You Bought the Perfect Turnkey Property, Now Here’s What Could Go Wrong

 

Investing in turnkey real estate opportunities offers the hope of simplicity, steady cash flow, and a hands-off path to building wealth. But for every story of effortless income, there are just as many tales of unexpected challenges and costly surprises. Whether your short-term rental is located locally or remotely, you need more than optimistic projections. So, we’re providing a reality check in risk management.
Here's what you may have not yet considered with a turnkey short-term rental property, what experienced investors wish they knew when they started out, and how you can shield yourself from liability, property, and revenue exposure.

Optimism vs. Reality: Overlooked Dangers of “Hands-Off” Investments

It’s easy to get swept up in the excitement of a new turnkey rental: the cash-flow projections look promising; the property is likely freshly renovated, and the property management company promises a hands-off experience. But beneath the surface, real risks can quickly turn optimism into costly surprises.

STR investment relies heavily on trust—trust in your property managers and cleaning services, the guests that are checking in, and the booking platform like Airbnb or Vrbo. But “hands-off” can quickly become “risk-exposed” when the wrong protections or systems are in place.

Repairs & Maintenance Delays

When you short-term rent your property, even minor repairs can become major headaches, especially if they force your property offline for a period of time. A small leak that goes unnoticed, a broken water heater, or a missed issue during turnover can escalate quickly if not handled immediately, leading to unhappy guests, negative reviews, and unexpected costs.

Property Management Issues & Oversights

Your property manager is effectively your eyes and ears on the ground. If they’re inattentive, slow to respond, disorganized, or make a small oversight, your investment can suffer.

Many investors assume that property managers may shoulder the burden of liability, but that’s not true. A property manager’s negligence can pull you into liability claims—where both you and your manager are named in a lawsuit. What if your cleaner doesn’t notice alcohol left behind by the previous guests? Or if there’s a maintenance request that falls through the cracks? Even if you have the most experienced, trusted property managers and contractors, guests are still inhabiting a space they’re unfamiliar with, increasing your overall risk from liquor liability to on- or off-premises injuries.

Guest Liability, Injury & Property Damage

Where most turnkey investors unknowingly take on the most exposure is by being misinsured, carrying a policy that isn’t aligned to protect you from industry specific risks. Guests staying in your short-term rental home create significant gaps in standard insurance policies when it comes to both liability and damage. Homeowners (HO) and Dwelling/Landlord (DP-3) policies were never designed to cover the increased exposure of a short-term rental. Common policy gaps for short-term rentals include limited or no coverage for:
❌ Property damage even if it’s unrelated to the “business activity”
❌ Injuries to the guest or to someone else by your guest
❌ Guest-caused damage, theft, or vandalism to your property or contents
❌ Alcohol-related incidents
❌ Dog bites or pet damage
❌ Amenity liability, on-and-off premises (pool, bicycles, hot tub)
❌ And more

Even experienced investors with DP-3 (landlord) policies are surprised to learn that most policies are not built for short-term rental damage or liability, treating your property as if you were a landlord, not a host of high-turnover guests. Without specialized (yet very limited) endorsements available on certain DP-3 and HO-3 policies, these traditional policies do not cover loss of income, off-premise liability, or guest-caused damage.

H2: The Real Risks Seen by Vacation Rental & Airbnb Investors

Even the best-performing turnkey property isn’t immune to unexpected events. Here's what catches many investors off guard:

Guest Injuries Like Slips, Falls & More

Slip-and-falls, hot tub or amenity accidents, and alcohol-related injuries are among the most common liability claims in the STR industry.

Without commercial liability, owners can face significant out-of-pocket costs. A single uncovered guest injury can result in legal fees, medical bills, and settlement expenses—costs that far exceed the price of carrying a risk-aligned insurance policy.

Guest Damage & Vandalism

Guest-caused damage—whether accidental, intentional, or even malicious—is another surprise limitation or exclusion in standard policies and a real risk for investors.

Landlord and Homeowner policies may cover vandalism by outsiders, but most will not cover damage caused by paying guests under a commonly found “property entrustment” clause. Since owners knowingly gave a guest the key, in the eyes of standard insurance policies, it shifts the risk. This leaves a significant gap for STR investors, who are often left absorbing the cost of damage themselves.

While guest-caused damage can often be thought of as just a broken mug or stained couch, consider this in more in line with “destruction,” like a totaled kitchen from an unapproved house party, accidental water damage to the entire main floor of the home after the faucet was left on, or a broken appliance after being used incorrectly.

Loss of Income During Damage

For investors, another large financial threat is property damage that takes your short-term rental property offline. It’s not only the cost of the repairs that you could be shouldering if you have the wrong insurance but also, the weeks, months or even longer of lost income during the repair period.

Most Landlord and Homeowners policies do not provide coverage for loss of business income for STRs, leaving you without income during the time your property is offline while still having other financial obligations to meet like mortgage payments, property manager fees, bills, etc. Specialized STR insurance, like the policy from the nation’s leading provider of short-term rental insurance, Proper Insurance, provides superior loss of business revenue coverage for cash flow stability until your property is back up and welcoming guests again.

Squatters and Holdover Guests

Unauthorized occupancy is also a growing challenge. Airbnb squatters and holdover guests can cause extensive property damage, lost revenue, and costly legal intervention.

Landlord and Homeowners policies do not acknowledge this risk, leaving owners to navigate the fallout alone. Proper Insurance offers the industry’s only squatter's coverage to help alleviate costs associated with guests who won’t leave your property, like legal fees, lost income, and the damage that the squatter or their pet(s) often leave behind.

How Specialized Vacation Rental Insurance Protects Investors
Whether you’re managing your STR locally or from across the country, the risks and insurance gaps remain the same for vacation rental investors. Most investors assume their Homeowners or Landlord policy protects their short-term rental exposure. Unfortunately, these policies were never designed for short-term lodging, and gaps become painfully clear during the first claim.

The Proper Insurance policy for short-term rentals protects both the property and the business. It helps to protect owners and hosts against accidental, malicious, and intentional guest-caused damage; theft of the property’s contents during the guest’s stay; and even vandalism or water damage from guests—areas where traditional carriers commonly deny claims. On the liability side, Proper includes robust Commercial General Liability that’s built to respond to guest injuries, alcohol-related incidents, guests’ pet or wildlife caused injuries, and accidents or injuries involving amenities like hot tubs, pools, or bicycles.

Proper completely replaces inadequate Landlord and Homeowners coverage with a single policy crafted for STRs—ensuring investors are not misinsured but rather have robust, business-grade protection that’s aligned for their risks.