Purchase Vacation Rental Property



Have you dreamed about owning a beachfront vacation home or a house in Tennessee’s Great Smoky Mountains?

Well, you can do that and rent it out whenever you are not there. Plus, you get a chance to leverage your tenant’s money to offset property expenses!

If the idea sounds appealing to you, purchase vacation rental property and turn your dreams into reality.

The vacation rental property concept has gained considerable momentum over the past few years. Read on to find out why this type of real estate investment is popular and how to invest in vacation rentals for a profit.

Benefits of owning a vacation rental

Buying a vacation rental property offers you many benefits, especially if you are just starting the journey. Some of the top reasons investors are interested in these real estate properties are.

Own a dual-use property

A dual-use property is an appealing thought to novice and experienced real estate investors. You can use your vacation home rental for your vacations and rent it out for the rest of the year. 

More income 

A big advantage of investing in a vacation rental is that you are making rental income. Depending on the location, vacation homes are an attractive proposition for many tourists and travelers during the area’s high season. You can charge high rates during the high season because of increased demand. The rental income can then be used for paying the mortgage and any other expenses related to the property. 

It’s easy to find guests 

Vacation rental applications and websites such as Airbnb, VRBO, and HomeAway makes it convenient to find short-term tenants for your property. 

There’s room for growth 

Vacation home rental ownership is a great opportunity to learn about investing in the real estate world. This includes learning how to use tools such as a vacation property investment calculator to increase the profitability of your properties. A high tenant turnover means you easily become an expert in managing property issues and rectifying them before the next booking. This experience is pivotal in your journey towards becoming a successful full-time real estate investor. 

You can hire professional property management services

Vacation rental management is a major concern for new real estate investors. Many don’t have the time to manage their properties and prepare them for the next guest. Instead, hire a property management service to take over the time-consuming duties. 

Leverage real estate appreciation

A major advantage of buying a vacation rental is the money you stand to make in the long term when you decide to sell the property. The demand for vacation rentals is growing, which means their values increase each year. When you decide to sell your property, cash in on the profits and use the cash to finance another rental investment property!

Steps to owning a vacation rental property

Inside a vacation rental property

If you’d like to purchase vacation rental property, there are a couple of things you need to consider. This is because learning how to buy your vacation rental requires specific strategies.

However, the purchase process is straightforward.The entire process is broken down into five steps:

Step 1: Research

You’ve probably heard this before. The golden rule of real estate investing is location.

The property’s location is critical because it’s the one thing you cannot change about your investment after signing the dotted line. Choose the city and even the region you are interested in.

Some tips for buying beach rental property or inland property include:

  • Investigating the market conditions
  • The area’s employment rate
  • The weather
  • The proximity to important amenities
  • Demand for vacation rentals in the area
  • The current inventory

Of course, you also need to factor in the financial aspects of any prospective property. Don’t ignore the fact that your property should be accessible, pleasant, and in a desirable location for guests.

Step 2: Analyze the market

Survey the area’s demand and market.

Investing in a vacation rental differs from purchasing your own house. You need to consider several practical things such as:

  • The attractions close to the property
  • The popularity of these attractions
  • Whether there is a consistent demand for vacation rentals
  • The local vacation trends and property types

Step 3: Understand the local vacation rentals rhythm

Houses near water attract more guests in summer, while a property near a ski resort thrives in the winter period.

Find out what you can expect during the peak and off-seasons. Consider the monthly overall expenses you expect to go into running the property. This includes homeowners’ insurance, flood insurance, costs to furnish the property, cleaning costs, and other expenses. If you intend on purchasing the property, make a down payment of at least 25 percent.

Step 4: Calculating expected income and expenses

Investigate your selected market further down to see if there is inherent demand and the numbers provide a good promise of consistent positive cash flow.

Make use of vacation rental profit and loss tools to investigate the rental income and expenses further. Many landlords set the weekly rental rate up to 20 percent higher than the monthly mortgage payments expected. However, you can get away with a higher percentage during peak seasons.

Make sure you account for down-times the property will face. Don’t forget to include the property management fee in your calculation.

By now, you have a good idea of how much you expect the property will fetch you after considering your rental income and expenses. As long as the remaining balance is suitable for you, that’s a good deal!

Step 5: Advertise the vacation rental

Once you have made your vacation rental property investment, start marketing.

A few sure-fire ways of bringing bookings and boosting performance include:

  • Provide clear photos of the property
  • Respond immediately to inquiries
  • Request reviews from past guests
  • Maintain the rates and calendars on different online platforms
  • Improve the length and quality of the property description
  • Accept online bookings

Getting started

The verdict is in! When you purchase vacation rental property up in the mountains or by the sea, you are buying into an excellent passive income opportunity. However, don’t dive in headfirst without a concrete plan. Instead, do your due diligence and know what you are getting into before diving!

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