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Maybe you're just back from the best vacation ever.
The family didn't argue.
You're actually recharged and at peace.
Or maybe you spent the weekend binging an HGTV show about beach side living or island life.
Whatever it was that got you thinking about things to consider when buying a vacation rental property you now find yourself here. Hopefully soon, you'll find yourself with your vacation rental, a place to visit when you want and that cash flows for you too.
Buying A Vacation Rental (12 Things To Consider)
When you're thinking about purchasing a vacation home to use as a rental, here a few things to factor in and consider:
1) Consider if this is where you want to vacation
When you're thinking about purchasing a vacation home to use as a rental, it's important to consider if this is the kind of place you want to vacation. If you're not interested in spending time at the property you purchase, it will be difficult to maintain and manage it as a rental.
If you're not a big fan of the location or the property, others might not be also. And that could really impact the rental side of your vacation home.
2) Is this vacation home where you want to retire
When you're thinking about purchasing a vacation home to use as a rental, consider if this is the kind of place you want to retire.
If you plan on retiring someday soon or already retired, this could really impact how much use your vacation home gets.
If retirement is off the distance, buying a home now that could be your retirement home in the future could still be a smart move. With home values increasing, interest rates increasing it could be harder to buy your dream retirement home. However, if you buy it now, lock in your interest rates, use it as a short term vacation rental, so you're generating money to pay for your mortgage and additional cash flow, you could have your retirement home paid for before you even retire.
3) Consider the best place to buy a vacation home
Start your vacation rental property search close to where you live. Or someplace you're already familiar with. Look for the places that are already popular destinations. It could be for snow skiing, or close to the water. It might just be a unique destination and a place to get away.
You might love the place, but if the vacation rental is not in the right location it's going to be hard to keep your occupancy full and charge enough money to generate good cash flow.
4) Consider the seasonality of your area
Seasonality is going to impact your occupancy rates of your vacation rental. Do you see a big flow of vacationers in the winter? Or is it more summer? Is there a peak season and low season? Does the area have events or things to do that attract guests year round?
5) Consider Accessibility
Consider the accessibility of reaching the property and the property itself.
You'll want to consider how close to major highways, airports etc. the vacation property is. Guests want to be able to get to their vacation spot without a lot of inconvenience or hassles. College students might be okay going out of the way if they can save a little money on lodging, but families would probably go elsewhere if they have very young kids or older parents with them and need specific accommodations like stairs free, elevator access etc.
6) Consider local laws and regulations
When it comes to owning a vacation rental property, it's important to be aware of the local laws and regulations. Each area has different rules when it comes to owning and operating a short-term rental.
For example, in some areas you may be required to live on-site while your property is being used as a vacation rental. Other areas may require a special permit or license in order to operate a short-term rental.
It's important to be aware of these rules and regulations before buying a vacation rental property, so you know what is required of you and your property.
7) Consider if this is a place you can manage
When you're thinking about purchasing a vacation home to use as a rental, it's important to consider if this is a place you can manage. Is it in close proximity for you to manage? How will the lawn get mowed in the summer? How will the driveway get shoveled in the winter? What happens if the wifi goes out?
While some places have on-site property management that will look after the property and take care of cleaning etc., some vacation homes might not be easy to manage.
8) Consider the maintenance costs and upkeep costs
Related to the above consideration, the cost of owning the vacation home is not just the mortgage. There are going to be costs associated with that. Things like property taxes, insurance, utilities, maintenance of the land will cost money.
If you're not into DIY or doing yard work yourself, it's important to factor in these costs before buying a vacation rental property.
You'll have to furnish the property, do cleaning after each guest, and buy new sheets and linens every so often.
9) Consider how you're going to buy the vacation home (Getting the mortgage and downpayment)
A mortgage for a second home is different from your primary home. And a mortgage for rental is different from a second home mortgage. A second home loan is more difficult to get and has greater interest rates than a primary residence. And if you are going to use this vacation home as a short term rental property that involves an entirely different set of standards.
When buying rental property, you have to come up with a bigger down payment and you'll likely have a higher interest rate also.
10) Consider insurance costs
If you are renting out your property more frequently, you might want to consider applying for a stand-alone commercial or business liability policy. This type of policy will help protect you in the event of any damages that may occur while your property is being used as a short-term rental.
If you're listing your vacation rental on short term rental sites like Airbnb, VRBO, and the guest books through the site you may qualify for insurance they provide or upgrade insurance coverage.
For example on the VRBO site https://www.vrbo.com/l/liability-insurance/
11) Consider marketing strategies on how to get your vacation rental booked
If you don't have your vacation rental booked then you just have liability. When buying a vacation rental you have to consider what marketing strategies you'll use to get your short term vacation rental property booked to start bringing in the cash flow.
Here are some marketing ideas to think about:
-Picture perfect: Have professional photos taken of your property to use in your online listings. This is your best chance to show off your home's charms and inspire potential guests.
-Location, location, location: Write in the property description about the many great things that are nearby. Parks, trails, restaurants, coffee shops, beaches, ski resorts, etc.
-Details, details, details: Write a detailed property description that paints a picture of what guests can expect when they stay with you. Include information about the surrounding area as well as any amenities or special features your home has to offer.
-Get social: Create social media accounts, like Instagram and share pictures of the property and the area. Use hashtags that guests would be interested in. Promote upcoming events in the area.
12) Consider Long Term Rental vs Short Term Rental
When looking at buying a vacation home for a rental, consider if you want to be a short term rental or if it could be a long term rental.
Short term rental properties could be a good move for real estate investing. But it depends.
A long term rental, a property that has a tenant for six months, 12 months or more, offers more stable rental income. Short term rentals can potentially see better margins with a chance to increase that income.
You could see more revenue as a short term rental investor, but it could be more sporadic and inconsistent. The short term rental may be harder to manage than a traditional rental. Short term renters are not staying for a long period of time, so you may need to spend more time marketing and managing the property.
With a long term tenant, you won't be able to use your vacation property for vacations. You won't be able to drop in for a weekend getaway or spend a week enjoying some time with the family.
Conclusion
When buying a vacation rental property, it's important to consider all of the associated costs and whether or not you're prepared for them. Things like maintenance, insurance, and marketing can be costly, so make sure you're aware of these expenses before making your purchase. By taking into account all of the things we've mentioned in this article, you'll be able to find the perfect vacation rental that fits your needs and budget.
How Persinger Group Real Estate Agents Can Help You Buy Your Vacation Rental Property
With over 40 years of combined experience in real estate, plus currently invested in 7 properties in 3 different states, Persinger Group can help you fine-tune your real estate investment strategy and offer guidance every step of the way. We make sure that our clients get the most out of their real estate investments and optimize their returns over the long term.
To start a conversation with us about buying, selling or investing visit SmartMovesChat.com
