Smart Investing in Vacation Rental Properties—Your Definitive Guide

Smart investing has helped many consumers solve their financial woes. So, you’ve probably heard of many different investment opportunities and friends who motivate buying a vacation property with your savings.

Yes, it’s a relatively easy property to manage and it’s an exciting venture that teaches about real estate. Also, properties’ value often increases over time and there’s the advantage of paying fewer property taxes because tax deductions apply when owning a second home.

But is buying a vacation rental a beneficial option for YOU? 

Let’s summarize vacation rental properties’ facts so you can make an informed decision. 

Vacation Rentals Types

Start off by deciding what exactly you want on the vacation real estate market. You don’t necessarily have to invest in an expensive villa, a mansion or a beach house near the sea. A cottage, a cabin, a simple house or even a studio can attract a lot of holiday goers. 

And don’t underestimate owning something out of the ordinary. When on vacation, some consumers opt for a boat, a barn or even a converted shipping container.

Your options are endless!

Know What You’re Getting Into: Risks of Investing in Vacation Rental Properties

Investing in rental property comes with risks which determine  the viability of your vacation property plan:

  • Your occupancy rate may be high in certain seasons only because tourists don’t visit all year round. Will your income cover a year’s expenses?
  • Many factors affect tourism. There may be natural disasters or the economy will cause fewer consumers to take a vacation away from home. 
  • Ever-changing regulatory environment. Cities are looking to establish significant restrictions on vacation rental properties by enacting new zoning regulations and rental laws.

View investing in rental property as a business: create a proper business plan. Include a market analysis of tourism in the area you wish to buy in and plan for all eventualities.

How to Get it Right when Investing in Vacation Rental Properties

Let’s give you a few practical tips to help make investing in real estate successful. 

Predicting Profit Margins

To put together a dynamic business plan, roughly predict your income and find the right price to ask:

  • Determine your monthly mortgage payment
  • Add 10% to 20% to that amount
  • The final number is your weekly rental rate

Now compare that to other rentals in the area and see if your price is market-related . In popular areas, don’t be scared to ask more. Lower it if you realize your price is scaring off customers. 

When you determine your profit margin and yearly budget, consider other expenses. You may need a property manager if you won’t be on-site  yourself. 

Identifying the Right Investment

You can do different research to determine whether you’re making a wise investment.

Start by looking at similar properties on vacation rental platforms, such as Airbnb. A full booking schedule and lots or reviews prove that’s it’s a popular area.

Also consider crime rates, employment rates and even the quality of schools in the area. This will affect your property’s value in the long term. 

Increasing Your Profits

You can enjoy a more positive cash flow if you improve small details. Even for short-term rentals consumers appreciate quality, so giving them hotel standard rooms can prompt positive reviews and return customers. 

Also, provide extras such as Netflix access and a list of attractions & amenities close by to make their holiday comfortable. 

[Conclusion]

Buying a vacation rental could be your ticket to financial freedom through passive income. Have a question? Please leave a comment. 

 

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