The Beginner’s Guide to Vacation Rental Investments

As vacation rentals have evolved to better cater to the market’s needs, so too has the concept itself, making investors find ways to capitalize on the newfound momentum. While people are searching to find more space—both inside and outside—more travel opportunities, and more inspiring remote work locations, short-term rentals have become an appealing and lucrative opportunity for investors to dive into headfirst.

Lucrative as it might be, however, owning a vacation rental can be more work than might be expected because it’s not just about the one-time purchase (as is often the case with fix-and-hold, or long-term rentals, for example). Understanding the local market, projected revenue, property management, and general upkeep are all factors that can make or break a vacation rental property, and without those facts and figures in place, the investment can tailspin before even hitting the market. Here are a few key items to note if you are a beginner investor looking to enter the vacation rental market.

Make sure you do your market analysis

Real estate’s golden rule of location, location, location may be that much more important when investing in vacation rentals. Much depends on the property for it to become good passive income, and as such, that means you have to prioritize a property’s location to ensure you’ll make money off of it. While a house can be upgraded, repaired, changed, or even rebuilt, you cannot change its address.

Narrow down your research to one or two locations that have a strong tourism industry that doesn’t rely on a few short weeks or months out of the year. Consider practical things like what attractions are nearby and how their popularity may shift throughout the year. Ultimately, you want to pick a place that is considered a suitable vacation destination with a consistent influx of visitors.

Once your location is selected, understand the patterns of vacation rentals

There are plenty of destinations worth investing in that don’t offer warm, sunny weather year-round but still have a considerable draw for tourists. As a result, you have to understand the ebbs and flows of your vacation rental market, the property’s high season and low season, and what revenue can be realistically expected.

For example, a property near a ski resort will obviously thrive in the winter months while a beach house will see many bookings come through during the summer. A property near mountains, woods, and trails might see greater success for much of the year and possibly taper off in the winter months. The point is to understand what your overall goal is with your vacation rental, find a suitable location that fits that goal, and manage your expectations.

Advertise your property

A beautiful property in the desired location isn’t worth much if no one knows about it. Filling up your calendar with as many bookings as possible can only be done through effective marketing techniques and by partnering with sites that exist for this purpose. Airbnb, VRBO, HomeAway, all provide extensive worldwide listings for properties often located in high-traffic areas; an appealing tactic for owners/investors looking to consistently rent out their property.

Vacation rentals can be a great way to expand your portfolio in locations outside of where you live full-time and create getaway opportunities for people looking to make a quick escape. Plus, you’re ideally catering to an already booming (or at least growing) tourist market. If your clients want to explore your vacation rental investment prospects, contact us today.