We’ve received hundreds of questions about the finances of running an Airbnb or other short-term vacation rental. The most common: “Can you outline the expenses and fees that reduce profit? Are there hidden costs? How do rental taxes work? What about insurance?”

Whether you’re considering hosting or just curious, we’re laying everything out to demystify the numbers and help anyone weighing this as a side hustle. We enjoyed learning the ins and outs, so here’s what we learned in a straightforward, practical way.

There are obvious upfront costs—buying, renovating, and furnishing a rental—that vary by project. This post starts from the point of “ok, I have a rental-ready house, now what?” and focuses on ongoing operating expenses you’ll face year after year.

We’re sharing real numbers from our duplex experience, but please don’t treat them as guarantees for your own costs—your situation will differ. Note: the duplex is one building with two separate rental units (a total of 6 bedrooms, 6 bathrooms, 2 kitchens, 2 living rooms, 2 laundry rooms, 2 backyards). If you have a single unit or smaller space, your costs may be lower.

Utilities

Utilities are inevitable, and annual totals can surprise you if you don’t look at the year as a whole. Unlike many long-term rentals, short-term hosts often pay all utilities. For our duplex we pay:

• Water & sewer
• Electricity
• Trash pick-up
• Internet
• TV / streaming services (we provide Sling and Netflix)

Other hosts may also pay gas, oil, or propane, plus parking or HOA fees depending on location. Our combined utilities for both sides ran about $5,200 over the last 12 months. Utilities don’t disappear in low season—minimum charges keep bills around $150 per month even when occupancy is low.

We explored pausing services like internet or trash in the off-season, but many companies charge reconnection fees that eliminate the savings. We do pause some streaming subscriptions when the property is empty for a month or more, which can trim costs a bit—just remember to restart them before guests arrive.

Lawn Care / Property Management

Cleaning fees are common and typically cover the post-stay cleaning, laundry, and reset of the home. We charge a $150 cleaning fee because that’s what our cleaner charges—so it nets out to zero on our books aside from a holiday tip.

Other recurring maintenance can include lawn care, pool or hot tub service, and snow removal. We pay a local landscaper to mow and maintain the exterior; because work is seasonal, it’s not year-round but still adds up to about $800 per year.

If you hire a property manager to handle bookings, cleanings, guest communication, and maintenance, expect to pay a percentage of bookings. In our area, management rates hover around 20%, though this varies by market and service level.

Restocking Consumables

We provide a set of consumables for guests, and replenishing them is an ongoing expense. Items we stock include:

• Toilet paper (6 rolls per side)
• Paper towels (1 roll per kitchen)
• Napkins, tissues, sponges
• Trash bags
• Tinfoil and storage bags
• Shampoo, conditioner, hand soap, body wash
• Laundry detergent, fabric softener, stain remover
• Basic cooking supplies (salt, pepper, olive oil)
• Coffee grounds, tea, sugar packets

Regional norms vary—some hosts provide many of these items; others provide none. For us, replenishing consumables cost about $900 this year. It may not be a major expense where you are, but it’s wise to plan for it.

Extra Linens & Towels

On our cleaner’s recommendation, we keep a full spare set of bed linens and towels available in case laundry isn’t finished or an item needs extended cleaning. For each side we purchased:

• 8 extra bath towels
• 6 extra beach towels
• 12 extra washcloths & hand towels
• 1 extra queen sheet set, duvet cover, and insert
• 2 extra twin sheet sets and quilts

We bought these per side and stored them in the locked owner’s closet. We didn’t need an entire set often, but having spares saved last-minute headaches—especially the extra duvet covers. The extra linens and towels cost about $400 per side, totaling roughly $800 for the duplex. Expect occasional replacements over time, so budget accordingly.

Insurance & Taxes

Insurance and taxes are two of the biggest, most important categories to understand.

For insurance, short-term rentals often require different coverage than owner-occupied homes. Because our duplex is a vacation rental and near water, we ended up with three complementary policies:

1. Vacation rental property insurance that covers short-term rentals.
2. An additional liability policy for extra protection against accidents and injuries.
3. A flood insurance policy, which many coastal hosts consider prudent even if not in a flood plain.

If you’re renting a primary or secondary home, check your existing homeowner’s policy—many standard policies don’t cover damage occurring while a short-term guest is staying. Speak with an insurance specialist to confirm adequate coverage.

Taxes vary widely by location, so research local requirements early. For our duplex we pay:

• Annual county property tax
• Annual town property tax
• Quarterly county transient occupancy tax
• Monthly town transient occupancy tax
• Monthly state and local sales tax

Property taxes are based on the property itself, not rental income. Transient occupancy taxes and sales taxes are percentages of rental revenue and require regular filings—monthly or quarterly. For example, in our town the combined transient and sales taxes amounted to about 11% of each booking this summer (not including property taxes). Altogether, combined taxes and insurance for the duplex ran about $13,400 this year. Know your tax obligations before you start—they can significantly affect profitability.

Airbnb Host Fee

If you list on platforms like Airbnb, VRBO, or HomeAway, they take a cut. Airbnb deducts a 3% host service fee from the nightly rate before payout. We didn’t include that 3% in our operating totals because it’s money we never see, but remember it when pricing your nights—part of the listed rate goes to the platform.

We chose Airbnb after consulting friends who host; their interface and guest reach suited our needs. Listing across multiple platforms is possible but can complicate calendar management and increase the risk of double bookings.

Miscellaneous Costs

You’ll encounter miscellaneous expenses: small repairs, maintenance calls, inspections, business license fees, or one-off upgrades to improve guest experience. This year we spent about $750 on miscellaneous items. For example, we added blackout curtains to two bedrooms mid-season after guest feedback, which cost $250. We also leave a small welcome gift (a handwritten note and a local gift card) for guests—optional, but it builds goodwill.

To summarize the math: combining all categories above, our annual operating expenses for the duplex are about $21,750. That total reflects two separate rental units, so a single unit will likely be less. The goal here is to highlight the range of ongoing costs so you can estimate your own expenses more accurately.

Although the number feels large, we still booked enough nights this year to make a profit after operating expenses. We’re not yet fully recouped on construction and furnishing costs, but we’re making progress, learning a lot, and enjoying the process.

If you’re thinking about starting an Airbnb or short-term rental, use these categories as a checklist to estimate your own operating costs. Research local taxes and insurance requirements early, and plan for consumables, linens, maintenance, and platform fees so you can set rates that cover expenses and still deliver a great guest experience.