Investing in property is one of the most financially prudent and secure business plans. Assuming you maintain the property, it is almost guaranteed to increase in value over time. Buying a rental property can provide you with a solid stream of passive income.
The length of a mortgage can vary and it all depends on how much you put down as a down payment, as well as how much you can afford to pay each month. A mortgage affordability calculator is handy for figuring this out. The ultimate hope is that it won’t take long to pay off the mortgage so every dollar you make goes directly into savings. If you’re looking to maximize your revenue, buying a vacation rental is a great investment. You can rent the property out for top-dollar, especially during busy tourist seasons when those types of rentals are in high demand.
The only question is, how do you find the best property for your needs and circumstances? We’re here to help you make the best possible decision. Keep reading for the top six things you need to consider before buying a vacation rental property.
1. The Costs
First, you need to make sure you understand the true costs of buying a vacation rental property. Of course, you must consider the price of the rental.
Do you have the money on-hand to buy the property? Alternatively, can you qualify for the mortgage?
Before shopping around for the right vacation rental, we recommended getting pre-approved for a loan. This way, you’ll know exactly how much money you qualify for. Additionally, you’ll get a good idea of the rates and terms available to you.
Owning a vacation rental includes costs outside of the purchase price. You’ll also have taxes. This includes both property taxes and income taxes based on how much money you make renting the property out.
Additionally, you’ll need to purchase insurance for your vacation rental. Look into landlord insurance, which is designed to provide coverage for situations unique to those who rent out a property for long periods of time. This includes damage, liability, and loss of rental income.
Finally, think about the costs of maintaining your rental property. Not only will you have regular home maintenance expenses, but you’ll also need to invest in cleaning services after each renter leaves (unless you do the cleaning yourself). This includes outdoor maintenance, such as lawn care, tree trimming, gardening, etc.
2. Location and Climate
When buying a vacation rental property, you need to think long and hard about the location. Southern vacation rentals typically perform better for year-round revenue. The climate in these locations is favorable, even during the winter months, making them popular rentals.
However, if you don’t live in the south, this can make it incredibly difficult to manage your rental unit. In this scenario, you would need to hire a property manager, cleaners, and a maintenance contractor.
Furthermore, think about the convenience of your renters. While you might not want to buy a rental on a busy city street, it shouldn’t be inconveniently located. You renters shouldn’t have to drive for several hours just to go out and get groceries.
Lastly, learn more about the local laws and restrictions. For example, some neighborhoods have restrictions dictating how long you can rent a unit at one time. Violating these laws (even if you don’t know about them), can result in heavy fines and penalties.
3. Nearby Attractions
If you’re wondering where to buy a vacation rental, consider the nearby attractions. Most people who go on vacation pick their destinations based on what the area has to offer.
For example, one of the best places to buy a vacation rental is near Disney theme parks. These attractions bring in millions of tourists every year. Snagging an available Disney vacation rental could be a wildly beneficial investment.
Check out this DVC resale site to see some of your options.
Alternatively, consider buying a vacation rental property near beaches and other bodies of water. You might also think about finding a vacation rental near or within popular tourist cities like New Orleans, Las Vegas, Washington D.C., etc.
Another important factor to consider when buying a vacation rental property is the size of the property. What is the square footage? How many bedrooms and bathrooms does it have?
The size of your rental property will determine the demographic of people who rent from you. For example, if you choose a larger property, you’ll primarily be renting to families with several children. This would be ideal if you’re looking into Disney vacation rentals.
However, if you’re looking for a larger market, a smaller property designed for couples might be more up your alley. Although, generally speaking, smaller properties rent for less money.
Next, think about the amenities you want to offer renters. Consider the amenities you would enjoy if you were renting the property.
If you’re thinking about southern vacation rentals, you can never go wrong investing in a property with a private pool. People love coming down to the south to experience the warm weather.
A pool will be an exciting feature most people won’t be able to turn down. It might even be a top priority for them.
However, other amenities to consider include:
- 24-hour emergency services
- High-speed internet and wifi
- Pet-friendly lodging
- Free parking
- On-site washer and dryer
- Full kitchen
Some of these amenities are things you can personally supply, like board games, DVDs, cable, and internet. However, some of them are dependent on the property itself, like having a pool. Regardless, the amenities you offer might make the difference between an inquiry that goes nowhere and a paying customer.
6. Renting Potential
Finally, any time you make an investment, you must identify your potential ROI (return on your investment). How much will you be able to rent the property for? Will you be able to charge more during busy tourist seasons?
The best places to buy a vacation rental are the areas that are in demand. This will ensure your rental property is always a hot commodity.
However, no one will know about your property unless you implement an effective marketing strategy. You must register your vacation rental on popular rental sites and Air B&B sites. You should also create a website for your rental property and take advantage of social media.
Are You Thinking About Buying a Vacation Rental?
If you’re in the market for a vacation rental, pay attention to the advice listed above. This is a big investment and a big decision. Take your time to make sure you’re buying a vacation rental that will be a blessing, not a burden.
And if you’re looking for more great tips and advice, check out some of our other articles while you’re here. Our blog is full of valuable information for entrepreneurs like you looking to make great investments.