How to Turn an Inherited Property into a Successful Short-Term Rental (UK & US Guide)
Have you inherited a property and aren't sure what to do with it? Increasingly, people are opting to convert an inherited home into a vacation rental. This strategy capitalizes on the surge in short-term rentals to generate additional income and boost the value of an asset that would otherwise remain underutilized.
Instead of leaving your home empty or selling it quickly at a price below its actual value, you can turn it into a steady source of income. You can capitalize on the growth in local tourism and the demand for rental alternatives to traditional hotels.
In this guide, we walk you through this process step by step: from legal and tax aspects to online promotion. With the right choices and tools, an inherited home can become a winning investment.
Inherited house: sell or rent?
After inheriting a property, one of the first questions you'll ask is: Should I sell it immediately or try renting it out? There's no one-size-fits-all answer, but you should consider several factors before making a decision.
When is it a good idea to sell?
Selling may be the right choice if:
- The house is in an area that isn't particularly attractive from a tourist perspective.
- The property requires extensive, expensive renovation work.
- You don't have the time or desire to manage your rental property.
- You want to quickly cash out the inheritance, perhaps to distribute the proceeds among other family members.
Keep in mind, however, that selling quickly may mean accepting a lower price than the home's actual value, especially if it hasn't been perfectly maintained or updated.
When is it worth renting?
Renting is an increasingly attractive option, especially if:
- The house is located in a tourist area, near a lake, the coast, in the mountains, or in a city renowned for its arts and culture.
- The property is in good condition or only requires minor work.
- You want to generate a steady extra income by taking advantage of the high season.
- You have the option of entrusting management to a professional or using digital tools to simplify the activity.
Why transform an inherited house into a vacation home?
Transforming an inherited home into a short-term rental property is an increasingly strategic choice, especially if the property is in a tourist area or surrounded by natural beauty. Let's examine the primary advantages.
Economic and tax benefits
Renting a vacation home can provide a steady income, especially during peak seasons. Compared to long-term rentals, nightly revenues are often higher, and you can adjust prices based on demand.
Furthermore, depending on your location (UK/US), you might find specific tax rules or deductions for short-term rentals (which we'll discuss later) that simplify tax management or offer advantages.
Property enhancement
Keeping a home lively and well-maintained through short-term rentals helps maintain (and often increase) its value over time. An inhabited and well-managed property deteriorates less than a closed and unused home, which risks losing value through neglect or lack of maintenance.
Opportunities in the short-term rental market
Experiential tourism is continually growing, and an increasing number of travelers are seeking flexible, authentic, and independent solutions. A well-furnished and well-managed vacation rental can become highly competitive on platforms like Airbnb, Booking.com, or Vrbo, attracting a broad, international audience.
Initial checks before renting the inherited house
Before posting an ad on online booking sites and welcoming guests, you must verify that the inherited home is legally, zoning-wise, and structurally compliant. The fact that someone lived there in the past does not necessarily mean it's suitable for hosting tourists.
Inheritance and property checks
Your first step is to formalize the inheritance. In the US, this typically involves a probate process, while in the UK, you may need to apply for a 'grant of representation' (probate or letters of administration).
Next, you'll need to settle any Inheritance Tax (UK) or Estate Tax (US) that may be due with HMRC (His Majesty's Revenue and Customs) in the UK or the IRS (Internal Revenue Service) in the US, depending on the value of the estate.
Please verify that:
- You have updated the property title (deed) in your name. This involves registering the change with the HM Land Registry (UK) or filing the new deed with the county recorder's office (US).
- The house is correctly zoned and classified for residential use (or short-term rental use, depending on local laws).
- No mortgages or liens limit its use.
Property status: works, furnishings, habitability
Once you complete the paperwork, it's time to assess the property's actual condition. Is it habitable and safe to host travelers? Are the systems up to code? Do you need to do any renovation work? Small, targeted interventions can increase the perceived value.
Make sure you have:
- A Certificate of Occupancy (US) or equivalent building regulation compliance (UK).
- The Energy Performance Certificate (EPC), which is legally required in the UK. (The US does not have a federal equivalent, but local ordinances may apply).
- Compliance certificates for the systems (electrical, plumbing, gas).
A property in good condition serves as the foundation for delivering a positive guest experience and earning excellent reviews.
Tax and regulatory aspects to know
Once you have verified the property's suitability, it's essential to understand the local tax rules and requirements to rent smoothly and avoid unpleasant surprises.
Tax regime for short-term or tourist rentals
If you rent for periods of less than 30 days, you fall under the short-term rental regime. In this case, tax authorities generally treat this income differently from long-term rentals:
- In the US, you typically report rental income on Schedule E (Form 1040) and include it in your ordinary income, which is taxed at your applicable progressive rate. However, if you provide substantial services, it might be considered self-employment income (Schedule C). Specific deductions for rental expenses can offset this income.
- In the UK, if a property is furnished and you rent it out on a short-term basis, it may qualify as a Furnished Holiday Lettings (FHL). This status offers more advantageous tax rules (e.g., capital allowances, specific pension contributions). If it doesn't qualify, it's treated as standard property income, with restrictions on mortgage interest relief.
If your rental business grows substantially, you may need to register for VAT (UK) if your turnover exceeds the threshold, or collect state/local occupancy taxes (US).
Local obligations: permits, safety, and tourist tax
In addition to taxes, you must comply with administrative and local obligations:
- Licenses and Permits: Many US cities (like New York, San Francisco, and Las Vegas) and UK boroughs (especially London) require hosts to obtain a specific license or permit to operate a short-term rental. Rules vary drastically by location.
- Zoning Restrictions: Check local zoning laws. Some areas prohibit short-term rentals entirely or limit the number of days you can rent per year.
- Occupancy/Tourist Tax: If your municipality or state requires one, you must collect it from guests and remit the payment periodically. Platforms like Airbnb often handle this automatically, but you are ultimately responsible.
- Safety Regulations (UK): In the UK, you must comply with fire safety regulations (e.g., smoke alarms, carbon monoxide detectors, fire risk assessment) and conduct gas safety checks (CP12 certificate) if applicable.
Each municipality has different rules; we recommend consulting your local council (UK) or city/county planning department (US).
How to prepare your inherited home for vacation rental
A well-presented and equipped home can make the difference between a satisfied guest and a negative review. Consider these aspects before opening your doors to your first travelers.
Functional and welcoming furnishings
Your furnishings don't have to be expensive, but they must be functional, clean, and well-maintained. Avoid improvised solutions or dated furnishings. Aim for a coherent and straightforward style, with:
- comfortable beds and quality linens,
- well-organized spaces,
- Decorative elements that create a welcoming ambiance.
A tidy and bright environment helps convey professionalism and enhances the appearance of your listing photos.
Essential guest services
For a good experience, guests expect a set of basic comforts:
- fast Wi-Fi connection;
- clean towels, soap and toiletries, toilet paper;
- a kitchen equipped with dishes, a coffee maker, and at least some basic spices (salt, pepper, oil);
- Helpful information on check-in, house rules, and local attractions;
- Flexible arrival and departure, with the option of self-check-in.
Find out everything you need to know about this topic in our "Guide to Essential Amenities for Airbnb Hosts."
Equipment for different target groups
Also consider the target audiences who might want to book your vacation rental. A crib or children's dinnerware set, as well as a pet bed for guests traveling with their pets, will enable you to cater to the needs of different types of travelers.
Some examples of target groups for your short-term rentals are:
- families with children;
- couples;
- senior guests;
- business travelers;
- digital nomads;
- groups of friends or relatives;
- hiking enthusiasts, etc.
Photos and captivating description
Your listing photos are your guests' first contact. Organize your spaces, ensure good lighting, and take high-quality photos. Show off each room from wide angles, and don't forget the details that make the difference: the terrace, the sea view, and the dedicated workspace (home office).
Write a clear, honest, and direct description: explain what makes your home unique, but avoid exaggeration. Your goal is to create realistic and positive expectations.
Where and how to publish your listing: Airbnb, Booking, and other portals
Once your home is ready, it's time to list it online. Choosing the right portals and creating an effective listing is crucial for attracting your future guests and generating bookings.
To avoid the risk of overbooking and reduce manual work, consider using a channel manager.
Differences between online booking platforms
Each portal has different characteristics, and you must know them to make the most of them:
- Airbnb is perfect for those seeking direct contact with guests, short stays, and flexibility. It's a great way to tell your story and showcase the uniqueness of your inherited home.
- Booking.com focuses on volume and visibility. It's ideal for tourist areas or high-demand cities: less storytelling, more features.
- Vrbo (Vacation Rentals by Owner), which is very popular in the US, often focuses on entire properties and family travel, competing directly with Airbnb.
Using multiple portals increases your chances of booking, but you must coordinate your calendar and pricing management. To avoid the risk of overbooking and reduce manual work, consider using a channel manager.
How to create an effective ad
A well-crafted ad includes:
- A precise and targeted title (e.g., “Apartment with terrace a stone’s throw from the center”);
- a detailed description, focusing on strengths and services offered;
- professional-quality photos (preferably taken during the day);
- Practical information on check-in, house rules, schedules, and what to expect.
Be transparent: it's the best way to attract the right guests and avoid problems.
Dynamic pricing and visibility strategies
Don't set a fixed price year-round. Utilize dynamic pricing strategies to adjust to seasonal fluctuations, local events, and average occupancy rates. Tools like Smoobu Dynamic Pricing help you automate your rates, keeping your prices competitive and effective.
To increase your visibility, respond promptly to guest messages, update your calendar regularly, and strive to receive good reviews early. Utilize dynamic pricing strategies to adjust to seasonal fluctuations, local events, and average occupancy rates.
Property Management: Is It Better to Do It Yourself or Hire a Property Manager?
Once you've published your listing and started taking bookings, it's time to decide how to manage your vacation rental on a day-to-day basis. You can manage it yourself or hire a professional to assist you. Both options have pros and cons.
Pros and cons of the two options
Self-management:
- More earnings: no commission to pay
- Total control over the guest experience
- More time to dedicate to your hospitality business and more responsibility
- Independent management of unforeseen events, cleaning, check-in, and bureaucracy
With a property manager:
- Less stress: they take care of everything (or almost everything)
- Experienced professionals, especially if you live far from your inherited home
- You must assess the costs (typically 15–30% of revenue)
- Less direct control over operational choices
Choose based on the amount of time you want to dedicate to managing rentals, the property's location, and the type of relationship you desire with your vacation rental guests.
Management software for short-term rentals
Even if you're self-employed, you can automate many aspects of your daily work with the right tools:
- calendar synchronization across multiple portals (channel manager),
- automated and personalized guest communications,
- management of payments and invoicing.
Software like Smoobu allows you to manage everything from a single platform, saving time and avoiding errors.
Advantages of Smoobu for managing your inherited home
Whether you manage a single vacation rental or multiple properties, Smoobu helps you streamline every aspect of your business, saving you time and increasing your profits.
Here's what you can do with Smoobu:
- Synchronized calendar across all portals: avoid double bookings and manual work. With the channel manager feature, you can integrate Airbnb, Booking.com, Vrbo, HomeToGo, and other portals in real-time.
- Automatic guest communications: Pre-set messages for confirmations, check-ins, instructions, and reviews. Fewer emails, more time for you.
- Invoicing Feature: Create and send invoices directly from the platform. Ideal for VAT-registered (UK) or professional hosts.
- Direct Booking Website: With just a few clicks, you can create your own website, receive commission-free bookings, and strengthen your online presence.
- Reports, payments, and smart integrations: Connect Stripe, PayPal, smart locks, dynamic pricing tools, and more. You can manage everything from a single dashboard.
Smoobu is designed for those who want to manage professionally and without complications, even starting from scratch.
Conclusion
Transforming an inherited home into a vacation rental presents an excellent opportunity to generate extra income, enhance the property's value, and build a personal project in the tourism sector.
The steps to follow are clear:
- Complete a legal and technical verification of the house.
- Select your tax regime and ensure compliance with local regulations.
- Prepare the accommodation to welcome guests.
- Post the ad on the right platforms.
- Manage your property effectively by utilizing digital tools to assist you.
With a bit of initial planning and the right tools, you can get off to a good start and increase your earnings quickly. Start with awareness, organize your business effectively, and capitalize on the opportunities in the short-term rental market.
Smoobu is here to help you do it easily, professionally, and stress-free. Try it now for free for 14 days.
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