Everything You Need to Know Before Starting with Vacation Rental Real Estate Investing

Real estate is a great kind of investment and involves different methods allowing you to choose which one suits your preferences the most. One of the most common types of real estate investment is a vacation rental. It serves as an ideal alternative for hotels and motels.

It is a good business to venture into, most especially that travel is an important part of almost everyone’s lives. According to Grand View Research, the global vacation rental market earned $87.09 billion in 2019. However, the Covid-19 pandemic hit the world that impacted not only the people’s way of living but also the economy. Major vacation rental platforms reported a huge drop in their reservations, but still, the industry is expected to recover with revenue growing to at least 36.7% in 2021.

The economy is bouncing back a bit, thanks to the initial and continuous phase of vaccine rollout. This means that this is a good time for you to explore vacation rental real estate investing. Find out more about this industry as you read this article.

What Is a Vacation Rental?

Gone are the days wherein vacationers only look for hotels or motels for their trip. The preferred accommodation these days is a vacation rental. In fact, 64% of the TurnKey Vacation Rentals’ 2019 Consumer Travel Survey’s respondents say that they opt for a vacation rental rather than a hotel booking. A vacation rental investment property simply serves as a temporary home for travelers. These rentals can be as simple as a spare bedroom to high-end villas.

Why Vacation Rentals Are Gaining Popularity

Although hotels and motels are still an important part of tourism, vacation rentals are becoming an alternative to most tourists. One of the reasons why people go after vacation rentals is because of the competitive rates they offer. Since vacation rentals are cheaper than hotel bookings, vacationers get to save extra money and spend it on other fun activities during their vacation. Privacy is another factor as vacation rentals save tourists the fuss of interacting with other guests. With vacation rentals, you can book a whole place exclusively for the whole group. Furthermore, vacation rentals give a homely vibe and warmth that an ordinary hotel or motel room will not be able to provide.

What Do Vacation Rentals Can Offer to Investors?

With the statistics we mentioned and the numerous benefits people enjoy with this type of accommodation, vacation rental real estate investing seems to be an excellent business. The question is if this investment is worth it. Not only do the guests have the advantage but also the investors. Here are some of the perks of investing in vacation rentals:

Extra Income

The beauty of vacation real estate investment is that you can make money from it, regardless if you do the business part-time or full-time. The average nightly rate for a vacation rental costs over $200. Do the math and you’ll know how much money you can bring in by just inviting guests to rent your place.

Tax Deductions

Vacation rental properties rented out for more than 14 days are considered as business, thus requiring you to pay taxes. But don’t fret, you can write off many of the expenses you made with the property. Money spent on repairs, cleaning, property management, mortgage, and more can be deducted from your vacation rental tax.

Instant Vacation Home

There will be times of the year wherein your vacation rental may end up vacant. During these days, you can use the property for your own vacation. You can even block certain days in the calendar and close the property off from bookings so that it will be exclusively used by your group. So, whenever you plan to have a quick getaway, you’ll have an instant spot to go to.

Appreciation

As we all know, the value of a property increases over time. That is why investing in a vacation rental provides you with long-term wealth. You have two options: you can either sell the property and earn more or simply use the property as your retirement home. Both options are a win-win situation on your part. 

How to Start with Vacation Rental Investing?

Ready to become a vacation rental investor? Here are some tips to get you started:

Pick a Prime Location

Location plays a vital role in vacation rentals. No matter where you choose to invest, make sure that the location will appeal to guests. Be aware of high and low seasons. For example, investing in beach rental property means you can get a steady stream of guests during summer and may have higher vacancy rates during other seasons.

Decide What Kind of Property to Buy

When it comes to vacation rental properties, you have plenty of options. Narrow down your search by choosing which amenities you’re looking for in a property. Do you want a property with a swimming pool or prefer a wood cottage type of home with a fireplace? You can also ask the help of a real estate agent to help you find a suitable property or research online from different platforms like ShortTermShop.

Conduct a Vacation Rental Comparative Market Analysis

A Comparative Market Analysis (CMA) is a study ensuring that you are indeed making the right investment. It involves studying and comparing similar vacation rental properties in your desired location to check the possible market value of that property you’re planning to buy. This analysis can help you determine if your investment will bring you a positive cash flow through renting it out to vacationers. If you’ve already done your homework and are sure about what you’re getting into, then it’s time to buy the property.

Create a Business Plan

A business plan acts as a map of your investment. It shows your goals, frameworks, as well as a set of rules and practices that can help you make decisions for your business. This helps you identify possible risks or contributors to success. Moreover, it helps you come up with strategies to ensure your business remains in the right direction.

In a Nutshell

A wonderful way to get into the real estate industry is through vacation rentals. With proper application of strategies, vacation rental real estate investing can be lucrative. Now that Covid-19 cases are steadily declining, people are starting to plan how to get back to normal. This is the best time to begin investing in vacation rentals so that when the pandemic is totally over, you’ll be ready to welcome guests to your property.

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