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To start with, I want to let you know not to expect this article to give you answers on your financial concerns about your Vacation Rental Business. You won’t find numbers pointing out the financial aspects of your business nor economic analysis of it. In this article, rather, I would like to show a different way of looking at the money aspect of the rental business by analyzing the definitions of terms included in it.
Investment is putting money into something with the expectation of gain, usually over a long term.
Renting is an agreement where a payment is made for a temporary use of a good, service or a property owned by another.
Pricing is the process of determining the amount of money a company will receive in exchange for its products.
Selling is the last step in the chain of commerce where a buyer exchanges cash for a seller’s good or service, or the activity of trying to bring this about.
Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payment.
Tax is a financial charge by a state such that failure to pay is punishable by law.
Salary is a fixed amount of money or compensation paid to an employee by an employer in return for work performed.
Expense is a cost that is paid in exchange for something of value, an item, service, or for a category of costs.
Revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers.
Profit is the money a business makes after accounting for all the expenses.
Profit = Total Revenue – Total Expenses
These definitions are pretty general and apply to many businesses, but your Property Rental Business deals with all of them. If you pay attention to every italicized and bold word in this article, it is more than obvious that money is part of every branch of your rental business. Each of those words has a bit of money inside: payment, cash, income, paid, pay…
Well, I can freely conclude that money is everywhere in your Property Rental Business.
“Every Property Rental Owner should be well versed in the flow of money and its role in the business, or have good accountant.”V.M.