom rentals, are seeing the most interest from couples, solo travelers, and remote workers.
Short-term rentals also have an edge over hotels. On average, U.S. short-term rentals bring in 9% more revenue per available unit (RevPAR) nationwide.
A. Potential Benefits of Renting Out Your Vacation Home
Owners usually rent out a vacation home for four reasons:
Extra Income Stream
The biggest reason people rent out a vacation home is simple: money. An empty place costs you. A rented place pays you. Short-term rentals often bring in more than a long lease because you charge by the night and adjust prices as demand shifts. When bookings are steady, the cash adds up. A few weekends a month can cover the mortgage, taxes, and upkeep. Instead of sitting there, the house pulls its weight.
Flexibility
Short-term rentals give you control. You decide when the house is open and when it’s just for you. That could be family holidays, a long weekend, or nothing at all. You also set the price. Raise it when travel picks up. Lower it when it slows down. The setup lets you enjoy the place when you want and still earn when you don’t.
Property Value
A home that’s lived in holds up better than one left empty. Regular cleaning, small fixes, and constant use keep it in shape. A property that earns money also looks better to buyers if you sell later. It’s not just a second home—it’s an investment that can grow over time.
Tax Breaks
Owning a rental can help when tax time comes. Mortgage interest, property taxes, and upkeep may be written off. Those breaks don’t erase costs, but they do soften the load. For many, that’s what tips the balance from “extra expense” to “worth keeping.”
Helpful Insights: Data shows the average stay has climbed from about 3.7 nights before the pandemic to between 4.1 and 4.4 nights in recent years. Meanwhile, long stays of 28 nights or more surged during the pandemic, from around 1.5% to 2.9%, and currently make up about 2.2% of total bookings
B. Challenges to Consider Before Renting Out Short-Term Rentals
The numbers look good, but there are tradeoffs. Travel is tied to the economy, and 2025 shows some slowdown.
Strict Local Regulations
The rules are tight. San Francisco only lets you rent an unhosted place for 90 days a year. You also have to register the property with the city. Skip the paperwork or go past the limit, and you can face heavy fines. Keeping up means staying on top of permits and renewals.
Costs of Setup and Maintenance
Turning a house into a rental costs money. You need furniture, linens, kitchen basics, and steady Wi-Fi. Cleaning, repairs, and utilities never stop. Insurance is another layer in which regular homeowner coverage often doesn’t apply, so you may need a separate policy. The bills start before the first guest shows up.
Competition
Vacation rentals crowd the market. In busy neighborhoods, listings pile up, and it’s hard to stand out. You’re not just up against other owners, but you’re also competing with hotels on sites like Airbnb and VRBO. Too much supply can push rates down and make it harder to keep bookings steady.
Time Commitment
Managing a short-term rental takes time. You deal with bookings, guest messages, and check-ins. When something breaks or a guest calls late at night, you handle it. Some owners hand this off to managers, but if you don’t, it can feel like a second job.
C. Financial Breakdown: What Can Owners Realistically Expect?
Averages don’t guarantee profit. Owners still need to cover:
- Nightly rates and occupancy: Short-term rentals in the U.S. in 2025 aren’t pulling in $250 to $300 a night on average. Instead, the revenue per available rental is about $162. Occupancy is closer to 50 to 57 percent. Say a place books at $200 a night with 55 percent occupancy, that’s about $3,300 a month. Then you shave off cleaning, utilities, platform fees, and upkeep before seeing what’s left.
- Profit or break-even: What’s left depends on costs. If the mortgage is high or the house needs constant work, the return may be slim. If overhead is low, the profit can be strong.
- When it doesn’t pencil out: Poor location, low demand, or keeping the home blocked for personal use can drag the numbers down.
Unlock the Earning Potential of Your Vacation Home and Make Hosting Easy with PMI SF Peninsula!
Renting out a vacation home sounds easy. List it online, wait for bookings, collect the money. In reality, it’s nonstop work. Guests have questions at all hours, turnovers pile up, and local rules are strict. That’s why many owners lean on property managers to take the weight off.
In 2025, most managers use smart tools to set rates and handle guest messages. A team like PMI SF Peninsula goes further. They fine-tune listings so they stand out, line up cleaning and repairs, and keep homes within the rules. That blend of tech and hands-on work means steadier income with less hassle.
What PMI SF Peninsula covers for you:
- Pricing and rate management
- Marketing and listing setup
- Guest screening and communication
- Cleaning, upkeep, and turnovers
- Compliance with rental laws
Vacation rentals can still be a strong source of income, but only if the numbers and the work make sense. If you want the upside without the stress, PMI SF Peninsula is ready to handle the details. Call us today to see how your property can start working for you.
FAQs
Do I need a guest agreement to rent my vacation home?
Yes. A guest agreement spells out when they arrive, when they leave, how many people can stay, and the rules. It keeps expectations clear and gives you backup if problems come up. You can use a template, but having a lawyer look it over is safer.
Do Airbnb or VRBO cover damages?
They do, but only partly. Airbnb’s AirCover gives hosts up to $3 million for property damage and $1 million in liability protection, while VRBO offers $1 million in liability coverage for injuries or third-party property damage, but does not cover damage to the host’s own property. Not everything is covered, and most homeowner insurance policies don’t include rentals, so check yours.
Do I have to register my rental?
Often, yes. Many cities and states require short-term rentals to register, sometimes with fees. Even a few nights a year can fall under the rules. Some places also make you register if you post on Airbnb or VRBO. Always confirm with local and state offices before listing.
