Going on vacation can be very relaxing. Acquiring vacation rental investments? Not so much.
There’s a lot of work that goes into investing in rental properties, and vacation rentals are no exception. Here are some of the things you’ll need to do to get started.
1. Find the right location
This will seem like an obvious point, but your vacation rental investments should be in places where people want to go on vacation. Some place by the ocean, mountains or a lake is typically a good choice.
But you can’t just pick a location near the water and call it a day. Look at other properties in the area and see what makes them successful so you can narrow down your decision.
2. You may have to pay more
Lenders are likely to be more hesitant about giving loans to people purchasing vacation rental investments than they are for people seeking a mortgage for their residence.
Think of it from the lender’s POV: if the borrower runs into tough times, financially speaking, they’ll be more likely to keep up with mortgage payments for their own home at the expense of covering the mortgage for an investment property.
They offset this scenario by asking for a bigger down payment and setting a higher interest rate. You may need to make a down payment that’s one-fifth of the purchase price, if not more.
3. Get insured
Talk to your insurance company to make sure you have a policy that covers short-term rentals. The cost of these policies can vary because vacation rental investments vary. For example, a property near a lake would have a higher rate than one that’s not near the water.
4. Consider your expenses
In addition to your mortgage and insurance, investing in rental properties means being prepared to cover other expenses, including:
- Repairs and maintenance Furniture – Guests will want to see attractive furnishings
- Homeowner association or condo fees
And if you don’t plan on living near the property, you’ll need to hire a property management company to check guests in and out and keep the property clean and well-maintained between bookings.
5. Advertise your property
The days of advertising your vacation property in print are over. These days, you’ll need to be online to attract potential renters.
Sites such as Airbnb have made it easier than ever to promote your vacation rentals, but that also means that your Airbnb rental needs to stand out in a sea of other places.
You can do that by:
- Offering accurate, descriptive listings, which contain as much info about your neighborhood as possible
- Responding to messages about your Airbnb rental as soon as possible
- Keeping an updated calendar of local events
- Avoiding cancellations, which are a factor that can cause Airbnb’s search algorithm to penalize property owners
- Logging in often – once a week at least – to improve your ranking
And don’t just let Airbnb do the work for you. Promoting your listing on social media not only enhances your ranking, but it can also get you found by search engines. As we said at the beginning, acquiring vacation rental investments can seem daunting. But it’s not something you have to tackle on your own. Let DIG help.
For more than 40 years, the Diversified Real Estate Investor Group has helped beginning real estate investors gain the tools to understand their field.
Come to one of our meetings – there’s no charge for new guests – to learn how DIG can help assist you as you enter the world of vacation rental investments.