Is It Hard to Make Money with Vacation Rentals? The Secret to Choosing Properties That Keep Delivering Profits

“Vacation rentals don’t make money anymore.” “I’m earning far less than I expected.” Have comments like these made you hesitant to enter the vacation rental business, or left you worried about the future of your operations?

Let’s start with the conclusion of this article.

That perception is half right and half wrong. The accurate statement is: “If you choose the wrong property, making money with vacation rentals becomes extremely difficult.” It’s no exaggeration to say that 80% of a vacation rental business’s success or failure is determined at the very first gateway—which property you choose—before any operational effort even begins.

In this article, we’ll thoroughly explain the secrets to choosing a profitable property—not for a one-time windfall, but for continuous, sustainable income—by focusing on five key checkpoints.

Why Does “Property Selection” Determine 80% of Vacation Rental Revenue?

Daily operational effort is certainly important. However, whether that effort actually pays off depends entirely on the “potential of the property” itself.

• Location can’t be changed: No matter how beautifully you design the interior, it’s nearly impossible to overcome the handicap of a property that’s a 20-minute walk from the nearest station. Location is an absolute factor that can never be altered later.
• The property determines your target guests: You can’t target families with a studio apartment. The size and layout of a property dictate your target guest demographic and, by extension, the ceiling on your nightly rate.
• The law sets the ceiling on your occupancy rate: In areas where vacation rentals are prohibited altogether, you can’t even start the business. Furthermore, there’s a world of difference in profitability between a property operating under the “Minpaku Business Act” (limited to 180 days per year) and one operating under the “Hotel Business Act” (able to run 365 days a year).

In other words, property selection isn’t simply a matter of “finding a location”—it is the business plan itself, the very foundation of your vacation rental operation.

【Directly Tied to Profit】5 Checkpoints for Spotting Profitable Vacation Rental Properties

So, what specific perspectives should you use when choosing a property? Be sure to check the following five points.

Checkpoint 1: Area Selection – Are You Choosing Based on “Proximity to Tourist Spots” Alone?

Many people decide on an area simply because it’s “near a tourist attraction,” but that’s not enough. What matters more is **”transportation convenience from the traveler’s perspective.”**

• Distance and quality of the station: Ideally, the property should be within a 10-minute walk of the nearest station. Beyond that, whether it’s simply “the nearest station” or a major terminal station served by multiple lines, or one with direct access from the airport, can dramatically affect your occupancy rate.
• Diversity of demand: Areas that offer more than just tourist demand—such as business demand (near major stations or business districts), event demand (near domes or arenas), and long-term stay demand (such as family members accompanying patients at a university hospital)—are better positioned to generate stable revenue throughout the year.

Checkpoint 2: Legal Compliance – “Vacation Rental Permitted” Is Only the Bare Minimum

Taking a listing advertised as a “vacation rental-eligible property” at face value is risky. You must personally verify the exact legal conditions under which the property can be operated.

• Check the zoning district: Confirm the property’s “use zone” under the City Planning Act. In zones such as “Category 1 Low-Rise Exclusive Residential Districts,” vacation rental operations are severely restricted.
• Additional municipal ordinances: Some municipalities have their own rules that are stricter than national law. Be sure to check the municipality’s website or relevant department to see if there are ordinances such as “operation prohibited on weekdays in this ward.”
• Feasibility of obtaining a Hotel Business Act license: If you’re aiming to maximize revenue, you should target a “Hotel Business Act (simple lodging)” license, which allows 365-day operation, rather than settling for the “Minpaku Business Act,” which caps operations at 180 days a year. This requires assessing whether the property can meet stricter requirements, such as front desk obligations (alternative measures are available) and fire safety standards.

Checkpoint 3: Target Setting and Layout – “Who” Do You Want to Stay There?

A property that “welcomes anyone” ends up being chosen by no one. Look at the property’s floor plan and define a clear target guest.

• For families and groups: A 2LDK or larger layout, multiple bedrooms, and a spacious living-dining area where a large group can eat together are essential. Kitchen facilities and the presence of a washing machine are also important factors. A floor plan that accommodates more beds translates directly into a higher nightly rate.
• For couples and business travelers: Proximity to the station is the top priority. Rather than square footage, what’s valued is cleanliness, a desk space suitable for work, high-speed Wi-Fi, and stylish interior design.

Checkpoint 4: Building Condition and Management Regulations – Watch Out for Hidden Costs

Especially when considering a pre-owned property or a condominium unit, you need to watch out for hidden costs and restrictions.

• Condominium management regulations: This is the single most important item to check. It’s very common for management regulations to explicitly state that “vacation rental operation is prohibited.” Purchasing or signing a lease without knowing this means you won’t be able to launch your business. Even if the regulations don’t mention it explicitly, you should confirm with the management association to avoid trouble.
• Building condition: For detached houses, have a professional building inspection done to check for termite damage, roof leaks, and earthquake resistance. This helps you avoid the risk of unexpected renovation costs.

Checkpoint 5: Competitive Analysis – Finding Your Blue Ocean

Thoroughly research what kind of competitors exist in the area you’re considering.

• Number and quality of competitors: Using platforms like Airbnb, analyze the number of listings in the same area, the going rate for accommodations, and the occupancy level (which you can estimate from review frequency and calendar availability).
• Research their concepts: Understand what kind of concept your competitors are operating under (e.g., Japanese-modern, Scandinavian-style, family-oriented).
• Differentiation strategy: Based on your research, identify gaps in the market—a “blue ocean”—such as “there aren’t enough facilities in this area that can accommodate large groups” or “there are no pet-friendly properties.” Choosing a property that lets you target that gap is the key to winning against the competition.

“Plus Alpha” Property Features That Boost Occupancy

In addition to the five fundamental points above, the following elements can further enhance a property’s appeal and profitability.

• Natural light and views: Bright, open rooms photograph well and increase click-through rates on booking sites.
• Presence of an elevator: For condominium units, an elevator is essential—especially for overseas guests with large suitcases or families.
• Surrounding amenities: Having a supermarket, convenience store, or coin laundry within walking distance greatly boosts guest satisfaction, particularly for long-term stayers.

Conclusion: Property Selection Is the Business Plan Itself

The answer to the question “Is it hard to make money with vacation rentals?” is clear.

If you choose the right property, vacation rentals remain an extremely attractive way to generate income even today.

Property selection isn’t simply the task of finding a location. It’s a strategic process that forms the very foundation of your vacation rental business—reading demand in an area, clearing legal requirements, defining your target guests, and differentiating yourself from competitors. This “entry point” is exactly where you should pour in the maximum amount of your time, effort, and wisdom.

Is That Property Really a “Profitable Property”?

“After reading this article, I feel like there are too many things to check, and I can’t make this decision on my own.”

“I want someone to evaluate a property from an objective, data-driven perspective.”

Perfectly researching and analyzing all five checkpoints introduced in this article on your own is an incredibly difficult task. In particular, interpreting ordinances that vary by municipality, judging the feasibility of obtaining a Hotel Business Act license, and sifting through vast amounts of competitor data to find a truly profitable property all require specialized knowledge and experience—without which, you risk a significant investment loss.

We at Stay Buddy Inc., a vacation rental management company, are professionals who operate numerous properties every day, and at the same time, we are property sourcing experts who identify “profitable properties” based on data and experience.

Drawing on our proprietary data analysis and area-by-area demand forecasting, we provide one-stop support—from proposing excellent properties that match your investment goals, to obtaining complex licenses and permits, to maximizing revenue once operations begin.

Why not move on from choosing properties based on gut feeling and start a data-driven, strategic vacation rental investment instead? Please feel free to reach out to us for your very first property consultation. We’ll show you the shortest path to success in your vacation rental business.