If you are considering getting into real estate investment to make money, one of the best options to consider is vacation rental homes. The vacation rental home is gaining popularity these days as it is the best way to enter into the real estate business and become a property investor.
Vacation rental business is booming exponentially now a days. The US vacation homes and short term rental industry revenue was around $13.5 billion in 2021. The Mount Pocono, which is a small region in Pennsylvania has total revenue of around $3.5 billion every year and is expected to grow after COVID-19 Pandemic.
You can also go with the real estate investment platforms, the major advantage of this approach is that there is a steady income, without actually buying the investment property. All you have to do is invest a certain sum of money in the short term rentals companies with professional investment managers and they will take care of smartly investing your money on properties. You will get share and fixed return.
Investing in a short term vacation rental business doesn’t guarantee that you will be rich soon, but it guarantees a good source of income. It is difficult to ascertain how much money you can make from the vacation rental property as many variables can impact the income generated from the vacation property.
It is a lucrative business and can build a defined business model with a clear plan of action. However, it is also important to consider that it is more volatile than traditional real estate investment as there is more room for growth and scaling, considering relevant market research and planning that can help you reap the benefits of vacation rental properties.
Vacation property investment calculator
The vacation property investment calculator helps to assess the total return and contains a list of inputs that are required in terms of mortgage and vacation home expenses.
- The input value of the purchase price is added, including down payment, mortgage terms with monthly expenses.
- The expected annual price growth and changes from year to year are based on the overall growth from state to state.
Investing in a vacation rental can be rewarding and highly profitable, with the right research, consistent work and factors.
How to invest in vacation rentals
Before you think about considering vacation rental investment, it is best to look where you can start and how the market operates. Finding profits with vacation rental depends on different factors. This includes location, management strategy and attraction nearby. To assess these factors, read the step by step guide below before you consider investing in vacation rental investment.
- Location: The location of the property is one of the most crucial factors in assessing the value of the property. You can uplift the value of the property by renovation and other techniques but you cannot change the location. The location is the first thing that you should be looking into before considering investing in vacation rentals.
- The demand: Even though the overall market has been quite progressive with rental properties, it is quite different in different locations. You can shortlist the [potential locations and then shortlist based on the individual demand for vacation rental. Consider looking into the demand based on the seasons, traffic and popularity of the area.
- Occupancy rate: It relates to the nights that the vacation rental is booked divided by the nights that it is available for. It is in your best interest to find properties that have greater occupancy rates.
- ROI and expenses: Speaking of finance here, it is yet another crucial factor that you need to consider. This means that you need to calculate how much the property can cost and how much you can potentially earn.
- It is important to get the numbers right. Note down all the expenses and check the differences. Calculate the income you need to earn on a monthly/yearly basis to generate profit.
Create a plan for the vacation rental investment
It is a good idea to create a comprehensive plan for investment that covers every decision with your business. Create a future timeline for your investment. Ask yourself – how much of the investment do you want to make and hold for how many years?
Not sure how to plan your investment? Look for short term property investment company, specialising in vacation rental investments, a rental platform that offers different vacation homes in the US and across the world while also taking care of the management and administration of the properties.
Determine the source of your investment
If you have sufficient funds, you can use them to cash out and invest in the rental property. By financing the mortgage, you can take out the difference that you have earned and use it for further investment. A reverse mortgage gives access to the full amount and doesn’t have to be paid back.
Pros of vacation rental investment
- One of the major benefits of investing in a vacation rental is being able to earn additional income. It depends on the factors discussed above.
- You have a home available even for personal use, especially on days when there are no guests.
- The investment made in a vacation rental is fixed and grows over some time.
Cons of vacation rental investment
- Renting a holiday home requires management that can be overwhelming at times.
- The cost of investing and managing the property cab pile up over time. It is recommended to invest through a property investment company, which also takes care of the management of the property along with the investment.
Minimise risk with a vacation rental
Still, confused or feeling nervous about investing in short term rental property? No matter what your goals are many companies are there to help you. They create a comprehensive management strategy that ensures that all your investment requirements are met
- They manage multiple accounts and listing, which distributes the risk across different rental properties
- The professional team is well-experienced to manage the fund flow, using specialised functionality.
- The process of investment is hassle-free. They takes care of the investment, management and other back end work with hospitality management as well.
- All the administration and marketing related activities will be taken care by those companies. So just invest, relax and earn, they take care of the rest
A specialised investment company in a vacation rental makes it easier for potential investors who don’t have much experience with vacation rental management
Vacation rental investment opportunities involve purchasing one or more properties to rent out to vacationers for short-term stays. This can allow you to generate an income while also providing you an asset to appreciate over time.
Investing in vacation rentals can provide you with a steady stream of income, tax incentives, appreciation over time, and can be an enjoyable way to diversify your investment portfolio.
As with any investment, there is always a risk involved. When it comes to vacation rentals, you could be faced with possible vacancies, unexpected repairs, and the need to constantly market your properties for renters.
The costs associated with a vacation rental investment will vary depending on the specific property and the market you are in. You could be responsible for property taxes and insurance, rental or repair costs, or other maintenance costs.
Before investing in vacation rentals, you should research the current market in the area where you are considering investing. You should also take into account factors such as property taxes, vacancy rates and potential for appreciation.
When it comes to setting rental prices for vacation rentals, you should consider the local market demand and supply, the seasonality of visitors to the area, amenities offered and the types of guests you want to attract.
There are many avenues for finding tenants for your vacation rental, including online listing sites, referrals from past tenants, and advertising in local publications.
Depending on where you are investing, there could be various local laws and regulations that you need to be aware of. This could include zoning laws, rental restrictions, and other issues that could affect your investment.
To maximize your investment, you should focus on finding tenants who stay for extended periods of time, setting competitive pricing, and using marketing strategies to attract the right type of tenants to your property.
Most tenants prefer to pay for their vacation rental stay via credit card or an online payment service such as PayPal or Venmo.