How to Start a Vacation Rental Business: A Simple 5-Step Guide with Cost Estimates

“I’d like to put my empty house or spare room to use and earn some extra income.”

“I’ve heard vacation rentals can be profitable, but how much would it actually cost to get started?”

Many people are interested in starting a vacation rental business but aren’t sure where to begin, leaving them unable to take that first concrete step.

Let’s cut to the chase and share the conclusion of this article right away.

Vacation rentals are a business that individuals can absolutely succeed at, as long as they prepare with a clear plan and follow the correct steps. And surprisingly, the initial investment can start from as little as a few hundred thousand yen, depending on your operating style.

In this article, we’ll break down how to start a vacation rental business and the estimated costs involved at each stage, explaining everything in 5 simple steps that anyone can understand—in the clearest way possible.

Before You Start: 3 Vacation Rental Operating Styles You Should Know

First, the style you choose for running your vacation rental will significantly affect both the costs and the preparations required.

• 1. Home-Based (Owner-Occupied): This style involves renting out an unused room in your own home. Since you don’t need to secure a new property, initial investment is kept to a minimum. It’s also a great option for those who enjoy interacting with guests.
• 2. Rental Property-Based: This involves leasing an apartment or house and operating it as a vacation rental. Since there’s no need to purchase a property, you can start the business with relatively little capital of your own—though you’ll have the fixed cost of monthly rent.
• 3. Property Purchase-Based: This style involves purchasing a new or used property specifically for vacation rental operations. While the initial investment is the largest, you won’t have rent to pay, making it easier to achieve higher profit margins—plus you’ll gain a real estate asset in the process.

[Easy 5 Steps] How to Start a Vacation Rental Business and Estimated Costs

Now, let’s take a closer look at the 5 concrete steps to opening your business, along with the estimated costs for each.

STEP 1: Choosing a Property and Confirming the Rules

This is the most important step, as it forms the foundation for everything that follows.

• What to do: Choose the style that best fits your situation from the three options above, and decide which area you’ll operate in. From there, thoroughly research whether operating a vacation rental at that property is legally permitted.
  • For condominiums: Check with the management association to confirm that vacation rentals aren’t prohibited under the building’s management rules.
  • For rental properties: Always obtain written consent from the landlord for subleasing.
  • Checking laws and ordinances: Confirm which laws apply to the property (the Hotel Business Act or the Private Lodging Business Act) as well as any additional local ordinances specific to your municipality.
• Estimated costs:
  • Home-based style: ¥0
  • Rental property style: ¥300,000–¥1,000,000 (deposit, key money, agent fees, advance rent, etc.—typically around 5-6 months’ worth of rent)
  • Property purchase style: Several million to tens of millions of yen (property price plus incidental costs such as agent fees)

STEP 2: Business Planning and Fundraising

Rather than starting on instinct alone, build a plan based on solid business numbers.

• What to do: Research the room rates and occupancy rates of competing facilities in the area to forecast realistic revenue. From there, subtract all the costs that will arise in Step 3 and beyond to simulate how much profit you’ll actually be left with. Based on this business plan, if your own capital isn’t enough, consider raising additional funds—for example, through startup loans from the Japan Finance Corporation.
• Estimated cost: There’s no direct cost for this step itself, but it’s the most important intellectual work phase, as it determines the overall budget and success of your business.

STEP 3: Obtaining Permits and Installing Fire Safety Equipment

These are the administrative procedures required to protect your guests’ safety and operate legally.

• What to do: Consult with your local health center and apply for a license or submit a notification under the Hotel Business Act or the Private Lodging Business Act. At the same time, consult with your local fire department and install the necessary fire safety equipment (automatic fire alarms, emergency exit lights, fire extinguishers, etc.) according to their guidance.
• Estimated costs:
  • Fire safety equipment costs: ¥50,000–¥1,000,000+ For notifications under the Private Lodging Business Act, small-scale facilities can be relatively inexpensive (starting from ¥50,000). However, if you’re obtaining a license under the Hotel Business Act, or depending on the size and structure of the building, an automatic fire alarm system may be required, which can push costs up significantly (¥500,000 or more).
  • Permit application fees: ¥0–¥300,000 There’s no cost if you file the application yourself, but since the process is complex, it’s common to hire an administrative scrivener (gyoseishoshi). In that case, expect to pay around ¥150,000–¥300,000 in fees.

STEP 4: Interior, Décor, and Furnishing Preparation

This is where you create an appealing space that makes guests think, “I want to stay here!”

• What to do: Define your target guest demographic (couples, families, business travelers, etc.), and design your interior and décor around a “concept” or theme that resonates with that group. Furnish the space with everything guests need for a comfortable stay—beds, bedding, sofas, and tables, as well as appliances like a refrigerator, microwave, washing machine, TV, and Wi-Fi, plus amenities such as towels and shampoo.
• Estimated cost: ¥300,000–¥2,000,000 For a studio apartment, it’s possible to get started for around ¥300,000, but costs will rise with larger spaces or more elaborate design choices. By making good use of brands like IKEA, Nitori, and MUJI, you can create a stylish space while keeping costs down.

STEP 5: Marketing and Operational Preparation

Now it’s time for the final preparations before opening.

• What to do: List your property on OTAs (online travel agencies) such as https://www.google.com/search?q=Airbnb%E3%82%84Booking.com. Since photos are often the deciding factor for bookings, hire a professional photographer, or shoot in bright natural light from the angles that show off your room’s best features. It’s also essential to decide who will handle the day-to-day cleaning—yourself or an outsourced company—and to secure a reliable cleaning partner.
• Estimated costs:
  • Photography costs: ¥0–¥50,000 (free if you do it yourself; professional photographers typically charge around ¥30,000–¥50,000)
  • Other: If you use a property management company, you’ll incur contract fees and monthly service charges.

[Summary] So, How Much Does It All Cost in Total?

Adding up all the costs above, here are rough estimates for total initial investment by operating style:

• Case 1: Starting with a spare room in your home (6-tatami mat size) Fire safety equipment (¥50,000+) + furnishings (¥150,000+) + miscellaneous expenses = Total initial cost: approximately ¥250,000+
• Case 2: Renting a 25㎡ studio apartment in Osaka City Rental initial costs (¥600,000+) + fire safety/permits (¥200,000+) + interior/furnishings (¥400,000+) = Total initial cost: approximately ¥1,200,000+
• Case 3: Purchasing and renovating a used house in a rural area for ¥5 million Property purchase price and related costs (¥5,500,000+) + renovation costs (¥3,000,000+) + fire safety/permits (¥500,000+) + interior/furnishings (¥1,000,000+) = Total initial cost: approximately ¥10,000,000+

Conclusion: Vacation Rental Success Is 90% Planning. Draft Your Blueprint Carefully from the Start

Running a vacation rental business is a venture full of potential—one that individuals can absolutely succeed at, as long as they follow the correct steps and draw up a thorough “blueprint” in the form of a careful business plan.

Using the 5 steps and cost estimates we’ve introduced here as a reference, try building a realistic plan tailored to your own situation. That initial, meticulous planning will become the surest guide leading your vacation rental business to success.

Ready to Take That “First Step”? Let’s Take It Together

“I understand the general flow of how to get started, but there’s so much specialized knowledge involved—I’m not sure I can do this on my own…”

“I don’t want to make mistakes with my initial business plan and funding strategy.”

We completely understand how you feel. The 5 steps introduced in this article require many specialized judgment calls—researching property regulations, navigating complex administrative procedures, and selecting cost-effective interior furnishings, to name a few. In particular, the accuracy of your initial business plan is absolutely critical, as it can make or break your entire venture.

At Stay Buddy Inc., we strive to be **”the first, and the strongest, partner”** for everyone who dreams of starting a vacation rental business.

Tailored to your operating style and budget, we offer:

• ① Property search and regulatory research
• ② Development of highly accurate business plans and profit/loss simulations
• ③ Handling the hassle of permit and license applications on your behalf
• ④ Space design that maximizes revenue
• ⑤ Marketing support once operations begin—we provide one-stop support for every process involved in launching your vacation rental business.

We know exactly where you’re likely to stumble and what you’ll worry about.

Why not start walking the shortest path to success, without wasting time or money? Please reach out to us for the first step toward making your dream a reality.