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Since the stock market has been so unpredictable this year, some people now prefer investing in real estate. Many property financing options exist in this area, one of them being vacation rental investments.
Purchasing a vacation rental property to put it on lease as a holiday home is becoming a more enticing choice for a growing number of investors.
There are a few things to consider before buying a vacation rental property. However, acquiring these structures involves specific strategies, and due to the size of such investment, it’s difficult to select where to buy one. Some of these techniques include:
In This Post:
1. Deciding on a Location
When searching for the best places to buy vacation rental property 2021, choosing an attractive location for renters is essential because a good site will significantly affect the property’s performance.
The last thing you’d want is to be trapped with a rental property in a deteriorating area as opposed to one that is stabilizing or thriving.
Good destination places are typically near lakefronts, beaches, mountains, national parks, or any popular travel destination.
The most convenient way to find holiday homes is to conduct an online search. You may already have a destination in mind for your vacation property, and amazing ones can sometimes be in your backyard or state.
Having your vacation property near you can make it easier to manage it yourself than when you live far away.
Do you want your potential renters to stay in your holiday home for many months? It is usually ideal to look for areas with low property taxes, good schools (in case the lodger has kids), and lots of amenities such as restaurants, parks, movie theaters, etc.
Furthermore, a low-crime location with public transit and an expanding job sector may attract a wider pool of possible renters.
2. Understand Vacation Rental Patterns
Vacation properties are distinct from conventional rentals in that the income earned is primarily seasonal.
In choosing the best places to buy vacation rental property in 2021, you need to study the demand patterns for these holiday homes.
In the summer, a home near water would be more appealing. Over the winter, a house near a ski resort will prosper. You should be aware of what to expect during peak seasons as well as off-seasons.
When you want to purchase a vacation rental property, It won’t make sense to buy one in an area where there isn’t much demand.
So research the real estate market in general and look for areas where holiday homes are in high demand.
If your vacation rental property demand isn’t high enough, your occupancy rate might end up being low, which will affect your rental income and overall ROI.
3. Estimate Your Future Income and Expenses
After identifying the holiday home that you want to purchase and determining whether it’s in demand, you need to go a step further and calculate its expected income and expenses.
You can do this by making use of a vacation property investment calculator. This kind of tool allows you to enter basic figures for property purchase, holding costs, and maintenance, while also providing a wealth of helpful information about the potential of any property.
The vacation home you choose to purchase has to produce enough income to cover maintaining it.
Expenses associated with these rentals typically include decorating, heating and cooling, repairs, as well as insurance and taxes.
Finding out an estimate of the occupancy rates for holiday homes in the location you choose will help you to determine how much you can expect as income.
If you need help learning the occupancy rates of holiday structures, you can consider hiring the services of a real estate manager or agent.
In addition to providing you with valuable information, they could also teach you how to make money with a short term rental.
4. Determine the Growth Potential
Growth is a sign of a desirable location for both traditional and vacation rentals. It refers to an increase in the number of renters of holiday properties in any given year.
When looking for places to buy these holiday properties, it’s usually ideal to go for locations with a constantly increasing number of tourists, as this would mean a high level of income for you.
If you acquire a structure in a place where tourists hardly visit, you can end up counting losses and regretting the purchase.
To become aware of the number of people visiting vacation rental destinations, you can consider running an online search for past statistics for major cities in the country.
5. Find Out the Short-term Rental Regulations
When it comes to holiday rental properties, each city and municipality has its own set of rules.
When deciding on the best places to buy vacation rental property in 2021, you need to find out the regulations that owners of the homes in those locations are expected to follow.
Before you’re allowed to list your property or accept renters in many cities, you need to register, obtain a permit, or get a license.
If you’ve been paying attention to real estate news, you’ve undoubtedly seen that various cities, both in the United States and around the world, have changed their Airbnb laws and regulations.
This fallout is the consequence of several city lawsuits filed against the home-sharing service. As a result, there are specific locations where investors aren’t allowed to run vacation homes.
As a potential holiday rental property owner, you need a location where the laws and regulations accommodate your business instead of creating hassles for you.
Choosing the best vacation property to buy is not so difficult when you follow the strategies above.
You simply need to search for nearby locations with beautiful scenery and ensure various amenities in the area.
Then, you study the demand patterns, which entails knowing when specific rental properties are in demand and when they’re not.
Then you calculate your expected income and expenses using a real estate calculator.
You take the process a step further by studying the growth potential of your chosen rental property.
Then finally, you research the regulations associated with holiday rentals in your chosen destination.
Following these steps, you’ll be closer to acquiring the holiday rental property of your dreams.