Sp what are the pros and cons of investing in a vacation rental property?
- A good vacation rental property will cover the mortgage payments and generate additional profit.
- You have the opportunity to interact with your guests and hear how much they enjoyed staying at your property.
- Now a vacation rental property can help pay the costs of buying your future retirement home.
- Not many investors can boast about owning a vacation property in your favorite area.
- Vacation rentals can be costly to manage, in both time and money, requiring seasonal upkeep and special maintenance considerations.
- Unless you live in the immediate area, you will face the same challenges as a long-distance landlord.
- Vacation rental properties are particularly sensitive to downturns in the economy, which could leave you financially exposed if you suffer a lack of booking revenue.
Before searching for the best places to buy vacation rental property, investors need to understand how to invest in vacation rental property.
STEP #1. Choose a city or region to buy property in. Consider locations you have vacationed in before and are familiar with first. You need to choose a vacation rental property that is in a pleasant, accessible, desirable location that easily attracts guests. Factors such as beach accessibility, skiing or snorkeling opportunities should be taken into consideration when choosing the location.
STEP #2. Research the current market conditions in your chosen area. Look for properties currently on the market on a vacation home specific site, such as Airbnb or in the newspaper and local realtor’s listings in the area. Check the rental prices for other nearby properties on a rental listing site to see what type of rental income you can reasonably expect from the property you are interested in.
STEP #3. Work out your actual expected yearly rental income. Forbes recommends setting the weekly rental rate 10 to 20 percent higher than your expected monthly mortgage payments. You should factor in at least a 25% vacancy rate. So include condo fees, if you are considering a condo, or routine gardening and maintenance for a house. Research local property management salaries and include the annual rate in your calculations.
STEP #4. Check your credit report to make sure you are in a good position to take out a mortgage. Compare your yearly mortgage payments with your yearly expected rental income. Evaluate your finances to see whether you have other funds available to make up potential gaps when the rental income can’t completely cover your mortgage payments. You could also consult a loan officer to review your financial situation and second home loan opportunities. Place your bid on the property and pay the required realtor and closing fees once the deal is settled.
Step #5. Book a one or two week stay at your property before you open it to visitors. Fix it up! Paint, hang curtains and place furniture in the rental. Pick out plates, artwork and appliances. Make sure the interior design is ready. Create listings for your property on the main vacation rental websites, such as VRBO or Airbnb. Keep list maintenance contacts for yourself or your property manager (if you hire one) with names and contact information for utility companies, landscapers, plumbers and electricians.
Best places to buy vacation rental property
Home of the Music City Center, the Country Music Hall of Fame, the Johnny Cash Museum and Musicians Hall of Fame, this city attracts tourist like a swarm of clustering bees. With all its restaurants, parks and public amenities, this city is quite affordable and is a perfect for investing in real estate. The median price of a single-family home in Nashville is around $235,000 making it one of the best places to buy vacation rental property.
There isn’t anything I can think of about Austin that would make people not want to vacation there! Beautiful weather, Austin Texas football, barbecue, movies, and music; the list can go on and on. Realtor.com puts the average selling price of a home in Austin at $223,400, which is just under the national average and fairly exceptional. This city is great for owning a vacation rental property.
Amelia Island, Florida
Luckily, after the housing crisis that devastated both Florida and Jacksonville it’s a lot easier to get a vacation house in some of its more attractive destinations. Amelia Island is hot in history and attractions. It’s now home to seven golf courses, a jazz festival, a shrimp festival, a film festival and 13 miles of gorgeous beaches. With average prices just under $314,800 for a single-family home, Amelia Island is one of the best places to buy vacation rental property.
Lake Arrowhead, California
With this city attracting more than 4 million visitors each year, this city is perfect for investing in vacation homes. The outlet shops, boutiques, restaurants, summer concert series, Oktoberfest, car shows, Antique Wooden Boat Show, bike races and other events keep attracting people in. The average home price in this city is $241,000 and cabins and condos are very affordable here.
A Final Word
When it comes to owning a second home whether it’s a vacation rental home or not, many factors are taken into consideration. The price range, location, home maintenance and much more need to be fully thought about. Real estate investors need to carefully study and analyze the situation before making any decisions. Mashvisor provides investors with the best website to freely search for the property you are looking for and in the area you are interested in.