Are you wondering what the best way to start investing and making money from real estate today is? Our one answer: vacation home rentals!
The trend of purchasing vacation home rentals is an increasing pattern in today’s real estate market.
Many decide to buy a vacation home as a getaway property to use throughout the year. However, some owners also see this type of real estate property as a great opportunity to make a profit through putting it out on the market and renting it out as to short-term renters when it is unoccupied.
Consequently, vacation home rentals are real estate investment properties under the category of low risk investments. Investing in these investment properties is a great strategy for property investors to pay down their monthly mortgage and make money from real estate investing.
A successful real estate investing career depends on many factors, most importantly time and location! In this article, we break down why this time of year is the best time for you to start investing in vacation home rentals. In addition, we explain what real estate investors need to take into account in order to find the most profitable vacation home rentals in the US real estate market. So, without further ado, let’s jump right in!
Vacation Home Rentals – Why Now?
Spring and fall are the best seasons to travel and visit the United States. The months of April to September are peak tourist seasons with pleasant temperatures throughout. What does this mean for property investors? A larger pool of potential short-term tenants!
Staying in vacation home rentals is a booming trend these days for a lot of international travelers and tourists. The old days of renting a hotel suite are long gone! This further means higher turnover and higher occupancy rate, which are important factors for a successful real estate short-term investment property.
Home prices in the US real estate market have been rising, and they’re expected to rise by another 4.6% this year. It’s expected that the housing market will continue to climb in the coming years as well. In other words, if you want to invest in vacation home rentals, now might be the best time to buy.
Property investors still might be able to find affordable investment properties in some cities across the US real estate market. In addition, real estate investors should take advantage of the steadily rising prices and hold their investment properties to get some of that appreciation over the coming years and sell later for a profit!
Another reason why you might want to consider investing in vacation home rentals is the tax benefits and tax breaks you can claim. However, real estate investors need to carefully track the amount of time they spend at their vacation home. The tax treatment on your vacation home depends on the number of days you rent it out at fair market value and the number of personal use days.
If you rent out your home for less than 14 days, it will be considered a personal residence. In this case, real estate investors can deduct mortgage interest and property taxes, and any rental income they collect is tax-free. However, they can’t deduct any rental-related expenses.
On the other hand, if you limit your personal use to 14 days, the vacation home is considered a business. Thus, if property investors rent out their vacation home rentals for more than 14 days, they must report all rental income. However, they get to deduct rental expenses such as depreciation, utilities, repairs, and property management fees.
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The concept behind this type of renting is that it can provide property investors with substantial profit in a short period of time. Short-term rental properties are usually more profitable than traditional long-term rentals, especially if they are in the right locations! Depending on the location and the demand for short-term investment properties, real estate investors can charge a decent amount for renting out their vacation home rentals.
Vacation Home Rentals – Where Exactly?
When you think of vacation home rentals, the first thing that may come to mind is a beach house or a ski condo. However, a major city can also be of the best places to buy a vacation home due to the high demand from short-term visitors there.
Generally, the best places to buy vacation home rentals are those with a high demand for short-term accommodation properties. Additionally, such places have a special feature which attracts tourists. This might be a large annual event, a beautiful beach nearby, or many popular tourist sights. So, a condo in a nice urban neighborhood, for example, has great prospects on vacation rental sites.
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As mentioned, now is the best time of the year to start investing in vacation home rentals. Nonetheless, real estate investors should be aware of a couple of things regarding this type of investment property for a successful real estate investing career.
Marketing Your Vacation Home Rentals
The main factor which determines the success of vacation home rentals (after location) is how property investors market their investment properties. What you want is to get as many bookings as possible. However, potential short-term tenants might not even know about your investment property if you’re not properly marketing it!
The best and most effective way to market vacation home rentals is by listing them on listing sites so that they get exposed to as many potential short-term tenants as possible. The most popular site for listing short-term investment properties is Airbnb. Other efficient sites are VRBO, HomeAway, and AllTheRooms.
Airbnb Laws and Regulations
If you decide to go ahead and list your vacation home rentals on Airbnb, you should first do your research on whether or not Airbnb is even legal in your real estate market. Some cities across the US real estate market set limits on the number of days per month (or per year) that an Airbnb investment property can be rented.
Moreover, there are city zoning laws that limit short-term investment properties to specific neighborhoods. Some cities prohibit short-term rentals near other short-term rentals or even go as far as to limit the number of occupants or tenants. Thus, it is important that real estate investors dig deep and research what rules and regulations apply in their local real estate market before buying vacation home rentals.
Property management plays a major role in a successful real estate investing career. Therefore, this is something real estate investors should carefully think about before buying vacation home rentals. Property management is actually the reason why many hesitate about renting out their vacation homes.
Due to the high turnover, vacation home rentals require constant attention including check-ins, cleaning, and maintenance. This could be an issue for property investors, especially those who don’t live near their investment properties (out-of-state).
However, this problem can be solved easily by hiring a professional property management company. In real estate investing, professional property management companies offer services that take care of every detail of the investment property on behalf of the real estate investor.
If you’re thinking of starting a real estate investing career and making money by renting out your vacation home, NOW is the perfect time to do so! Vacation home rentals are gaining popularity and are in high demand this time of the year. However, don’t forget to keep the above-mentioned factors in mind before buying an investment property as a vacation home.
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