When Is The Best Time To Buy
If youve come this far in your guide, chances are, youre getting serious about buying a vacation rental. Now comes an important decision: when to buy your vacation rental.
Some experts will say that its best to buy your vacation rental during the slow season because thats when youre most likely to get a great deal. On the contrary, you may want to consider buying during peak season instead. This will allow you to experience the property as your guests would. Not only will you personally witness the homes selling points, but it also allows you to identify any potential issues that you might not detect otherwise.
For example, lets say that you buy a vacation property in a remote mountain village. Although the area is quiet in the spring and summer, the colder months draw a large tourist population for skiing and other winter sports. If you had purchased the home over the summer, you might not pick up on critical cues such as the need to keep the driveway clear of ice or that the heating system needs an upgrade. By experiencing the property first-hand during peak season, youll be able to make the necessary adjustments to provide your guests a premium experience.
Taxes And Higher Insurance
When you rent out your vacation home for more than 14 days out of the year, youll owe federal taxes on your rental income. That is in addition to any local, state, and property taxes. If youre considering a beach condo or house, you may be charged steeper insurance due to possible adverse weather conditions.
First, we recommend mapping out all these extra costs with your CPA beforehand. Once youre ready to rent out your property, take advantage of dynamic pricing, which will automatically price your nightly rate based on travel demand, market conditions, events, and more. This makes sure youre reaching your peak revenue potentialand not leaving money on the table.
Learn more:How dynamic pricing helps you earn more
Owning A Vacation Rental Home
As I mentioned yesterday we purchased our rental home near the height of the housing market. We secured a 30 year fixed rate mortgage at 6% through a credit union that required 20% down. These days I highly doubt you could attain a mortgage on a second home without putting down at least 20%. The down payment came from a bunch of stocks and mutual funds that my husband and I had been holding onto for years. A large chunk came from company stock that would now be worthless.
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You Make Extra Income
The biggest perk of owning a vacation property is simple: You make money. Airbnb hosts alone earn upwards of $900 per month on average, while hosts in the most in-demand cities can make four times that or more. And thats only on one platform. Dozens of other vacation rental sites exist, opening the door to even more earnings if you play your cards right.
Here are some of the best vacation rental platforms you might want to consider listing on:
Vacation Rental Investment: What Are The Options
Thinking about real estate investment to make money outside your 9-to-5 job? Buying a vacation rental home might be the best way to enter the real estate business and become a property investor.
Vacation rental investments are gaining popularity nowadays. Many people choose to buy vacation property as an investment and rent it out when theyre not using it themselves.
The idea is that you are actually buying a dual-purpose property. You can use it as a second home and spend your vacations there. Then you can rent it to guests for the rest of the year.
The major advantage of this approach is that you gain a source of steady income without having to necessarily buy an investment property. Its your second home, and it looks as if you make money on the side.
The best thing is that the money you make from bookings helps you pay the mortgage and other expenses for the property where you spend your vacations.
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Tips For Making It Easier To Own Airbnb Or Vrbo Properties
Whether you own a single home or multiple properties, here are a few ideas to help lighten the load for a vacation rental business like yours.
Outsource what you can. Some vacation communities have property management companies already established that help owners like you keep their properties up and running. Property management companies can help with things like:
- Check-in/Check out
Youll Probably Pay More To Finance The Property
One of the biggest downsides to owning an investment property is that you pay more to finance it. Investment property loans typically come with higher interest rates than other mortgage options. That means a higher monthly payment and more interest paid over the life of the loan.
On top of this, lenders usually require a hefty down payment when covering an investment property. In most cases, it’s 25% or more. On a $300,000 home, thats at least $75,000.
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Market Opportunity Is Vast And Varied
And since vacationers favorite travel locations are scattered in every corner from coast to coast, that means your scope of opportunity extends into more areas, wider price ranges, and bigger profit margins.
Create An Availability Calendar
Create a schedule for when your vacation home is available to rent. Having and keeping an up-to-date schedule will make the booking process for future vacationers run smoothly.
Keep in mind that you will need to ensure that the rental property is cleaned and tidied for the next guests between stays. Make sure that either you or someone you hire has adequate time to make sure that this happens.
Key Insight: Making money on your vacation rental property boils down to how you determine your rates, have effective advertisements and listings, and if you keep an up-to-date calendar. If you keep this in mind, your property will be generating income in no time.
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Create A Listing On Sites Like Airbnb Vrbo And Vacasa
A great listing can mean the difference between a profitable vacation rental thats consistently booked and one that barely breaks even. This Resource Center offers tips for setting up a successful listing:
- Write a catchy title.
- Create an honest and detailed listing description.
- Take great listing photos.
Experts Weigh In: What Are Some Tips For Owning A Vacation Rental
The vacation rental industry is ripe with golden opportunities and low-hanging fruit for anyone who is just starting. On top of that, the industry keeps growing every year. That means you dont have to fight for a piece of the pie it just keeps getting bigger.
If youre new to owning and operating a vacation rental property or thinking of getting started, theres a lot you can do to shorten your learning curve and boost your revenue from day one. You can start by avoiding some of the common problems in running vacation rentals. But most importantly, you can learn from seasoned veterans and vacation rental experts. To help you out, we asked these industry pros what tips theyd give to new hosts on owning a vacation rental. Heres what they said:
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Is Buying A Vacation Home A Good Investment
We all seem to get the itch at one point or another. It tends to start after a memorable vacation that we cant stop thinking about. Thoughts of buying a vacation home begin to creep in. With mortgage rates near record lows and the pandemic changing how and where many of us work, the idea of purchasing a vacation home has been gaining even more popularity.
As fun as the prospect can be, investing in real estate comes with ample work, especially if it involves buying a vacation rental property.
Do Everything You Can To Get Reviews
Guy Novik is the Managing Director of Orlando Villa Holidays, a vacation rental company that specializes in high-quality luxury villas in the Orlando area. Guys company currently operates 250 villas. Heres one of his tips for owning a vacation rental:
Reviews are amongst the leading factors which holidaymakers consider before booking a holiday rental. Because of the high price of what theyre renting, potential guests wont trust somewhere, which has a low review count or several unfavorable one. On the other hand, highly positive reviews make your listing appear more reliable. Reviews help sway a potential guests decision in your favor. So, find a way to quickly gather feedback and generate reviews for your vacation rental when you first start renting it. And dont worry about a negative review once in a while. A vacation rental that only has 5-star reviews can look suspicious.
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Continually Improve Your Vacation Rental
Because each property is unique, different strategies will work better than others. One of the necessary but exciting parts of owning a vacation rental property is continual improvement.
Keep this in mind as you figure out what things work well for your home.
One of the best ways to know how your rental is doing is to receive feedback from your guests through reviews. Reviews from your past tenants can offer a lot of valuable information about what they liked about the rental, as well as areas that can be improved.
When you do receive reviews, be sure to respond promptly to let them know you care and appreciate their feedback.
Positive reviews can let you know what your tenants really like about the property, as well as the perks and amenities that they enjoyed. They are also a valuable tool in generating more visitors and future tenants for your vacation rental.
For any negative reviews, you receive, be sure to reach out to them directly. This can show other potential guests that you care and want to provide a good experience. This is a good way to learn how to improve.
If you lack reviews, especially when you first start with renting out your property, dont be afraid to request reviews from your guests!
Write A Compelling Listing
Make certain you mention in your listing the nearby attractions and perks of staying in your vacation home.
When future tenants read your rental listing and compare it with other options, you want to ensure that your listings text is compelling. The goal is to write a pitch to why they might want to stay there. Dont overdo it, though, because nobody wants to be sold.
Carter Seuthe, CEO of , gives an expert tip, Put as much information in the headline as you can and use a professional photographer. Those two things will sell a rental more often than not.
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Obtain Licenses Permits Bank Account And Insurance
The city, county, and state in which a vacation rental business is located may require a business license to operate and another license to collect and remit occupancy tax from guests. Many investors also open up business banking and credit card accounts to avoid commingling personal and business expenses.
While listing sites like Airbnb and Vrbo provide hosts with liability insurance of up to $1 million, investors may wish to speak with an insurance agent or broker about acquiring additional coverage for an STR property. In many cases, a special homesharing insurance endorsement can be added to an existing insurance policy to provide an additional layer of protection.
You Have An Extra Monthly Payment
If youre not careful, vacation rentals can cause problems with your cash flow. For one, they come with an extra mortgage payment. Depending on how expensive the property is, that alone could cause financial stress in your household.
There are also other expenses to consider, like utilities, lawn care, and general maintenance. Youll probably have unexpected repairs, too — and who knows what those will cost you? Take a good look at your larger financial picture and be sure the extra costs arent going to strain your finances before moving forward.
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Take The Next Step With Evolve
Investing in a vacation rental property is a personal decision, but you dont have to navigate your options alone. Whether youre drawn to one of our tried-and-true hotspots or enticed by the untapped potential of an up-and-comer, our Real Estate Services team can help you take the next step.
We have the data to help identify your investment opportunities and financial goals, preferred local real estate agents who specialize in vacation rental purchases, and a team of experts available to manage your property once youve closed on your vacation home and are ready to jumpstart your business.
Build Your Own Website For Getting Direct Bookings
Another way to reach new guests and increase your occupancy is to create your own business website to receive direct bookings. Having a business website formalizes your business in a more concrete way than just having listings.
You can include information about your property on your website, as well as additional photos, and links to your social media channels. Also, you will have access to guests data which will enable you to make them recurring visitors by means of vacation rental marketing.
About the Author
Phoebe Gunning is a content writer in the Marketing Department at iGMS. She is passionate about the vacation rental industry, notably helping hosts make the most out of their vacation rental businesses. Some of her hobbies include reading, traveling and drinking a good cup of coffee.
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The Perks Of Owning A Vacation Rental
First up: The good stuff. There are obviously many advantages to owning a vacation rental, or millions of people wouldnt do it. Its why platforms like Airbnb and VRBO have grown exponentially over the last decade. Its probably why youre reading this article in the first place.
Lets look at a few of those perks now:
Advertise & Manage The Vacation Property
You or your property manager can list the propertys availability on the websites we mentioned earlier to expose it to vacationers. When you list availability, block off the days you want to use it so no one else can rent it during that time.
If you live a distance from your property and manage it yourself, youll need a system to let service staff and guests into the property. Some owners have a keypad that renters use to get into the property and then reset it between each use. Alternatively, you can hire a management company to manage the property for you, saving you time since you dont have to be involved in the daily operations.
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If You Only Rent Your Vacation Home Out Every Once In A While
The IRS has a special rule for properties that arent rented very often. If you rent your vacation home out for 14 days or less each year, you dont have to report that rental income or pay any taxes on it. Even if you rent your home out and make thousands of dollars in those two weeks, the IRS cant touch a penny.
Just something to keep in mind.
Develop A Process To Screen Guests And Protect Your Investment
Mackenzie Kearnan is the marketing manager at Autohost, a guest-screening system for short-term and vacation rentals. The intelligent software runs Airbnb background checks and flags risks to reduce parties, property damage and fraudulent activity. Mackenzie is a vacation rental host herself and knows a thing or two about screening potential guests. Heres her advice on owning a vacation rental home:
The vacation rental industry faces a considerable amount of risk from guests damaging properties. To protect our earnings, investments, and the trust our communities place in vacation rental owners and operators, we have to safeguard our properties from unruly guests. Its incredibly important to screen guests. If youre just starting, develop a process for it. Ask questions, verify IDs, and collect security deposits. That way, guest screening will be embedded in your operations. One bad guest has the potential to destroy your reputation and cost you thousands of dollars in property damage. By screening guests in a legal and non-discriminatory way, you can avoid the risk altogether.
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Mortgage Rates And Down Payments Are Lower For Vacation Homes Than For Investment Properties
Getting a loan is not as cumbersome as some might think, but it does take patienceand paperwork. Mortgage loan rates are lowest for those who have a good credit score and who plan to live in their homes all year round. Often, these owners can put down as low as 5 percent of the asking price in a downpayment. According to Bankrate, these loans are now hovering around 3 percent APR. Second homes tend to require at least 10 percent down and mortgage rates can be .05 to 1 percent higher than primary residence rates.
An investment property, on the other hand, can be purchased even while someone else is living in it, but the downpayment is usually between 20 and 30 percent down and those rates often reach 2 to 3 percent above primary residences. With this in mind, many people who have lived in their primary residence for over a year see great financial benefit in buying a new home for themselves at these low rates, and putting their existing home on the short-term rental market. Otherwise, if you crunch the numbers correctly, buying a second home outright could still yield great returns.
Melinda Satterlee of says that each person should review their own finances to see which mortgage product is best over the long-term.