The Five Most Common Mistakes Made by New Vacation Rental Owners

With so many new properties coming onto the vacation rental market, owners are bound to make some mistakes along the way. I did when I started out, and learnt to my cost that if you don’t do the homework and get the systems in place at the outset, more problems are created along the way.

Mistake #1 Accepting the first booking that comes along

It is so exciting to get your first booking, but if you don’t have some policies in place, you could find it doesn’t work out as well as you hoped. Common pitfalls are taking a weekend booking in the middle of high season without appreciating this has blocked the opportunity of a full week’s rental before and after, and accepting a group without fully establishing how many of them there are, including their day guests.

Solution: Create your booking policies in advance; write them down and post them on your web site so every visitor knows what your policies are. Decide on your maximum occupancy (including children) and stick to it. Don’t worry…if you have to turn down your first booking, there will be more.


Mistake #2 Agreeing to take a deposit then a cash-on-arrival balance

It may seem like a good idea to take a deposit on booking, then meet your guests who will give you cash on their arrival. This isn’t necessarily a bad thing to do, but it does have the potential to go badly wrong. Your guests may conveniently forget to bring the cash, and if you are not assertive enough to stand your ground and refuse entry until it has been paid, you might find you are out of pocket. It can be a very stressful situation.

Solution: Clearly state your payment terms on your web site or listing. It’s generally accepted that a deposit of up to 50% is payable on booking with the balance payable up to 60 days before the vacation commences. 30 – 45 days before is the norm.


Mistake #3  Not taking a damage deposit

It’s unlikely anything will go wrong and there will be any damage. However, accidents do happen and the damage deposit paid by the renter is your security that you will be compensated in the event of significant damage or a gross breach of the agreement. Let’s say you accept pets and your carpet is chewed. Without a damage deposit you may not be able to recover the costs of repair.

Solution: There are a couple of ways to handle a damage deposit. Hold a cheque for the damage deposit amount but don’t cash it ( you need a good amount of trust that it will be honoured if something goes wrong); include the damage deposit amount in the final balance, or ask for a cheque post dated to a week before the vacation and cash it then. If you have taken the money prior to the vacation, make sure it is returned promptly after you have checked for damage at the end of their stay.


Mistake #4 Not using a rental agreement or Terms and Conditions of Rental

If you don’t have a clear document that states each party’s responsibilities, you have no come-back if something goes wrong. There are many people who are renting for the first time, and without laying out what you expect them to do; the limits of your responsibilities as an owner, and the terms of the contract, they really have no clue what is expected of them. You then open yourself to the risk of counter claims if something should go wrong.

Solution: Write a contract that lays out all the terms of the agreement, such as maximum occupancy numbers; the time and day of arrival and departure; your policy on day guests, pets and cleaning, and a liability waiver. Googling ‘vacation rental agreement’ should bring up some examples, or go to and search for posts about the topic.


Mistake #5 Neglecting to tell the insurance company

I wince every time I hear that an owner has elected not to tell their insurance company they are renting out their property. This is not a money saving option! If a catastrophic event occurs – the place is burnt down, or a guest is injured in some way on the property – not having appropriate insurance or third party liability cover could be even more catastrophic. A second home/cottage policy is unlikely to cover rentals as a standard clause so check thoroughly.

Solution: Check with your own broker or insurance company first as they may add a simple rider to your existing policy, however you may find you have to take out an additional policy or even change providers to ensure adequate cover. Don’t leave this one until you have an accident on your property to find out that your insurance is void because you have entered into a paid transaction for a rental.

Margaret Leach

From experience, I think it is better not to set too many rules from the outset. We started out with a fixed changeover day, accepted the first booking which came along (we had no idea whether it would be our last – our location was totally unknown) and have never regretted our immediate change to flexible changeovers – if you are on site, it is one of the most guest-friendly things you can do, in my opinion. If you are on site, you can also do without the damage deposit – we have never taken one and rarely had a problem: mutual trust between owners and guests goes a very long way.

Heather Bayer

Hi Margaret

If you are able to be flexible, and achieve maximum occupancy then that is great. In our situation, cottages in Ontario have no problem renting in July and August for complete weeks and being flexible in that way would mean empty times as our domestic clients generally expect a week or more. Outside the high season, flexibility is king, because there are a ton of properties chasing a significantly smaller number of renters.

Thank you for your contribution which is valuable as always!

Julie Roberts

Hi Heather
Your list of the 5 most common mistakes vacation rental owners make has been very well thought out. I guess it all boils down to the little “if” word. ie: if a catastophe happens etc. It is always better to have all things in place for your own protection just in case something does go wrong. We were so lucky for 12 years of renting in West Maui, because we never took a damage deposit, and never had a contract for people to sign. I do it differently now. Also we had a flood that started in our unit last Oct. and damaged 3 below us. We were so happy that we had adequate insurance to cover everything except the $1000 deductible. The unit below us had $40,000 worth of damages. Believe me it was a stressful time for us.
So Heather is absolutely right. Protect yourself!!!

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Rob Hyndman

I was wondering whether you know of insurers in Canada who will provide insurance for the cottage when it is going to be rented (in our case, only occasionally).


From our experience it is always good to have strict policy when renting out you place. A significant problem we have is the maximum occupancy. We have several 3-bed villas all with the capacity of 6 people. Groups of 7 people (and above) are not welcome but the tenants insist all the time it is not a problem for them to sleep on the couch/floor etc. We had once a family with 9 (nine) children coming from Netherlands. They said they could sleep in a tent in the garden!!!!! Of course we declined, but as our destination is not very popular for vacation rentals we have to accept some of these 7-people bookings. I wish we didn’t have to…
You are very right about the insurance. We have a very very expensive insurance just in case someone forgets to switch off the oven. This could end extremely expensive for the owner.
Although we are onsite, we (try to) collect damage deposit from our guests. It is not much but it covers the damages the guests cause – broken doors (!?!), broken chairs, broken garden furniture… Not worth mentioning the broken glasses and plates.

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Kendal Cottages

Hi there

I’m an owner just starting out and am aware of most of these pitfalls. However, I’m not sure about the necessity to take a damage deposit. Isn’t this what insurance is for?

Grant Hammond

@ Judy – Sadly, Nashville also just got slammed by what officals are calling, ‘The Great Flood’. The Army Core of Engineers have confirmed this is a 500 year flood event. I wish I had read your comment earlier!

Grant Hammond’s last blog post..What Happens to the Nashville Market Post Flood?

Bruce Gillett

As a “violator” of 4 out of 5 of your rules I’d like to offer a second opinion. First, we agree on the insurance issue completely. I looked long and hard for a policy and found many companies considered our vacation apartment as a “boarding house”, requiring absurd pricing. I finally found one with premiums only a little higher than our homeowner’s policy. Now for the other rules: 1) Like others with properties off the beaten track, we can’t afford refusal for short stays. We compensated by increasing our short term stay prices so that they approach weekly rates. 2) We take 1/2 down 6 weeks before arrival and the second 1/2 on arrival. We have never had a problem. We will explain to future guests if we have to change this that it was because of a bad experience and give them details. 3) The same for damage deposit. So far so good. We are on site and figure that the guest behaves better knowing the owner is a few feet away. Rambunctious people seek isolated lodgings. 4) We offer a lease for the guests benefit, but few ask. We are very specific in our emails and let them serve as receipts and agreements. People are put off by legalese and I’ve seen landlords treat leases and deposits as automatic extra income.
The only exception is the use of our kayaks. For this we want the signer to read about all the risks and responsibilities, and to sign the agreement.

Bruce Gillett’s last blog post..Bar Harbor’s Bugs

Heather Bayer

Hi Bruce – thank you for your comment. It’s always interesting to hear different viewpoints and methods of doing things. No one- size- fits- all in this business. I think your situation of living on site makes a big difference to how the rental is managed – it’s almost like a bed and breakfast where they supply their own breakfast and have more privacy.

Accommodation near Bath

Your list is great, and we do most of your list already, however I would have to agree with Kendal Cottages above and wonder if the damage deposit doesnt over complicate matters?

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