How to Buy a Vacation Home with No Money Down

The tourism industry has reopened this year, boosting demand for Airbnb rentals. Buy vacation rental property to take advantage of this trend.

Table of Contents

1. Benefits of Investing in a Vacation Rental Property
2. Should I Invest in a Vacation Rental Property in 2022 or 2023?
3. How to Buy Vacation Rental Property With No Money Down
4. Five Investment Property Financing Strategies to Consider
5. Ten Best Cities to Buy a Vacation Rental Property
6. Buy a Vacation Home With the Help of Mashvisor

While the tourism industry was one of the most affected sectors during the lockdown, it is now on its road to recovery and is continuing to pick up momentum. This year, most states have reopened their doors to tourists and local visitors. Demand for vacation rental homes is expected to rise, creating opportunities for Airbnb investors.

To take advantage of this demand, you should consider buying a vacation rental property. Vacation rental properties are a lucrative investment, especially if you know where to invest. Choosing the right place for your vacation rental property is crucial to success. Keep in mind that not all areas are optimal for vacation rental investments.  

It’s best to use a real estate analytics website like Mashvisor to help you decide whether a location is good for vacation rental investment. Mashvisor lets you search for a property from its listings anywhere in the U.S. Also, it provides the necessary data and analytics that can help you make an informed decision.

However, you might worry about the money you need to start a vacation rental investment. The good news is that you can buy a second home with little or no down payment. In the following sections, we will learn how to buy vacation rental property with no money down.

Benefits of Investing in a Vacation Rental Property

Perhaps you are asking yourself, “why should I buy a vacation rental property?” Investing in vacation rental homes has several benefits. Before we learn how to buy a vacation rental home with no money down, let us first look at some of the benefits of investing in vacation rentals, as follows:

1. You Can Earn an Extra Income

One of the biggest benefits of buying a vacation rental investment is the opportunity to make more money. According to Statista, the revenue from vacation rental homes is expected to grow to almost $18 million by 2023. Platforms like Airbnb have made it easy for homeowners to list their properties and find guests. 

As an Airbnb host, you can earn hundreds or even thousands of dollars every month from your Airbnb investment property. Other vacation rental sites where you could rent your vacation rental property include VRBO, FlipKey, Booking.com, Kid and Coe, and HouseTrip.

2. You’ll Have Your Own Vacation Spot

Besides hosting Airbnb guests, you can also use your vacation rental home whenever you want to get away and unwind. You can also host your family or friends on special occasions. It will save you the costs of paying for accommodation elsewhere.

3. You Can Enjoy Several Tax Benefits

Renting out your property means that you will have to pay tax on your income. However, the good news is that you can deduct many of the costs incurred to maintain the vacation rental home. For example, you can write off expenses such as hosting fees, occupancy taxes, and cleaning costs. 

In most cases, you can also deduct supplies, utility costs, insurance premiums, property management fees, and mortgage interest. It’s best to consult a local accountant, financial advisor, or tax professional to know what deductions you are entitled to.

Watch our video below to learn about tax exclusions related to vacation homes:

4. This Can Serve as Your Nest Egg

Owning vacation rental homes that are positive cash flow properties can be an excellent way to prepare for retirement. You can continue collecting rent for the long term to earn a passive income. Or, you can also opt to sell it when its value appreciates. You can then use the return on investment to cover your costs of living, healthcare, travel, and other expenses.

Should I Invest in a Vacation Rental Property in 2022 or 2023?

Perhaps you’ve been considering buying vacation rental property for quite a while. However, you’re not sure if it will make a good investment in 2022 or 2023. If you’re uncertain if now is the right time to invest in vacation rental homes, it’s best to know the trends and demands of local visitors and tourists across the United States.

In general, the demand for vacation rental properties is still 35% higher compared to the demand during the pre-pandemic period. The increase is because many Americans and tourists worldwide are excited to travel again after being in lockdown for two years. However, not all places are ideal for vacation rental investment, and some places saw a decline in demand. 

The good news is that, at the end of 2021, the average annual revenue generated from vacation rental properties in the U.S. was $56,000. It is the highest average annual income ever recorded. The figure is expected to continue to increase amid the growing anticipation to travel all throughout 2022 and 2023.

Reasons Why You Should Buy Vacation Rental Property in 2023

We’ve learned the different benefits of investing in a vacation rental property. Now, we will discuss the four major reasons why you should buy a vacation rental home this year or in early 2023, as follows:

1. Flexible Work Arrangements

The flexible work arrangements in this new normal make it easier for many people to travel at any time of the year. Employees nowadays don’t necessarily need to wait for the holidays or file for vacation leave to go on a vacation. Many companies adhere to a work-from-home setup, providing workers with more flexibility to work anywhere. 

As a result, it is now possible for working individuals to travel while at work. Those who do not want to compete with other travelers during peak season can now possibly travel during non-peak periods. It means that vacation rental owners can expect high demands even during non-holidays—and this is something that makes the vacation rental industry enticing in 2023.

2. International Travel Is Slowly Coming Back

One of the best things about investing in the vacation rental market is that your renters are not limited to residents, unlike with a traditional rental. The good news is that international travel is slowly getting back, which means vacation rental owners can expect visitors from all different countries. Foreign visitors are among the reasons for the high demand for vacation rental homes. 

However, note that international travelers prefer certain destinations when they go to the US. If you want to attract international visitors, it’s best to buy a vacation rental property in a place where there is an influx of foreigners. For example, most international visitors would love to visit the beaches in Florida when they go to the US, so it’s best to buy a vacation home in the state.

3. Opportunities for Unique Properties

Before the pandemic, most vacation rental properties were saturated in urban places, where most visitors flocked during the peak season. However, since many people are still scared of big crowds because of COVID-19, there are now new opportunities for unique vacation properties. The idea is to provide an adventure for guests within their vacation rental home itself.

If you’re the type of investor who loves to be unique and creative, this opportunity may interest you. After all, we can expect unique vacation rental properties to gain more interest from guests, even in 2023 and beyond. The key here is to be creative in what your property can offer. It’s best to invest in secluded places that can provide unique experiences to adventurous guests. 

4. Rural Areas Are Becoming Popular

Many travelers now prefer to visit secluded places rather than big cities, opening more opportunities for vacation rental investors in rural areas. The good news is that most rural places are not yet saturated with vacation rental properties. It means there are still plenty of good opportunities for new rental investors looking to buy a vacation home.

In urban places like New York City and Los Angeles, finding a vacation rental property for sale can be very difficult. It’s nearly impossible for new investors to buy a vacation home at a reasonable price in these areas. However, there are still a good number of listings in rural places, including the rural areas in Florida.

2023 Is a Good Year to Buy Vacation Rentals

Due to the reasons mentioned above and so much more, we can say that 2022 and 2023 are ideal times to buy a vacation rental property. The demand from both local and international travelers is one of the reasons why many investors are earning so much money from the vacation rental market. 

However, remember that since many investors are interested in investing in vacation rental homes, tight competition can be expected. If you plan to buy a vacation rental property, it’s best to act fast before all the good inventories are sold out. Before you buy a vacation home, however, make sure to choose the right place that is optimal for vacation rental investing.

If you’re unsure where to find a good deal on vacation rentals, start your rental investment journey with Mashvisor. The real estate analytics website lets you easily search for a vacation rental property that matches your criteria, such as budget, property type, size, etc. It has a wide selection of available tools like an Airbnb calculator, making it easier for you to find an income property to buy.

In addition, Mashvisor will also provide you with important property details, so you’ll know if the place and property are optimal for vacation rental investment. While 2023 is a good year for investing in vacation rentals, not all locations will make for a profitable investment. With Mashvisor, you’ll find an ideal location where you can generate the most rental income from your vacation home.

What’s the Next Step?

Once you know where to buy an investment property for a vacation rental, the next step is finding a lender to help you finance the purchase. However, even if you plan to buy the vacation rental property through a mortgage, you’ll still need enough cash to pay the down payment and closing costs.

Fortunately, there are options for real estate investors to buy a property with no money down, which we will discuss in the following sections.

How to Buy Vacation Rental Property With No Money Down

Traditional lenders, such as credit unions or banks, require a down payment when you take investment loans to purchase an income property. The question is, how much money do you need for a down payment? 

It’s worth noting that the amount of down payment may vary, depending on several factors. They include your credit score, relationship with the lender, and experience as an investor. However, the down payment typically is around 20% of the purchase price. 

For example, if you are purchasing a home worth $500,000, the down payment is usually $100,000. In most cases, new real estate investors find this amount too big. In fact, it would take the average property investor a long time to raise such an amount.

So, what does it mean to buy a vacation home with no money down? In general, it means that the real estate investor is putting very little or none of their own cash into the investment upfront. If you buy an Airbnb property with no money down, it will greatly enhance your chances of making a higher return on investment.

Moreover, rental property investors with insufficient cash reserves for a down payment can still have the opportunity to buy a vacation rental property. If you are one of those investors who cannot make a substantial down payment for a property purchase, it’s best to consider the different options mentioned below. They allow you to buy a vacation rental property even when you’re short in cash. 

5 Investment Property Financing Strategies to Consider

Maybe you’re asking yourself, “how to buy a vacation property with no money down?” In this section, we will discuss the five best strategies you can use to finance your investment property purchase. The strategies apply to both new and seasoned real estate investors.

Here are the top five strategies that can help you buy a vacation rental property with little to no money down:

1. Leverage Other Property

If you own another home with equity and have a good credit score, you can leverage the equity and apply for a home equity loan or home equity line of credit (HELOC). With this kind of financing, you can take out a line of credit or loan of up to 80% of your home’s equity. 

For instance, if you own a home worth $300,000 and you owe only $100,000, you can pull out $160,000 of the home’s equity in cash. You can then use this money to buy and finance a vacation rental home. So, depending on the equity you have built, you can easily purchase a vacation rental property with very little or no money down.

Such a strategy is best for investors who have built equity on existing properties. If you’re an experienced investor with an existing income property or two, you can use your equity on these properties to buy a new one. If you’re a new investor, maybe you can use your equity in your private home to help you finance your next investment property purchase.

2. Use Seller Financing

As the name suggests, seller financing is where the owner or seller of the home offers a financing option for the buyer. In other words, the owner or seller of the property plays the role of the lender for the buyer. The buyer is then expected to repay the loan according to the terms laid down in a formal agreement. 

This agreement will outline terms such as interest rate, repayment period, and down payment. Looking into owner-financed homes as a method of financing a vacation home purchase is a great strategy because there is room to negotiate for little to no money down. To do this, you need to build rapport with the seller, and you must also have a good credit history.

It’s worth noting that some sellers may not be open to the idea of selling their property without a down payment. But if you know how to negotiate properly, this strategy may work successfully even for new investors. Just be prepared for a little compromise, such as a higher interest rate or a shorter repayment term.

3. House Hacking

House hacking is becoming an increasingly popular strategy for beginner real estate investors who want to buy a vacation property with no money down. It involves making one unit of a multi-unit property your primary residence and renting out the other units. 

Using a second home mortgage, such as the 203k loan or the Federal Housing Administration (FHA) loan, you can buy a home with as little as a 3.5% down payment. Now, house hacking is not the strategy to use if you’re looking for a true vacation home that you can enjoy. After all, you’ll live next door to the units you plan to rent out as vacation rentals. 

However, if your main goal is only to own a vacation rental property that you rent out for cash, house hacking is an excellent option. Also, you can eventually move out of the property and rent out all the units. So, if you have the flexibility, you can buy the investment property in a place you’d eventually like to visit as a vacation destination once you move out and live elsewhere.

4. Real Estate Partnerships

Another great strategy you can use to buy a second home with no money down is to leverage other people’s money (OPM). For instance, you can look for a funding partner or private lender that is willing to provide the cash required to purchase the investment property. 

Partners can be friends, family members, or members of your investment group. With real estate partnerships, the rental income, appreciation, and equity are usually shared among the partners as agreed. Keep in mind that this strategy may work for seasoned real estate investors who have established their reputations in the real estate market. 

While it’s possible for new investors to find creditors and partners, one of the major criteria most creditors and partners are looking for is experience. It is the reason why inexperienced investors may find it difficult to look for a partner or creditor who will trust them. However, it is not impossible.

5. Assume a Seller’s Mortgage

Also referred to as buying “subject to,” assuming a seller’s mortgage is another option where you can buy a vacation home with no money down. With this no-money-down mortgage plan, you simply purchase a home based on the terms of the owner’s current mortgage.

Top 10 Cities to Buy a Vacation Rental Property

Now that we’ve established that buying a vacation rental property is a good idea in 2023, we must now find the best places for a vacation rental investment. In this section, we will provide the 10 best cities where you should buy a vacation rental home. The cities offer good profitability for vacation rentals based on several factors, including the available attractions.

When finding the best places for vacation rental investment, we included cities with a median property price of below $1 million. We also considered cities with Airbnb occupancy rates of 50% or higher and active Airbnb listings of 100 or more. We also took into account the Airbnb cash on cash returns, as well as the potential demand for vacation rentals.

Here are the top 10 best cities to buy a vacation rental property, sorted by the highest Airbnb cash on cash returns:

1. East Lansdowne, PA

• Median Property Price: $165,341
• Average Price per Square Foot: $144
• Days on Market: 118
• Monthly Airbnb Rental Income: $2,157
• Airbnb Cash on Cash Return: 7.13%
• Airbnb Daily Rate: $129
• Airbnb Occupancy Rate: 53%
• Walk Score: 65

East Lansdowne is a borough located in Delaware County. The city is also frequented by out-of-state visitors, making it one of the best places for vacation rental investment. Its popular attractions include the Schuylkill River Trail, boathouse row view, and the Museum of the American Revolution. It’s a good place to buy a vacation home because of the low median price of the properties in the area.

2. Fort Wayne, IN

• Median Property Price: $241,815
• Average Price per Square Foot: $127
• Monthly Airbnb Rental Income: $2,426
• Airbnb Cash on Cash Return: 6.87%
• Airbnb Daily Rate: $95
• Airbnb Occupancy Rate: 66%
• Days on Market: 42
• Walk Score: 34

There are so many unique attractions and things to do in Fort Wayne, Indiana, making it one of the best places to buy a vacation rental. It is home to Science Central, Fort Wayne Children’s Zoo, and Allen County Parks and Recreation. Fort Wayne is one of the best cities for families with children. Plus, it features nightlife experiences, performing arts, and seasonal sports.

3. Highland Heights, KY

• Median Property Price: $169,880
• Average Price per Square Foot: $179
• Days on Market: 91
• Monthly Airbnb Rental Income: $1,922
• Airbnb Cash on Cash Return: 6.04%
• Airbnb Daily Rate: $120
• Airbnb Occupancy Rate: 54%
• Walk Score: 43

Highland Heights is one of the best places to buy a vacation rental home. It is near several tourist attractions, such as the Newport Aquarium, Taft Museum, and Cincinnati Zoo and Botanical Garden. Tourists find it best to visit Highland Heights during the summer as it offers various activities like hiking, canoeing, kayaking, fishing, and shooting sports.

4. Rochester, NY

• Median Property Price: $219,272
• Average Price per Square Foot: $115
• Days on Market: 50
• Monthly Airbnb Rental Income: $2,849
• Airbnb Cash on Cash Return: 5.72%
• Airbnb Daily Rate: $132
• Airbnb Occupancy Rate: 63%
• Walk Score: 56

Investors who buy a vacation rental in Rochester, New York, do not only limit their target market to tourists alone. They also want to target business travelers who prefer to stay in short-term rentals instead of hotels. Moreover, Rochester is also one of the best locations for tourists, especially those who want to visit various museums and experience city life.

5. Akron, OH

• Median Property Price: $173,375
• Average Price per Square Foot: $110
• Days on Market: 47
• Monthly Airbnb Rental Income: $1,823
• Airbnb Cash on Cash Return: 5.43%
• Airbnb Daily Rate: $93
• Airbnb Occupancy Rate: 65%
• Walk Score: 48

The fifth largest city in Ohio, Akron is home to many tourist attractions that make visitors come back. Akron is best known as a farming community as well as a picturesque tourist destination. It is home to several museums, ski resorts, music entertainment, and the famous Akron zoo. Because of its tourist attractions, It’s a good place to buy a vacation rental property.

6. Inverness, FL

• Median Property Price: $350,449
• Average Price per Square Foot: $200
• Days on Market: 47
• Monthly Airbnb Rental Income: $2,695
• Airbnb Cash on Cash Return: 5.25%
• Airbnb Daily Rate: $173
• Airbnb Occupancy Rate: 53%
• Walk Score: 34

Another city in Florida that is best for vacation rental investing is Inverness. Located in Citrus County, Inverness is one of the most favorite destinations during the summer. It is one of the best places for outdoor activities, including airboat riding, fishing, and hiking. Investors buy a vacation rental home in Inverness because of its beautiful scenic views.

7. Largo, FL

• Median Property Price: $485,091
• Average Price per Square Foot: $308
• Days on Market: 50
• Monthly Airbnb Rental Income: $3,290
• Airbnb Cash on Cash Return: 4.13%
• Airbnb Daily Rate: $216
• Airbnb Occupancy Rate: 53%
• Walk Score: 53

As the third largest city in Pinellas County, Florida, Largo is also home to beautiful white sand beaches, spectacular botanical gardens, preserved historic structures, and several golf courses. It is among the best cities to buy a vacation rental home because of its scenic attractions. Plus, Largo is home to amazing shops, bars, and restaurants tourists often visit.

8. Malabar, FL

• Median Property Price: $672,543
• Average Price per Square Foot: $494
• Days on Market: 84
• Monthly Airbnb Rental Income: $3,398
• Airbnb Cash on Cash Return: 3.95%
• Airbnb Daily Rate: $168
• Airbnb Occupancy Rate: 53%
• Walk Score: 16

Malabar is also among the best cities in Florida where investors can buy vacation rental property. It is home to famous attractions, including the Palm Bay Community Center, Graffiti Skate Zone, Liberty Bell Memorial Museum, and Camp Holly. In general, a vacation rental investor in Malabar can earn an average monthly rental income of more than $3,000. 

9. Hudson, FL

• Median Property Price: $389,766
• Average Price per Square Foot: $243
• Days on Market: 76
• Monthly Airbnb Rental Income: $2,256
• Airbnb Cash on Cash Return: 3.13%
• Airbnb Daily Rate: $138
• Airbnb Occupancy Rate: 51%
• Walk Score: 60

If you want to target beach-goers and watersports lovers, then it is a good idea to buy a vacation rental property in Hudson, Florida. Hudson is home to a few of the best beaches in Florida, and it is also a great place for diving and hiking. Tourists also love to visit the Hillsborough River State Park to ride the rapids and go canoeing.

10. Kissimmee, FL

• Median Property Price: $392,055
• Average Price per Square Foot: $236
• Days on Market: 52
• Monthly Airbnb Rental Income: $2,516
• Airbnb Cash on Cash Return: 2.69%
• Airbnb Daily Rate: $113
• Airbnb Occupancy Rate: 60%
• Walk Score: 65

Kissimmee is the largest city in Osceola County, Florida. If you’re planning to buy a vacation rental property in a place that targets thrill-seekers, Kissimmee is one of your best options. In this city, tourists can enjoy helicopter riding, jet skiing, zip-lining, and other exhilarating outdoor activities. Visitors can also try flying warplanes and riding airboats.

Buy a Vacation Home With the Help of Mashvisor

When it comes to knowing how to buy a vacation home with no money down, you can use one method or a combination of strategies that we’ve mentioned above. Analyze each strategy to see what works best for you. When you buy a second home with no money down, you can expedite your investment and start earning money from rentals immediately.

When you are ready to buy vacation rental property, make sure to only invest in the best places for short-term rentals. Remember that since not all locations are optimal for Airbnb rentals, you should learn how to perform a rental analysis before making a decision. Fortunately, you can do it easily with the help of Mashvisor.

Mashvisor is the best real estate analytics platform available online today. Aside from providing access to a wide selection of property listings, it also offers in-depth real estate analysis to help you make an informed investment decision. 

With Mashvisor, you will easily determine which area is optimal for vacation rental investment. In such a way, you can ensure that you’ll only buy an investment property in a location that’s best for your chosen rental strategy.

Sign up for a 7-day free trial now and have a personal hands-on experience with Mashvisor.