It’s a veritable gold rush for vacation rentals this year as homeowners scramble to get their share of the profits.
With incredible growth in the industry and ever-increasing demands for private accommodations, you may be thinking there is no better time to invest in a vacation rental property of your own – and you’d be right.
Whether you want to buy a vacation rental property strictly as an investment, or you’re looking to purchase a property that you can also rent out to offset some costs – the time is right to pull the trigger and get into the vacation rental business. Here is what you should consider when purchasing your first rental property.
Find the right location
Sure, you can argue that with the right positioning and marketing – any location could be a vacation destination.
But if you’re really committed to making an investment that will pay for itself and then some, you should be looking at destinations that are both popular for tourists and profitable for homeowners.
Consider these types of locations and the draw that they have:
- Coastal areas that are hot spots for year-round sun and sea
- Mountain towns that are popular for winter skiing and summer hiking
- Big cities that are year-round destinations for every type of tourist
- Outdoor areas that are common for big-families and reunions
- Towns with amusement parks that are popular almost every season
Vacation destinations like these receive a steady flow of tourism every year. The more tourism, the greater the demand for accommodations. When the demand is already there, you don’t have to worry so much about whether or not you’ll get bookings.
Plus, areas where a lot of vacation rentals already exist will likely have existing short-term rental protections and regulations in place. In areas like these, you won’t have to fight an uphill battle to rent out your property on a short-term basis.
Unfortunately, there is a drawback to buying in a popular vacation destination: you’ll face stiffer competition. If the area is saturated with vacation rental properties, you’ll need to work harder to make yours stand out.
If you don’t want to do the work to get your vacation rental property to the top of the pack in a crowded vacation marketplace, you might want to look off the beaten path. Below are some alternatives to consider:
Buy a property near where you live:
Investing in a vacation rental property that is in your town or the town over is a great idea if you’re feeling a little intimidated by buying. It allows you to stay involved with the goings-on around your rental, maintain that personal touch, and have more of a say in the service provided. You also are more familiar the demographic that visits and you know the best spots in town. This type of insight can give you a better marketing strategy, but also great recommendations for a welcome book.
Living near your rental also enables you to go the extra mile for your guests’ experience. If you’re able to, we recommend gifting your guests. This doesn’t mean you have to do anything too extravagant, but even a handwritten note to say, “thank you for staying at my home,” is enough to make your guests feel comfortable and will likely lead to a rave review! You can see our guide on gifting your guests by clicking here.
Buy a property in a location you love:
Another option is to buy a vacation rental property in a place you already love to visit. You’ll get the best of both worlds because you have a home away from home for yourself when you want to vacation – and rent it out to guests the rest of the time.
With a property in a location that you love, you have a unique perspective into what guests want when they travel to the area and what they can expect – because you’re a visitor there, too. Having this kind of information will be sure to give you a leg-up over your competition!
Find a property that’s close to attractions
Before you fall in love with a home, you should consider properties that are in the perfect location: close to local attractions, restaurants, or whatever it is that makes the area a pick for vacationers.
The difference between “walking distance” and “driving distance” is huge when it comes to where travelers decide to book, so keep that in mind when choosing your property. The farther away your rental is from certain attractions – the less you’ll be able to charge.
With that being said, properties that are farther away from the popular spots are often less expensive for you as the homeowner. Remote rentals can also be more appealing to a certain set of travelers – those looking for a true escape or off-grid experience may be more drawn to a home that is far from the hustle and bustle of a downtown area.
There’s no perfect way to invest in a vacation rental – it’s all about who you want to rent to, and how you market the property to them once you’ve purchased it.
Decide If You Want to Start Small or Big
First, you need to decide where you want to purchase your property, then comes the nitty gritty. When you picture your future vacation rental property, do you see a humble condo in the city, a huge mansion by the beach, or something in between?
Condos are a great first-time investments for vacation rental owners – they are generally less expensive than houses and townhomes, and they likely require a lot less maintenance.
Condos also often offer hotel-like amenities that entice potential guests, such as pools, hot tubs, workout rooms, and on-site staff and concierge services.
Condos are great if you want to start small, but going bigger can definitely turn more of a profit.
A study done by Rental Advisor found that when homeowners restrict themselves to 2 guests per bedroom, they could be cutting into 40% of their profits and their visibility. Rental Advisor suggests that one-bedroom rentals should have the means to accommodate 4 or more, with 2 bedrooms accommodating up to 8.
If you want to add sleeping space to your property, simple furniture choices such as pull-out couches, futons, and two full beds per bedroom boost your chances of getting booked up, while also increasing your income.
You can find out more about how to maximize the amount of profit potential you have per bedroom by checking out this article by Rental Advisor.
If your goal is to make as much money as possible with vacation rental, you should look for properties that don’t require a lot of work. While fixer-uppers and big house projects can be fun and rewarding, there are a lot of reasons why they may not be great for your financials.
Renovating a property means that you:
- Spend more money
- Spend more time
- Can’t rent your property to guests until it’s finished
- Can’t list your property with updated and relevant pictures until it’s finished
So instead of purchasing a property that needs a new kitchen, new flooring, and a new roof – it’s smart to try to find a property that has little to no need for renovations. That way, you can start making money immediately without having to sink funds into an investment that won’t be profitable for weeks or even months.
When you make this kind of investment, you probably don’t want to have to do more than some small renovations, such as adding a fresh coat of paint and decorating or furnishing.
One of our successful Evolve homeowners, Tammy Geiken, actually attributes much of her success to the fact that her vacation rental investment came furnished and ready to be rented! Though it does cost more to buy a turnkey rental, the Geikens made well on their investment – bringing in over $100,000 in less than a year. You can read their full story by clicking here.
Look For important Upgrades
After searching by location and property size, travelers will choose where to book based on – you guessed it: upgrades and amenities.
Beach-side homes with pools are a great value-add, while hot tubs in mountain cabins are almost necessary. Game rooms, saunas, grills, and decks, are all great amenities that give you a leg up on your close competitors.
If you can find a vacation rental property that has all the extra amenities and updates you could want – that’s great. If you can’t, don’t sweat it. Upgrades are the next step in your investment once you start turning a profit.
Of course, this may not happen immediately – and that’s completely okay. You shouldn’t make additional upgrades to your property until you’ve done research into what your potential guests want most, and you are sure it fits your budget.
Before you invest in an upgrade, check out your competition first. What do they have that your rental doesn’t? Use online listing sites to check up on your competitors so you can get an edge and turn an even greater profit.
Create a Great Vacation Rental Marketing Strategy
So once you have your perfect rental, in the perfect place, on the perfect vacation rental property, how do you plan to make good on your investment and achieve long-lasting rental success?
At the end of the day, a vacation rental is only as successful as the marketing strategy behind it. If you’re serious about maximizing your vacation rental profit, then I advise you to look into more effective options than doing the marketing yourself.
Will you pay a property manager handle everything? Can you take on all the work of running the rental yourself? Or will you be choosing a different strategy?
Regardless of what you choose, our Evolve blog has got you covered. From important property checklists, to a welcome guide template, andour article on which listing site is best for you – you’ll find all of your questions answered throughout our helpful catalog of posts.
But if you’re looking for more than just an article or a download – give us a call at 877.881.7584 or click here to learn more about what we do. At Evolve, we create a personalized listing and custom marketing strategy for every homeowner, provide traveler support 7-days a week, and much more for just a low, flat fee of 10%. Are you ready to achieve rental success?