With tourism and travel numbers returning to their pre-pandemic levels in 2022, many investors are looking into investing in vacation home rentals as their next lucrative venture.
Table of Contents
- What Are Vacation Home Rentals?
- Why Do People Stay in Vacation Home Rentals?
- How to Run a Thriving Vacation Home Rental
- How Investment Tools Can Help You Run a Thriving Vacation Home Rental
- Top 10 Best Vacation Rental Markets in 2022
- The Bottom Line
However, before investing in vacation home rentals, one should be aware of the different factors that affect how you invest in a short term or vacation rental. The factors include finding a location with a thriving short term rental market to being a memorable host. Keep reading to find out how to invest in a vacation home rental and how to run it successfully.
What Are Vacation Home Rentals?
Before getting into how and where to buy investment properties for a short term rental real estate strategy, you should know what exactly a vacation home rental is. As the name suggests, vacation home rentals are properties that are leased out for short periods of time. Similar to hotels, they are commonly used by travelers and tourists who plan to visit a place for a few days or weeks. While the amount of time a guest stays will vary, most do not stay for more than 30 days. Vacation home rentals also charge daily rates as opposed to the monthly rates of traditional rentals.
Is a Vacation Home Rental Different From Traditional Rentals?
So besides the rental period, are traditional and vacation rentals different? Well, due to the short term rental nature of vacation rentals, the maintenance, pricing, and management of the property significantly differ from traditional rentals. Here are some of the differences investors need to watch out for when running a vacation home rental business:
1. Fully furnished and equipped with basic necessities
For traditional rentals, most investors rent out their property as a bare unit. While they may include some appliances like a stove or air-conditioning unit, for the most part, the home is left unfurnished. It is because for traditional rentals, it is understood that the tenant will furnish the property to their liking over their long-term stay.
On the other hand, for vacation home rentals, properties are expected to be fully furnished. Due to the short stay of each guest, it’s expected that everything they need for a few days will be made available to them. From kitchen tools and utensils to towels and bedding, vacation home rentals need to provide all the necessities to make their guests’ stay more convenient.
2. Regular cleaning between guests
Both traditional and vacation home rentals require investors to clean the property between tenants and guests. However, vacation home rentals will require you to do so more often due to the more frequent turnaround of guests. Cleaning the property before each guest can occur two to three times a week for any well-maintained vacation rental. It is quite a difference from the once every six months to a few years cleaning that is required from traditional rentals. It can be said that vacation rentals require more from the investor to properly maintain.
3. Rental price changes
Unlike traditional rentals, rental price and income are quite unpredictable for short term rentals. For home vacation rentals or any type of short term rental like Airbnb, rental prices are bound to change. It is common practice for investors in vacation home rentals to change prices per season or even per day of the week. To maximize profits, experienced investors will know when and at what rate they should increase their rental price without outpricing themselves to travelers.
For example, with more people looking for Miami vacation home rentals during spring break investors know that they can charge a higher price. Due to the high demand, investors can change a higher price knowing that people are willing to pay a premium due to the season. Additionally, prices are usually increased during weekends due to the higher demand as well. To accurately set your daily rate for your vacation home rental, sign up for Mashvisor’s 7-day free trial and access the Airbnb rental calculator.
4. State and city laws on short term rentals
While every city allows long-term and traditional rentals, some states and cities have different rules and restrictions on short term rentals and vacation home rentals. Some states and cities allow investors to run vacation rental businesses with just a registration form. However, others impose strict rulings on how long a guest can stay, what type of properties are allowed to be rented short term, as well as which additional taxes will apply to the investor.
Airbnb regulations by city and state differ, so it’s important to make yourself aware before investing in a vacation investment property. While you may think that Florida vacation home rentals should be subject to the same rules as Miami vacation home rentals, it is not the case. Though Miami rentals will need to adhere to the state regulations of Florida vacation homes, the city itself can add additional rules and regulations on top of state laws as they see fit.
Related: Airbnb Miami Beach Laws: What You Need to Know
Why Do People Stay in Vacation Home Rentals?
With an understanding of what a vacation home rental investment is and how it differs from other real estate investments, you may be wondering if it’s a truly lucrative real estate strategy. With hotels, motels, and hostels available, many investors doubt the demand for vacation home rentals. However, many tourists and travelers prefer short term vacation homes like Airbnb rentals when they travel. Here are some reasons why people chose to stay in vacation home rentals:
1. Cheaper costs
It’s no secret that hotels and accommodations are one of the biggest expenses when one travels. To compete with the established hotels and motels in the area, most short term rentals and Airbnbs will lower their daily rate. With vacation homes and Airbnbs costing travelers less money than staying at a hotel, many will prefer staying at your vacation home rental over a hotel.
2. Convenience and amenities
Another reason why people choose to stay in a vacation home rental is the convenience and amenities it comes with. Hotels will usually just offer the standard ensuite bedroom with multiple common areas like dining rooms. However, vacation home rentals will usually come with additional features like a full kitchen. Being able to access a full kitchen allows them to not only make their own meals but also save on the traveling costs of eating out for every meal.
3. Space and privacy
In addition to cost and convenience, vacation home rentals also offer more space and privacy compared to traditional travel accommodations. With most vacation rentals comprising a bedroom, living room, kitchen, and bathroom, guests are not restricted to a smaller space during their trip.
Additionally, guests usually rent out the entire apartment or home, meaning they do not need to deal with seeing other guests in the vicinity. They are free to view the property as their own private home while on vacation and don’t need to worry about being disturbed by other guests or staff.
How to Run a Thriving Vacation Home Rental
Now that you understand the demand for vacation home rentals, it’s time to find and manage a property to invest in. Finding and managing a vacation rental can be tricky as you need to consider several factors to ensure that you get a high return on investment. Here are things to look out for when looking for and running a lucrative vacation home rental:
1. Find a good location
To run a thriving vacation home rental, you will first need to find a location with a high demand for short term rentals. Think of why Palm Springs and Orlando vacation home rentals usually do so well. Such places constantly see visitors and travelers staying for short periods of time. It means the traffic for vacation home rentals is quite high as many people are looking for a place to stay. High demand and traffic mean that your property will see greater higher chances of being rented out and generate more income for you.
2. Focus on cleanliness
While a good location is crucial, how you maintain your property is just as important. Guests want to stay in a place that is inviting and clean during their vacation. It is why to run a thriving vacation home, it would be good practice to get the property cleaned after every guest checkout. It will ensure that each guest enjoys their stay and boost the chances of them rebooking later on.
3. Provide all basic necessities and amenities
One of the main alluring factors of vacation home rentals is that it truly feels like a home away from home. To ensure that your property gives off such a feeling to guests is by providing the basic necessities and amenities that one would need in their own home. You don’t need anything extravagant either. A stocked kitchen for the essentials, linens, pillows, and bathroom necessities are enough to make people feel at home and enjoy their vacation home rental.
4. Get good reviews
Good reviews can make or break the amount of income your property will generate. With listings on vacation home rental sites like Airbnb, many people look at the reviews before booking. If you have good reviews, more people will likely book your property throughout the year. On the other hand, if you get negative reviews, they will deter future guests from wanting to stay at your rental.
Related: What You Need to Know Before Becoming an Airbnb Host
How Investment Tools Can Help You Run a Thriving Vacation Home Rental
With all of the above factors, many investors seek real estate investment tools like Mashvisor to assist them during the investment process. While you can find and compute the potential of a property manually, Mashvisor’s investment tools offer investors the comfort and accuracy that any investor would benefit from. Here are some of the key features of Mashvisor that will help you realize lucrative returns from investing in vacation home rentals:
1. Location Analysis and Property Finder
Whether you are investing in a traditional or vacation rental, location is the most important factor when finding an investment property. That is why Mashvisor offers users access to a Heatmap and Property Finder tool that allows you to find the most lucrative areas to invest in. While most investors only look at the city-level location analysis, Mashvisor’s Heatmap feature refines the search further by showing the most lucrative neighborhoods in the city.
For example, you are considering buying Myrtle Beach vacation home rentals or Las Vegas vacation home rentals. While the two cities show thriving real estate markets for short term rental properties, not every neighborhood will be equally in demand.
Using the Heatmap and Property Finder, investors can simply look at the color-coded map to see the properties for sale in the best neighborhoods. While not the only factor that will contribute to a thriving vacation rental, buying property in a prime location is the first step.
2. Property Analysis
After finding a location and potential property, Mashvisor can show you the breakdown of the property’s potential performance in the market. It will show you things like median listing prices, occupancy rates, daily Airbnb rates, monthly Airbnb rental income, cap rate, cash on cash returns, etc. With the said metrics available to you, you can easily see if the individual property is worth the investment.
For short term rentals, a key factor to consider when comparing real estate comps is the occupancy rate. While a high daily rate and monthly income are important, the occupancy rate will determine how successful the rental is.
As a vacation home rental, the only time your property will generate income is if someone has booked it. If no one is staying on your property for a month, it means you will not generate any income at all. That is why it is important to have a high occupancy rate over a potential higher daily rate.
3. Real Estate Comps
To compare the handful of properties you are considering, Mashvisor offers users real estate comps. The Real Estate Comps feature will allow you to see the properties’ potential side by side. Using the feature, you will be able to compare the potential rental income, occupancy rates, expenses, and other important metrics of different properties. To make things convenient, Mashvisor provides a downloadable Excel file to its users with all the necessary data that will guide your decision.
Mashvisor’s Real Estate Comps feature allows investors to see and compare the properties’ potential profitability side by side.
4. Rental Calculator
While the other tools of Mashvisor help in the process of finding an investment property, its rental calculator can be used when running your vacation home rental business. As mentioned earlier, rental prices can change daily or seasonally when it comes to vacation home rentals. It means that investors will need to constantly monitor the market and adjust their rental prices to ensure they are charging the best daily rate for their property. Charging too much will deter people from booking the rental but charging too low leaves potential income on the table.
By using Mashvisor’s short term rental calculator, you can easily keep up with the price change of the market without risking charging too much or too little. It will ensure that your property is always seen as a good deal for guests to book while also making investing in vacation home rentals a worthwhile venture.
Top 10 Best Vacation Rental Markets in 2022
As mentioned earlier, while many things contribute to the success of a vacation home rental, location is a primary factor. To help you get started on your investment property search, we’ve compiled a list of cities with the best vacation rental markets 2022. Based on the locations’ estimated cash on cash returns, listed below are the places you should consider investing in this year:
1. Marmora, NJ
- Number of Listings for Sale: 8
- Median Property Price: $468,138
- Average Price per Square Foot: $227
- Days on Market: 50
- Number of Vacation Home Rental Listings: 8
- Monthly Vacation Home Rental Income:$6,408
- Vacation Home Rental Cash on Cash Return: 9.39%
- Vacation Home Rental Cap Rate: 9.55%
- Vacation Home Rental Daily Rate: $235
- Vacation Home Rental Occupancy Rate: 64%
- Walk Score: 48
2. Dunmore, PA
- Number of Listings for Sale: 6
- Median Property Price: $197,300
- Average Price per Square Foot: $123
- Days on Market: 105
- Number of Vacation Home Rental Listings: 15
- Monthly Vacation Home Rental Income: $2,404
- Vacation Home Rental Cash on Cash Return: 9.28%
- Vacation Home Rental Cap Rate: 9.74%
- Vacation Home Rental Daily Rate: $162
- Vacation Home Rental Occupancy Rate: 65%
- Walk Score: 79
3. Matamoras, PA
- Number of Listings for Sale: 34
- Median Property Price: $382,632
- Average Price per Square Foot: $176
- Days on Market: 130
- Number of Vacation Home Rental Listings: 6
- Monthly Vacation Home Rental Income: $5,981
- Vacation Home Rental Cash on Cash Return: 8.94%
- Vacation Home Rental Cap Rate: 9.11%
- Vacation Home Rental Daily Rate: $879
- Vacation Home Rental Occupancy Rate: 63%
- Walk Score: 57
4. Wolverine Lake, MI
- Number of Listings for Sale: 6
- Median Property Price: $581,367
- Average Price per Square Foot: $232
- Days on Market: 59
- Number of Vacation Home Rental Listings: 5
- Monthly Vacation Home Rental Income: $4,142
- Vacation Home Rental Cash on Cash Return: 8.89%
- Vacation Home Rental Cap Rate: 9.12%
- Vacation Home Rental Daily Rate: $122
- Vacation Home Rental Occupancy Rate: 65%
- Walk Score: 2
5. Kingsburg, CA
- Number of Listings for Sale: 10
- Median Property Price: $760,939
- Average Price per Square Foot: $336
- Days on Market: 97
- Number of Vacation Home Rental Listings: 8
- Monthly Vacation Home Rental Income: $9,443
- Vacation Home Rental Cash on Cash Return: 8.89%
- Vacation Home Rental Cap Rate: 8.98%
- Vacation Home Rental Daily Rate: $165
- Vacation Home Rental Occupancy Rate: 62%
- Walk Score: 87
Related: What Is a Good Cash on Cash Return on Rental Properties in 2022?
6. Centerville, OH
- Number of Listings for Sale: 5
- Median Property Price: $456,032
- Average Price per Square Foot: $135
- Days on Market: 111
- Number of Vacation Home Rental Listings: 21
- Monthly Vacation Home Rental Income: $6,215
- Vacation Home Rental Cash on Cash Return: 8.87%
- Vacation Home Rental Cap Rate: 9.03%
- Vacation Home Rental Daily Rate: $204
- Vacation Home Rental Occupancy Rate: 61%
- Walk Score: 59
7. Centereach, NY
- Number of Listings for Sale: 15
- Median Property Price: $548,640
- Average Price per Square Foot: $257
- Days on Market: 84
- Number of Vacation Home Rental Listings: 9
- Monthly Vacation Home Rental Income: $7,059
- Vacation Home Rental Cash on Cash Return: 8.84%
- Vacation Home Rental Cap Rate: 8.99%
- Vacation Home Rental Daily Rate: $139
- Vacation Home Rental Occupancy Rate: 64%
- Walk Score: 59
8. Horn Lake, MS
- Number of Listings for Sale: 10
- Median Property Price: $267,744
- Average Price per Square Foot: $138
- Days on Market: 10
- Number of Vacation Home Rental Listings: 11
- Monthly Vacation Home Rental Income: $3,172
- Vacation Home Rental Cash on Cash Return: 8.79%
- Vacation Home Rental Cap Rate: 9.08%
- Vacation Home Rental Daily Rate: $149
- Vacation Home Rental Occupancy Rate: 64%
- Walk Score: 44
9. Winneconne, WI
- Number of Listings for Sale: 7
- Median Property Price: $431,929
- Average Price per Square Foot: $313
- Days on Market: 71
- Number of Vacation Home Rental Listings: 6
- Monthly Vacation Home Rental Income: $2,770
- Vacation Home Rental Cash on Cash Return: 8.68%
- Vacation Home Rental Cap Rate: 9.03%
- Vacation Home Rental Daily Rate: $391
- Vacation Home Rental Occupancy Rate: 46%
- Walk Score: 31
10. Wethersfield, CT
- Number of Listings for Sale: 6
- Median Property Price: $501,133
- Average Price per Square Foot: $156
- Days on Market: 122
- Number of Vacation Home Rental Listings: 9
- Monthly Vacation Home Rental Income: $4,455
- Vacation Home Rental Cash on Cash Return: 8.67%
- Vacation Home Rental Cap Rate: 8.91%
- Vacation Home Rental Daily Rate: $137
- Vacation Home Rental Occupancy Rate: 82%
- Walk Score: 73
The Bottom Line
Investing in vacation home rentals can be a lucrative investment if done correctly. Due to the benefits of renting out a vacation rental, many travelers opt to stay in such types of accommodations compared to a traditional hotel. Additionally, tourism and travel being a rising business this year, the demand for vacation homes is sure to increase. With this, investing in a vacation home rental is a no-brainer for any savvy investor wanting to capitalize on the rising market demand.
However, not all properties were created equal. If you want to invest in the most lucrative properties, you will need some assistance in calculating the properties’ potential return on investment.
When choosing and managing a vacation rental property, consider using Mashvisor to assist you. From pinpointing the best neighborhood to calculating your rental price, Mashvisor’s investment tools is a one-stop shop that can help your investments from start to finish.
Sign up today for your 7-day free trial, followed by 15% off from your quarterly or annual subscription.
