If you think that the work doesn’t start until after you’ve bought your vacation rental property, think again! There are many things that you need to give thought to before you even get to buying the property. So, here are the five key steps before you can step across the threshold of your new vacation rental property.
1. Figure out what you want from your property and who you will target
Will you use your property as a place to vacation? Are you looking at short-term rentals alone, or are you open to the idea of longer rental agreements as well? Will you mostly target families with children? These are just some of the questions that you need to ask yourself before you begin your search.
2. Research the different types of vacation rentals that are available
There are quite a few variations of vacation rental properties. For example, you can buy a condo, multifamily property, or a single-family home. These different vacation rental properties boast different characteristics that certain short-term renters will love and others will find, well, let’s just say somewhat less appealing.
Condos are divided into more than one unit, but each individual unit is still separately owned. The condo building will many times have amenities like parking, a swimming pool, etc. that are jointly owned by the different condo owners and, therefore, will be shared.
One major perk is that the maintenance of these common areas is someone else’s responsibility. The downside is this comes at a price (literally) as you'll have to pay a homeowner association (HOA) fee. And speaking of HOA, they also have their own regulations that might restrict your rental plans in some way.
Conclusion: If you're willing to pay for the amenities and be flexible to the regulations, condos can make a great vacation rental property.
A multifamily property is a complex or building that has many residential housing units with each unit having its own entrance. If you’re just starting out, this might not be the best fit for you as multifamily properties call for more property management and, therefore, can end up costing more.
However, if you’re not new to the field, it can be an excellent investment option. One reason is that this type of property holds its value. After you've taken some time to make it more appealing to renters, you'll find that investors are knocking at your new door with offers to buy it.
Conclusion: If you're willing to invest to time, effort, and a little extra dough, a multi-family property can turn a pretty penny for you (that is, if you're willing to sell it).
A single-family home was designed to accommodate one family and does not share any walls with other properties. If you're planning on targeting families or travel groups, this stand-alone building will make a great choice as it's more private. A single-family home will make even more sense if it's near an attraction and has transportation options (public transit such as buses and trains, shared ride services such as Uber or Lyft, etc).
Another thing you'll want to consider, though, is the possibility of having an HOA. This is particularly common if the home is located in a distinguished neighborhood (and even more likely if it's gated). If this is the case, refer back to the fees and regulations we discussed above under Condos.
Conclusion: If your target market is families or travel groups, you're able to find a property near an attraction/transportation options, a single-family home may be your best bet.
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Once you've decided which type of vacation rental property will best suit your requirements, it's time to start searching! But where?
Why not start where you currently are? Online!
Pick a couple of destinations that are popular among tourists and find out more about the region by browsing maps, searching for local attractions, and getting to know the competition (other local vacation rental properties). This step is important. By doing this, you will understand what it is about the area that attracts tourists and which other vacation rental units are available to rent (or even buy).
Although this might take some time, when you search for available properties you can filter according to your budget and areas that you're interested in.
After you've browsed online, it's key that you also get a local realtor to assist you. By working with a local realtor, you will gain a lot more insight on the area. As they say, when in Rome…
3. Work out how much income you can generate (and don’t forget about the costs)
Yes, the right vacation rental property will be able to generate income, but don’t forget that there will be certain expenses, too. If you view your property as purely an investment, you would want to compare the potential rental income to the price of the property and the costs involved. However, if you're looking for a property that you can both rent to guests on a short-term basis AND use for your own vacations, then personal preference will play a much bigger role.
The following are some of the typical costs that you can expect to pay.
As the saying goes, in this world nothing can be said to be certain except death and taxes. Yes, even you will have to pay tax. In fact, you might be expected to pay three different kinds of taxes. (eek) It all depends on where you're situated. You'll first have to factor in property taxes and occupancy taxes. Then, the amount of short-term rental tax you'll be required to pay will be calculated based on what you earned.
You'll want to keep your new investment safe, so it's important to get insurance. The kind of insurance that you'll require will be influenced by how frequently it will be rented out and how often you will use it.
The vacation rental industry is different in many ways. One such way is that you are not going to forward the utility bills to your guests for sure! So, remember to review the previous utility bills to get a better idea of what it costs on average.
4. Think carefully about the location
It's all about location, location, location! Travelers are not just looking for a destination – they're looking for an experience (especially millennials). Attractions like restaurants, shopping centers, and other facilities should be easy to reach from just about any rental property.
5. Uncover the different policies and rules that are specific to that town
Every area has its own unique rules and regulations for short-term vacation rentals. It could be as simple as having to apply for a permit or as complex as rentals not being allowed. So, always make sure that you find out everything there is to know about the local regulations before you buy a vacation rental property.
Now that you've done your research, you're ready to buy a vacation rental property – but, you're not just yet ready to start renting out your new vacation rental property. There's one last important thing… Before you can start renting your property, you first need to stay there yourself! That way you'll know if anything needs to be repaired.
All-in-all, managing a vacation rental property requires a lot of knowledge. The most basic and valuable tip, though, is to automate! AirGMS vacation rental software is designed to help hosts with multiple Airbnb listings, and is capable of automating up to 80% of your day-to-day activities. Professional Airbnb hosts can start with a free trial here. It's all about working smarter, not harder.
This content is courtesy of AirGMS, all-in-one vacation rental management software specifically for Airbnb businesses. It allows users to control bookings and alterations, guest communications, as well as automate day-to-day operations.