A Quick Step-by-step Guide to Buying a Vacation Rental Property

By Inna Shevchenko

The  benefits  of  buying a vacation rental property are more than merely monetary. While renting out vacation homes can be more profitable than traditional long-term rental properties, it also offers property owners the opportunity to enjoy their properties for a couple of weeks during the year themselves. 

If  you  are  thinking  about  buying  a  vacation  rental property, you need to do your homework first. To help you avoid some of the most common pitfalls, here are six simple steps for buying a vacation rental as an investment.

Choose a Top Location 

If  you  are  considering  buying  a  vacation  rental property, the first   important   step   is   to   identify  the  top  vacation  rental markets.   It  is  important  that  you  search  for  a  location that attracts  a  large  number  of  travelers  during  the  year  as  the occupancy  rate  is  one  of  the  key factors which will decisively affect your return on investment. 

To  help  you  find the top locations, you can, for example, use a heatmap analysis tool. 

While  it  sounds  intricate,  it  simply  offers  a  visual  representation  of  factors  that  may impact your ROI by highlighting them in different colors. These are listing rates, rental income, and occupancy rates.

Check Out the STR Laws and Regulations

To  avoid  getting  into  legal  trouble,  make  sure  to  check  out local short-term rental laws and regulations. In fact, in some cities,  vacation  rentals  might  be  prohibited  altogether.  Therefore,  before buying a vacation rental property, consult local government authorities and talk to your lawyer to ensure that you understand the short-term rental regulations for that city.


Set Up Your Budget: Use Financial Consulting and Loan Options

While  investing  in a vacation rental property in a top location is recommended, it will be of no use if you cannot afford it. To help  you  work  out  your  budget,  you  should list all your regular income sources and your expenses (including the hidden costs  linked  with  maintaining  and  buying  a  vacation  rental  property).  This  important exercise will help you to identify a maximum price that you will be able to afford comfortably.

Search for Properties Thoroughly and Conduct Careful Analysis

Now  that you have identified the top STR-friendly locations and know  your  price  range,  your  property investment search can commence.  In  addition  to  using  My  State  MLS, you can also check  the newspaper’s real estate section or even ask a friend. 

During   your   vacation   rental   property   search,   it  is  crucial that you continuously remind yourself that your goal is to buy a property for investment purposes. Thus, let the numbers which you have worked out in the previous step guide you, instead of your own personal preferences.

Work With an Agent

Real estate agents often have access to the top deals in a specific market. Furthermore, if you come across a vacation rental property  that  is  just  slightly  out  of  your  budget,  their years of experience negotiating property prices can be invaluable. Ideally, you should work with a real estate agent who is familiar with purchasing a vacation rental property.


Use Specialized Software and Other Tools to Make a Smart Decision

Real estate analysis requires hard work, time, and some luck. There is a lot of data that you need to collect such as: 

  • an estimation of the monthly rental income 

  • the average occupancy rate 

  • the average daily rate

  • startup costs

  • ongoing expenses

As  a  matter  of fact, in some instances, you can spend a couple of months analyzing a potential vacation rental property. As time is money,  be  sure  to use specialized software and other tools that can make this process easier and faster. These tools use big data and predictive analytics to deliver results that you can trust

Not  only  are  tools  essential  to help you when you are buying a vacation rental, but they can also help you to manage it efficiently. After  all,  even  the  best  investment  property  won’t  be  able  to  yield  the  desired return on investment if it is mismanaged. With vacation rental software  you  can  essentially  put  your  vacation  rental  business on autopilot and get yourself busy with business-scaling tasks.

Conclusion

In  the  majority of US markets, buying a vacation rental property can help you to generate an attractive return on investment in the short  and long-term. While it does require in-depth groundwork, by following these six simple steps, you will increase your chances of  success.  Moreover,  it  helps  you  to  reduce  the  risks  to  vacation  rental  investment.  At  the end of the day, it is important to remember  that  each  short-term  rental  market  is  unique.  Thus,  it  is key that you complete thorough research, know what your budget is, and enlist the services of experienced real estate agents.

About the Author:

Inna Shevchenko Chief Marketing Officer at iGMS Inna has over 12 years of experience in marketing and content writing specifically. Currently, she is the CMO at iGMS, a short-term rental management software company.

What to Read Next

New Year, New Growth

New Year, New Growth

With the past year behind us, it's time to think about what you want to accomplish in the new year. Are you looking to grow beyond your local area? Interested in recruiting top talent? Don't miss out on expert tips for expanding your team, territory, and business offerings - without growing your workload. Download this guide for the ultimate plan to meet all of your business resolutions in 2021!


Information Required

Thanks for your interest in our awesome content!
Just fill out your information below to access this page.

I am a(n)*