Top Tips for Buying a Vacation Rental Property
Buying a vacation rental property is one of the most expensive investments. In fact, for many, this is the most expensive purchase they’ll make in their lifetime.
The upfront cost just to purchase the property alone is enough to scare experienced investors. Then, in addition to the mortgage payments, there are other continuous maintenance expenses to consider as well.
So, it makes complete sense that you want to do your homework before you jump right in. The following are a couple of the most important factors to consider when buying a vacation rental property for investment purposes.
3 Things To Do Before You Start Your Property Search
The following are three things that you should do prior to starting your property search for buying a vacation rental property:
Identify potential locations
Not all vacation destinations are profitable real estate investments. Every city has its own set of regulations. So, first find out if short-term rentals are allowed in a specific city before you start searching for individual properties.
Research the legal implications, property taxes, and insurance concerns
After you’ve paid the cost to acquire the actual property, you’ll still need to pay property taxes and insurance premiums continuously. Researching these other expenses will give you a more comprehensive idea of which properties could make worthwhile investments.
Calculate your break-even point
First, it’s necessary to calculate how much you need to generate in order for your property to be profitable. For instance, if you’ll rely on financing, first apply for a loan so that you know in which price range you can search.
Things To Consider When Buying a Property for a Vacation Rental Business
Once you’ve identified cities that allow short-term rentals, you can shortlist possible locations that attract enough tourists. Also, the closer a property is to important amenities, the better.
You don’t want your guests to rush just to arrive at your property in time for checking in. Not only is it dangerous, but it’s not the way to start a holiday. The solution is to find a place that could offer self-check-in.
When buying a vacation rental property, let your budget guide you when it comes to size. A one-bedroom apartment and a mansion with multiple rooms can both make great properties for investment purposes. Buying a vacation home with many bedrooms will allow you to charge more per night. Though, by adding a bunk bed or sleeper couch, you can also create extra sleeping spaces. At the end of the day, the most important is that the size of the property should fit your budget.
If your budget allows it, you should try to buy a vacation rental that boasts unique amenities and other creature comforts that will make your guests’ stay even more enjoyable. This will make it easier for you to attract interest in your property.
Maintenance and cleaning
Either you or a reliable company should be able to maintain and clean the property. So, try to find a property that’s close to your home or in an area where there are enough property management companies.
Nowadays buying an investment property to turn it into a long-term rental is no longer the only option available. Thanks to the boom in the sharing economy, buying a vacation rental property for the sole purpose of renting it out on a short-term basis is another viable alternative to explore.
While it might be tempting to think of this property as your own home away from home, it’s best to forget about your personal preferences. By implementing these tips, you’ll make sure that your decision-making is guided by numbers. It can also pay to work with an agent or invest in specialized software tools to help you crunch all the information so that you can ultimately buy the best property for your budget.