This post contains affiliate links. Read the full disclosure here.
Vacation Rental Property: Is It Worth Investing?
Buying real estate for a short-term rental business is a serious step. Such a decision cannot be made rashly. You need to evaluate all the advantages and disadvantages, calculate the possible risks so that they do not become an unpleasant surprise for you. We invite you to learn important points about the Vacation Rental Property.
Benefits of Investing in Real Estate for Short-Term Rentals
Platforms like Airbnb and VRBO are full of millions of vacation property rental ads due to the undeniable pros of this type of business:
One of the main reasons people decide to invest in Vacation Rentals. Renting a well-furnished home in a popular location can generate a good income for your extra needs — around $900 per month. And if the owner has several houses for short-term rent — this can become the main source of money.
Airbnb platforms, Booking.com, FlipKey, VRBO come to help the host of the property. There you can find out all the information about prices and demand for housing in your favorite area, as well as consistently find clients for your business and compete with other homeowners.
Don’t worry about not being able to handle requests from your potential guest. With the software https://www.hostyapp.com, you can consolidate your rental property information across multiple platforms. The program allows being always in touch with clients and promptly managing the business’ tasks.
A good investment for the future
You will be able to sell your home after retirement and live on the money from the sale or cover other expenses. The proceeds will allow you to spend money on your health, travel, or other important purchases.
Vacation Home for your family
You can always plan a rental schedule according to your needs. Whether you’re looking for a change of scenery for the holiday, reuniting with your family, or even relaxing alone, you don’t have to look for a place to stay. Owning a house by the sea or in a mountainous area will allow taking a break from the routine.
Writing off some costs
Renting a home for more than 14 days is considered a taxable business. However, it also allows the owner to write off some costs of maintaining and repairing their property:
- premiums insurance,
- hosting on sites,
- mortgage interest,
- supply and stuff.
Disadvantages of Vacation Rental Property Investments
Now you need to assess the cons that the owner of a rented home may face.
Vacation rental property is not a thing that can be left unattended. You will need to monitor the cleanliness both inside the house and in the yard, repair communications in time, fix facades and pay utility bills. This requires funds, otherwise, a client will not covet an unkempt house. Also, do not forget about paying for insurance.
Hosts can hire a dedicated manager to look after the house, but he also needs to be paid.
If you buy a home on credit, your monthly spending increases enormously. And it is not a fact that the rental income will cover them until the end of payments.
Constant advertising and searching for clients
Prepare to place your ads across a variety of popular platforms. You need to constantly review competitors’ proposals and improve your rental conditions to attract customers.
You will need to update the repairs, take care of the lawn, make new and high-quality photos of your rental home. Owners need to keep an eye on prices during the holidays and a small influx of people, not to underestimate or overestimate the rental price.
It may be necessary to create special conditions, such as staying with pets or having a pool. Such amenities increase customer demand by 10-15%. The increased level of comfort can easily attract guests, and the cost of the mortgage and home maintenance will pay off very soon.
Restrictions for rental business
Rental property may be prohibited in some regions. The Homeowners Association (HOA) regulates this issue. Buying a house, clarify for how long it is allowed to rent out a house in this area, whether you need to get a license (which is not cheap), etc.
How to Prepare Before Investing in Vacation Rental Business?
Before investing in Vacation Rental Property, you need to consider several important factors, so that the business will bring not only money but also pleasure:
- Get complete information about permits for a rental business in the region, where you are buying property. Will you be satisfied with the conditions, and have enough funds to pay for the license, if necessary? Short-term rentals may be prohibited in the chosen area, then you should look for other variants.
- Choose a suitable place for guests: with a beautiful view, not too far from the main attractions and civilization.
- Analyze the rental housing market: what apartment do clients need, how much they pay per night on average, how many similar offers are available in the area. In addition to the prices of competitors, the state of their property must also be taken into account. Higher prices provide a higher level of comfort.
- Find out about the demand for rental housing depending on the season. What you can count on: a regular flow of clients, or their visits only in the summer. This has a significant impact on income.
- Calculate your possible costs: mortgage, insurance, home maintenance, utility bills, and more. Compare your potential income level. Determine the ROI (return on investment) percentage. Will it be profitable to rent out housing?
- Keep money for contingencies and house improvements. The needs of the client are growing, so make your property look more attractive to guests than its competitors. Update the furniture and think over the design.
- Consider, if you can regularly clean up the house, so that its unkempt appearance does not scare away guests. Perhaps there is a need to hire a manager, who will take care of the order in the rented house and promptly report problems and needs.
The Bottom Line
Short-term rental housing can be a profitable investment with proper budget preparation and management. When buying a rental property, you should be well aware of the demand for rents in the region, prices, as well as costs. Prepare the accommodation for guests: think not about what you like, but the things that attract guests.