10 Essential Tips for
Profitable Vacation Rental Investing
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Are you considering investing in vacation rental property and not sure where to start? There are many benefits to buying a vacation rental investment; however, it’s important to ensure you buy a home that is both suitable for your needs and perfect as a long-term investment, so you get the best returns. Vacation rental investing is similar to other real estate investments, apart from the fact that you are renting your vacation home out for short periods of time – usually a couple of weeks or less – to bring in a higher return than a traditional long-term rental property. |
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Vacation homes are typically furnished, and with all the inclusions you’ve come to expect from a vacation rental property. Not every investment in your portfolio can be used and enjoyed by your entire family. You can utilize your vacation home during low season periods when rental income is lower - or whenever you like!
But how can you ensure you are buying a property that is going to bring in a substantial income for you and your family so you can get the best returns from your vacation home investment?
We’ve put together some of the top tips from industry experts for profitable vacation rental investing, so you can jump into the vacation rental market armed with plenty of knowledge and a deep understanding of how this real estate market works.
Let’s count down the tips from #10 to #1…
Tip #10 – Find a vacation rental you desire, in a location you enjoy, within your budget
Our first tip for finding a profitable vacation rental investment is to find a home that is located in an area that you both enjoy and also suits your budget. While we all might like to live in a multi-million dollar vacation rental mecca, can you afford a vacation rental listing in that area? Will you be in an area that is relaxing and somewhere that you will want to return to year after year?
It’s important to find a vacation property that suits you and your family’s wants and needs to a tee – and provides a long-term destination that your family will want to visit. There is no use buying a property in a far-flung location that is affordable, yet isn’t going to be somewhere you want to travel to for your holiday breaks.
Draw up a list of places that you desire, and work out whether there is a property that is going to meet your budget and meet your desires for your vacations.
Short term rental properties come in all shapes and sizes. You can choose from a condo right through to a mansion. So do your research and ensure you have adequate space for you and your family before you jump in and purchase a property.
But how can you ensure you are buying a property that is going to bring in a substantial income for you and your family so you can get the best returns from your vacation home investment?
We’ve put together some of the top tips from industry experts for profitable vacation rental investing, so you can jump into the vacation rental market armed with plenty of knowledge and a deep understanding of how this real estate market works.
Let’s count down the tips from #10 to #1…
Tip #10 – Find a vacation rental you desire, in a location you enjoy, within your budget
Our first tip for finding a profitable vacation rental investment is to find a home that is located in an area that you both enjoy and also suits your budget. While we all might like to live in a multi-million dollar vacation rental mecca, can you afford a vacation rental listing in that area? Will you be in an area that is relaxing and somewhere that you will want to return to year after year?
It’s important to find a vacation property that suits you and your family’s wants and needs to a tee – and provides a long-term destination that your family will want to visit. There is no use buying a property in a far-flung location that is affordable, yet isn’t going to be somewhere you want to travel to for your holiday breaks.
Draw up a list of places that you desire, and work out whether there is a property that is going to meet your budget and meet your desires for your vacations.
Short term rental properties come in all shapes and sizes. You can choose from a condo right through to a mansion. So do your research and ensure you have adequate space for you and your family before you jump in and purchase a property.
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Tip #9 - Expect the unexpected - there may be unanticipated costs
When you consider buying a vacation rental home, you are going to need to factor in plenty of additional costs that you might not have even thought about. These could include taxes, insurance, maintenance and cleaning, repairs, updates, and utilities. If you are located in another state, you might need a caretaker to meet and greet your guests when they arrive. Should any issues occur, a caretaker may also be helpful to have around so that you do not have to worry from a distance. Be aware that if you are purchasing a beach house, you might have wear and tear from the sand and salt. Also, outdoor areas will need updating and repairing due to the elements such as sun and wind. |
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It is a good idea to factor in a budget for unexpected costs for your vacation home each month, so there are no nasty surprises. You will need to maintain your property to the highest standard to ensure you are competing with other properties in your rental area to stand out from the crowd and offer your guests the best possible experience.
Tip #8 - Avoid new construction - buy an existing vacation home
When you’re buying a vacation rental home, it’s important to consider maximizing your rental income. While buying brand new property might seem like a great idea, you have no idea what could happen with contractors. You could be waiting months or longer for your property before you can realize any rental income.
Buying an existing property will allow you to realize rental income soon after the moment you exchange the keys, rather than waiting for a lengthy build to take place. The process of building can be costly and there may be a lot of unexpected costs in a build. So to ensure you are getting a good ROI (Return On Investment), it’s often best to avoid building your vacation rental home and instead buy an existing property that is ready and raring to go.
Tip #7 - Take advantage of tax deductions
In the world of vacation rental homes, you can enjoy plenty of great tax deductions that apply to a range of costs including mortgage payments, property tax, rental income, insurance, rates, utilities, and a range of your vacation home expenses.
You will need to be a little savvy and understand the ins and outs of the deductions as there can be some calculations required based on the number of days you live in the property and the number of days you rent out your vacation home property to guests.
When you navigate around this with your accountant or real estate attorney, you could be rewarded with some fairly significant tax deductions that may be well worth the effort.
Tip #8 - Avoid new construction - buy an existing vacation home
When you’re buying a vacation rental home, it’s important to consider maximizing your rental income. While buying brand new property might seem like a great idea, you have no idea what could happen with contractors. You could be waiting months or longer for your property before you can realize any rental income.
Buying an existing property will allow you to realize rental income soon after the moment you exchange the keys, rather than waiting for a lengthy build to take place. The process of building can be costly and there may be a lot of unexpected costs in a build. So to ensure you are getting a good ROI (Return On Investment), it’s often best to avoid building your vacation rental home and instead buy an existing property that is ready and raring to go.
Tip #7 - Take advantage of tax deductions
In the world of vacation rental homes, you can enjoy plenty of great tax deductions that apply to a range of costs including mortgage payments, property tax, rental income, insurance, rates, utilities, and a range of your vacation home expenses.
You will need to be a little savvy and understand the ins and outs of the deductions as there can be some calculations required based on the number of days you live in the property and the number of days you rent out your vacation home property to guests.
When you navigate around this with your accountant or real estate attorney, you could be rewarded with some fairly significant tax deductions that may be well worth the effort.
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Tip #6 - Avoid timeshare properties
Timeshares have been popular over the years; however, it can be difficult to track timeshares. There are often rogue scammers in this industry that can cause headaches for vacation property owners. There are many investors that have been bitten by the timeshare bug. While timeshares can be effective, it could be a risky venture. With such a high number of people trying to get out of their timeshare investments, it could be a good idea to avoid this vacation rental investment option altogether. Timeshares come with a great deal of risk; if you don’t read the fine print and contract to a tee, you could wind up paying much more than you should for your timeshare, without a significant return. Also, timeshares are typically more difficult to manage for short-term rentals and generally don’t make nearly as much profit as a fully owned vacation home. Tip #5 - Stay domestic when choosing your vacation home The USA has more consistent rules and lower risk when it comes to vacation rental homes. So when you are looking, focus on finding a property in the USA to lower your investment risk. |
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Buying outside of the USA or your country of residence immediately makes rules regarding title and ownership a little blurred. It’s best to stick to buying in your home country. This way you can remove the risk of being ransacked or nationalized, should circumstances turn for the worse when purchasing your vacation home property.
The rules and regulations for purchasing property and investing are unique for every country. Once you venture outside of US shores, you are at the mercy of other governments. Consider buying in a domestic area, and you won’t be exposed to any unusual or difficult rental and investment laws that may be new territory for you.
Tip #4 - Maximize seasonality for your vacation home
When it comes to maximizing the profitability of a vacation rental, the more and longer the seasons the better. If you’ve purchased a vacation home on the beach, the longer the summer and hot weather, the longer you will be able to rent out your home to short-term guests looking to soak up some rays.
The same goes for properties in ski resorts or other seasonally attractive areas. Focus on maximizing seasonality, and you will be able to drive your profits for your vacation home.
Consider what you and your family love to do during your vacation. Then, find areas that maximize those activities within their seasons, and you could be on your way to boosting your vacation rental profits.
Tip #3 - Maximize and get to know your cap rate
In the world of vacation rental properties, maximizing your cap rate is the way to truly boost your profitability. First things first, how do you define your cap rate? The process is fairly straightforward, and you can usually do this yourself with a little bit of know-how.
The cap rate, or capitalization rate, is the comparison of the net operating income (revenue minus expenses) to property asset value – so if you are earning $100,000 per year for your home, and your home is valued at a cool million, the rate would be 10%.
In the world of vacation home rentals, earning a profit is the name of the game for investors. You will need to keep your cap rate in mind and do what you can to always drive this rate higher. This can directly lead to getting the best ROI.
Generally, your cap rate can be anything between 4% and 10%. A goal should always be to increase your cap rate as much as possible. With this in mind, you can earn higher incomes across the board and ensure your vacation property investment is maximizing its value.
Be sure you are crunching the numbers and up to speed with the cap rate of your vacation rental property. Have a clear understanding of the annual return on your investment. Cap rates are important, as they not only provide an accurate understanding of operating costs, but also provide a clear opportunity for investors to check that a property investment is working and bringing in adequate ROI.
Tip #2 - Aggressively market & promote your vacation rental
Your property is not going to promote itself. Therefore, it’s important to aggressively market and promote your property so that it is top of mind for potential guests. A strong vacation rental marketing plan is essential to maximize profit for your investment. Quite simply, the more “eyeballs” that see your enticing listing, the more traveler guests will inquire with you and then likely book.
It’s critical that your property is listed on every booking site it should be. We’ve put together Top 50 Listing Sites as a great guide to show some of the best sites to use for promoting and advertising your property. Better yet, if you prefer less hassle and more profitable results, Plus+ Vacation Rental offers a complete solution to increase your bookings and manage inquiries to ensure you’re getting the best exposure for your vacation rental property.
Tip #1 - Hire a premium property manager
Buying a vacation rental home for the first time can be a big step, and you want to make sure you bring in positive cash flow from the start, so investing in a premium property manager is a great way to maximize your profits.
Taking on a vacation home and the management of your property can be extremely time-consuming; however, there are some premium property managers such as Plus+ Vacation Rental that specialize in vacation rental home property management that can take the headache out of managing your property and ensuring you maximize your profit.
The rules and regulations for purchasing property and investing are unique for every country. Once you venture outside of US shores, you are at the mercy of other governments. Consider buying in a domestic area, and you won’t be exposed to any unusual or difficult rental and investment laws that may be new territory for you.
Tip #4 - Maximize seasonality for your vacation home
When it comes to maximizing the profitability of a vacation rental, the more and longer the seasons the better. If you’ve purchased a vacation home on the beach, the longer the summer and hot weather, the longer you will be able to rent out your home to short-term guests looking to soak up some rays.
The same goes for properties in ski resorts or other seasonally attractive areas. Focus on maximizing seasonality, and you will be able to drive your profits for your vacation home.
Consider what you and your family love to do during your vacation. Then, find areas that maximize those activities within their seasons, and you could be on your way to boosting your vacation rental profits.
Tip #3 - Maximize and get to know your cap rate
In the world of vacation rental properties, maximizing your cap rate is the way to truly boost your profitability. First things first, how do you define your cap rate? The process is fairly straightforward, and you can usually do this yourself with a little bit of know-how.
The cap rate, or capitalization rate, is the comparison of the net operating income (revenue minus expenses) to property asset value – so if you are earning $100,000 per year for your home, and your home is valued at a cool million, the rate would be 10%.
In the world of vacation home rentals, earning a profit is the name of the game for investors. You will need to keep your cap rate in mind and do what you can to always drive this rate higher. This can directly lead to getting the best ROI.
Generally, your cap rate can be anything between 4% and 10%. A goal should always be to increase your cap rate as much as possible. With this in mind, you can earn higher incomes across the board and ensure your vacation property investment is maximizing its value.
Be sure you are crunching the numbers and up to speed with the cap rate of your vacation rental property. Have a clear understanding of the annual return on your investment. Cap rates are important, as they not only provide an accurate understanding of operating costs, but also provide a clear opportunity for investors to check that a property investment is working and bringing in adequate ROI.
Tip #2 - Aggressively market & promote your vacation rental
Your property is not going to promote itself. Therefore, it’s important to aggressively market and promote your property so that it is top of mind for potential guests. A strong vacation rental marketing plan is essential to maximize profit for your investment. Quite simply, the more “eyeballs” that see your enticing listing, the more traveler guests will inquire with you and then likely book.
It’s critical that your property is listed on every booking site it should be. We’ve put together Top 50 Listing Sites as a great guide to show some of the best sites to use for promoting and advertising your property. Better yet, if you prefer less hassle and more profitable results, Plus+ Vacation Rental offers a complete solution to increase your bookings and manage inquiries to ensure you’re getting the best exposure for your vacation rental property.
Tip #1 - Hire a premium property manager
Buying a vacation rental home for the first time can be a big step, and you want to make sure you bring in positive cash flow from the start, so investing in a premium property manager is a great way to maximize your profits.
Taking on a vacation home and the management of your property can be extremely time-consuming; however, there are some premium property managers such as Plus+ Vacation Rental that specialize in vacation rental home property management that can take the headache out of managing your property and ensuring you maximize your profit.
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At Plus+ Vacation Rental, our full-service property management program is focused on more bookings, more income, and quality guests. We make renting out your vacation rental home simple. We do the work and you get more booking income, driving your ROI and boosting your cap rate.
Are you ready to ensure your vacation rental listing is profitable and brings in maximum returns? Reach out today and let Plus+ Vacation Rental manage your inquiries and increase your bookings – we offer a premium property management service at a price that is lower than traditional property managers. |
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We can also manage all review requests for you and increase your stellar reviews, ensuring that you get the 5-star feedback that will drive new bookings to your door. Find out more about how Plus+ Vacation Rental works here.
Are you looking to bring in additional quality bookings for your vacation rental and boost ROI for your vacation rental? We do so much more to market, promote and manage your vacation rental. Get more income with help from Plus+ Vacation Rental.
Are you looking to bring in additional quality bookings for your vacation rental and boost ROI for your vacation rental? We do so much more to market, promote and manage your vacation rental. Get more income with help from Plus+ Vacation Rental.
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