Most of the time, people invest in a vacation home with two goals in mind: to use it as a family getaway and to bring in some income from rentals. When approached in the right way, an investment property can help you to cover the operational costs and maybe even turn a profit. However, it’s all too easy to choose the wrong property and/or fail to manage it properly, which can quickly turn the investment into a money pit. If you’re considering purchasing your first vacation rental, here are some tips that can help set you up for success.
Seek Out a Prime Location
There’s nothing more important than location when it comes to choosing the right vacation property. This is because you will need to keep your property occupied as much as possible to yield the returns you want. Most of the time, vacation rentals do best when they are located in an area with heavy tourism. For example, beaches, mountains, and lakes are hard to beat, as well as national parks/monuments and casinos. Also, it’s important that there are plenty of good restaurants, shops, and activities nearby. Choose a location your family likes, but also make sure it will draw renters who appreciate what your property has to offer.
Analyze the Costs
Once you’ve chosen a location, you will want to factor in all the costs for any property you’re considering and whether it’s affordable. Research local short-term rental rates and occupancy rates, and jot down the property operating expenses, such as:
- Insurance
- HOA fees
- Utilities
- Taxes (property, occupancy, rental income, etc.)
- Mortgage
- Household amenities
After you calculate the costs, you should be able to tell whether or not the property will produce the kind of cash flow you’re looking for.
Determine What Operational Services You Need
Some landlords choose to manage their investment property themselves. However, there’s a lot to managing a property, and it can be constant stress for some. Think of any services you don’t have the time or energy to do, and consider hiring them out. Some of the most common services to think about are maintenance, repairs, landscaping, on-site support, cleaning, and tenant screening. Hiring a property management company will help you with many of these tasks, and many landlords find this preferable to hiring out different services. Of course, any operational services you opt to hire out will need to be considered in your cost-benefit analysis of the property.
Decorate for an Experience
Now for the fun part: decorating your vacation rental. As with the location, you want the design of your property to please both you and your tenants. The interior should be connected in some way to the area so as to provide an immersive experience for guests. For example, rustic elements tend to do well in homes near the mountains, just as light and breezy decor does for beach properties. If your vacation home is in Phoenix, consider incorporating warm, natural tones throughout, as well as plants like cacti, snake plants, and aloe vera.
Since you’re hoping to draw tenants, be sure to include more sleeping options than you would for your own family. Also, opt for durable furnishings to avoid excessive wear and tear.
Purchasing your first vacation rental is a big step in building your investment portfolio. Be sure to prioritize the location and do a cost-benefit analysis for any property you’re considering. Decide whether you will manage the property yourself or hire out services, and spend some time tailoring an interior that provides a special experience for guests. Most importantly, seek out advice from other landlords who have experienced success!
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