We’ve had hundreds of questions about the finances of running an Airbnb or short-term vacation rental. Common concerns include: “what expenses and fees eat into profit? Are there hidden costs? How do rental taxes work? What about insurance?”
Whether someone was seriously considering hosting or just curious, we wanted to lay everything out clearly to demystify the process. We enjoyed learning the details and hope this practical breakdown helps anyone deciding if hosting is a viable side hustle.
There are obvious startup costs—buying, renovating, and furnishing a property—but those vary widely by project. You might already be listing your own home with furniture in place. This post starts at the point of “okay, I have a rental-ready property—now what?” and focuses on ongoing operating expenses you’ll likely face year after year.
We share real numbers from our duplex experience, but please don’t treat them as guarantees for your own costs—your situation will differ. Note that our duplex is a single building with two distinct rental units (totaling six bedrooms, six bathrooms, two kitchens, two living rooms, two laundry rooms, two backyards, etc.). If you have one unit or a smaller space, your totals are likely lower.
Utilities
Utilities are an obvious line item, but the annual cost can surprise you if you don’t look at the whole year. Unlike long-term rentals where tenants often pay utilities, short-term hosts usually cover them. For our duplex we pay:
- Water & sewer
- Electricity
- Trash pickup
- Internet
- TV/streaming services (we provide Sling and Netflix)
Other hosts might also pay gas, oil, propane, parking, or HOA fees depending on the property. Our combined utilities for both sides of the duplex ran about $5,200 over the last 12 months. Utilities don’t disappear when the house is empty—seasonal rental gaps may lower usage but minimum charges keep bills from dropping to zero. Our minimum utility costs average around $150 per month.
We explored pausing some services in the off-season, but reconnection fees often erase savings. We do pause some streaming subscriptions during longer vacancies, which helps a little—just remember to reactivate them before the next guest arrives.
Lawn Care / Property Management
Guests expect a clean property, so most listings include a cleaning fee to cover post-stay cleaning, laundry, bed-making, and basic chores. We charge a $150 cleaning fee because that matches our cleaner’s rate—so it nets out for us, aside from an occasional holiday tip.
Beyond cleaning, you’ll likely have ongoing maintenance costs like lawn care, pool or hot tub service, and winter snow removal. We pay a local landscaping company to maintain both yards and keep outdoor areas clear. While not year-round, frequent spring and summer visits add up to about $800 per year.
If you’d rather outsource hosting tasks entirely, professional property managers handle bookings, cleaning, and guest issues for a percentage of each booking. In our market, that rate is around 20%, though it varies by location and service level.
Restocking Consumables
We provide a range of consumables for guest comfort and convenience. Maintaining that supply requires ongoing restocking. We supply:
- Toilet paper (six rolls per side)
- Paper towels (one roll per kitchen)
- Napkins (a stack in each dining room)
- Tissues (one box per bathroom, replaced as needed)
- Sponges
- Trash bags
- Aluminum foil and zipper storage 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, and sugar packets
Supply expectations vary by region—some hosts provide all of the above, others provide very little. For us, these items help guests feel at home. We spent about $900 over the year replenishing consumables.
Extra Linens & Towels
Our cleaner recommended keeping a complete extra set of bed linens and towels available in case laundry doesn’t finish on time or an item is stained. We purchased, per side:
- 8 extra bath towels
- 6 extra beach towels
- 12 extra washcloths and hand towels
- An extra set of queen sheets, duvet cover, and insert
- Two sets of twin sheets and two twin quilts
We maintained that stock in a locked owner’s closet. While we rarely needed a full replacement set, we used individual items several times, and the extra duvet covers proved especially useful. This added over $400 per side—about $800 total—and we’ve replaced a couple of towels since then. Buying extras or budgeting for occasional replacements is sensible.
Insurance & Taxes
Insurance and taxes are two major, sometimes confusing, categories. For insurance, we needed policies that reflect short-term rental exposure and our coastal location. We carry three complementary policies:
- A vacation rental property insurance policy that explicitly covers short-term rentals
- An additional liability policy for extra protection against accidents or injuries
- A flood policy, recommended near water even if you’re not strictly in a floodplain
Standard homeowners policies may not cover incidents that occur while paying guests occupy your property, so consult an expert if you’re renting a primary or secondary residence part-time.
Taxes vary by location and can include different municipal and state charges. For our duplex we pay:
- Annual county property tax
- Annual town property tax
- Quarterly county transient occupancy tax (a tax on vacation rental income)
- Monthly town transient occupancy tax
- Monthly state and local sales tax
Property taxes are based on the home itself, independent of rental activity. Transient occupancy and sales taxes are calculated from rental income and often require monthly or quarterly filings. In our area, transient taxes and sales tax combined took about 11% of each booking this summer—separate from property taxes. Altogether, our combined taxes and insurance totaled about $13,400 this year. Knowing your tax obligations is essential when evaluating rental profitability.
Airbnb Host Fee
If you list on a platform like Airbnb, VRBO, or similar, expect a host fee. Airbnb deducts a roughly 3% host service fee from the nightly rate before paying the host. We didn’t include that fee in our operating cost totals since it’s deducted from payouts before we see the money, but account for it when setting your rates.
We chose Airbnb based on recommendations from friends and have been happy with the platform. Listing on multiple sites is possible, but it can be tricky to avoid double bookings without careful calendar management.
Miscellaneous Costs
Unexpected expenses happen. This year we spent roughly $750 on miscellaneous items. One small surprise was an annual business license fee and a mandatory rental inspection, both required locally. These are manageable once you know about them, but worth factoring into your budget.
Other miscellaneous costs include repairs, appliance service, and incremental upgrades. Midseason we spent $250 to add blackout curtains to two bedrooms after guest feedback about early morning light—a minor expense that improved guest comfort. We also leave a small welcome gift for guests: a handwritten note and a gift card to a local shop. It’s optional, but guests appreciate the gesture.
To summarize, combining all operating costs listed above, our duplex’s annual operating expenses this year totaled about $21,750. That figure covers two separate rental units, so a single-unit or smaller rental will likely cost less. The main takeaway is the range of recurring expenses you should expect when planning a short-term rental.
Although those costs sound significant, we still booked enough nights in 2019 to turn a profit after operating expenses. We’re not yet recouping all construction and furnishing costs, but we’re moving in the right direction and enjoying the learning process along the way.