Vacation rentals have been a hot topic in real estate investing. They can provide cash flow as well as build equity for you. Check out this article by Brittany Fisher that can help you learn some of the things to consider if you are thinking about buying a vacation rental. And don't forget, I'm happy to help you when you are ready to start investing in real estate.
Tips for First-Time Investors Starting Out with a Vacation Rental
They say there is a learning curve to everything, and that’s definitely true when it comes to real estate investments. If you’re considering a vacation rental to jumpstart a portfolio, your timing couldn’t be better. Here’s how to turn your budding idea into a money-making reality.
The time is ripe
Vacation rentals are trending strongly, and there is no sign of that changing anytime soon. In fact, if you’re considering investing in one, Forbes suggests it’s prime time to make the move, especially when you find a vacation rental property in an attractive location. Well-chosen short-term rentals equate to steady and lucrative income, so long as they have good choices and proper management behind them. On top of that, with the continual influx of renters and short stays, they can be stronger investments than long-term rentals.
Tally some numbers
When it comes to purchasing a vacation rental, just like other real estate decisions, the familiar saying that location is a top priority holds true. Location influences drawing tourists as well as what you can charge. With that in mind, consider other area rentals and what they are charging, and compare that with the value of prospective properties to figure investment potential.
Consider how much routine maintenance and repairs will cost you as well, and whether you’ll pay a property manager to help with running the rental. While it might seem like easy money, vacation rentals require organization, paperwork, handyman skills, and regular cleaning. If you’re close by and have time, ability, and energy, you might tackle it all yourself, but many people find it necessary to hire assistance. Weigh the pros and cons carefully, and if you elect to hire a property manager, carefully interview and screen potential candidates so you find a reputable agency you like that’s easy to work with.
Change your perspective
Your financial considerations are one aspect of choosing an appropriate vacation rental. View potential properties through the eyes of a guest as well. What will people be visiting the area to do, and what is the property’s proximity to attractions, events, and other draws? Think beyond the standard tourist attractions to include things like stadiums, hospitals, and concert venues. Being close to certain activities, especially if they are easy to reach from the rental, can help ensure steady bookings.
Another point to consider is that you’re competing with other rentals and hotels, so contemplate the amenities you can offer. Some surveys indicate there are basics guests search for on a routine basis, such as internet access, parking spaces, cable television, and a full kitchen. For a more posh experience, guests want amenities like swimming pools, hot tubs, and a porch or balcony with a view.
Consider what sort of guests you intend to attract, what the existing property offers, and whether you want to invest in upgrades. Sometimes it can be worthwhile to add luxurious touches, since you’ll not only enhance the appeal to guests, but also property value. You might want to finance upgrades up front, or you can spread them out, although as Spark Rental notes doing it later can mean turning away renters for a while.
Tips for getting a loan
Unless you have cash for the purchase, it will be necessary to finance your investment. Money Under 30 notes lenders are typically more strict when you’re trying to qualify for an investment property loan. You will need excellent credit, with a score in the mid-600’s or higher. You will need a substantial amount of cash sitting in reserve as well, since lenders require you to have enough handy to cover six months of mortgage payments on both your primary residence and the rental.
Before you begin
Buying your first investment property is very exciting. However, before you drop hundreds of thousands of dollars, make sure to check local laws and HOA regulations to ensure that you can put your newly-acquired home up for short-term lease. Find a local real estate professional that can help you find the answer to this question and that will work on your behalf to locate a property that fits your needs and budget.
A vacation rental can be a terrific first investment property. Choose your location well, examine potential properties thoughtfully, and have your finances in proper order. With good choices, a vacation rental can be a strong financial asset for first-time investors.