Thinking About Buying a Vacation Rental Property?
Buying a vacation rental property should be an exciting process. You’re adding to your portfolio, expanding your wealth, and hopefully, creating something that will deliver profit for you and your family for years to come. Sounds great right? It’s not quite as straightforward as purchasing and letting the cash roll in, rather there’s a process you should follow and, importantly, take your time with.
Tips for Buying Your First Vacation Rental Property
Understand Why You’re Purchasing
The first step on the vacation rental property journey is to understand exactly why it is that you’re planning on purchasing at all. Is this purely an investment? Do you want to create an attachment to the property making it yours or is this purely a financial investment? This might even be a property that you’re purchasing as part of your retirement plan.
Whatever your reasons are for making the purchase, get your goals crystal clear. It’ll help you stay focused, ask the right questions and, ultimately, make the right decisions.
Spend Time Researching
Now that you’ve set your goals, and you’re ready to realize that vacation property dream, it’s time to dive into the research. Thankfully, you no longer have to drive from realtor to realtor, asking for property details and collecting paperwork. Instead, we have our good friend Google. You can find endless information on properties on Google, even including previous purchase prices and current market trends/prices.
You’ll have heard the old adage, location, location, location, and it’s still very true to this day. Location truly is the factor that you really cannot avoid. Get the location of a property wrong, especially a vacation rental property and you’ll regret it. Beyond location, dig into what the neighborhood is like, what the seasons are, local amenities, and current demand.
Analyze The Market
After the initial research phase, chances are that you’ve managed to narrow down your search to a few (maybe even one) specific locations you’d like to purchase in. Now is the time to deep dive. Really get into what the area is like. What stories do the figures tell? Is the area on an upward curve or more steady? What’s the demand like for rental properties in the area?
Go beyond Google and dig into rental sites such as Airbnb or VRBO to begin to quantify your own data. Comparable to the property that you can purchase, what sort of prices are owners looking to achieve? Is there a surplus or dearth of options available to renters?
Get To Know A Specialist Real Estate Agent
One of the best things that you can do after your research is to turn to an expert. Local real estate agents know the property market better than anyone else. They live and breathe the area you’re wanting to purchase in. Leverage their knowledge, get to know one and they’ll prove invaluable. Especially because they’ll know the local nuances that a layman wouldn’t know about such as annual events, regular closures, etc.
Explore The Seasons
Unless you’re looking to purchase in a popular urban area, such as a major tourist city, you’ll need to pay attention to the seasons. Take, for example, if you’re looking to purchase a lake house as your vacation property. There are going to be high and low seasons that happen each year. That means you’re unlikely to have a flat income rate, and this needs to be factored into your calculations.
Crunch The Numbers
Talking of calculations, getting the numbers right is not only helpful but is mandatory if you’re going to be using this property for financial gain. Sure the biggest single outgoing will be the initial purchase, but you need to consider monthly mortgage costs, utilities, tax, maintenance, sundries, and management fees. Err on the side of caution, remember that almost all budget plans go over rather than under.
Consider Advertising Avenues
Don’t worry about getting out the pen and paper for a shop window advertisement. With the advent of Airbnb, VRBO, other property portals such as Booking.com, and even social media marketplaces, there are a plethora of advertising options. Some are completely free, others will charge a commission on bookings (which needs to be factored into your figures).
If you’re so inclined you might even consider building your own website for the property. This is particularly worthwhile if you have a unique, unusual, or well-placed property. Just remember that it’ll take a large investment of time and money into SEO (Search Engine Optimization) to get anywhere near the top of the first page of Google.
Look Into Management
Chances are you’re not about to purchase a vacation property in your local neighborhood. In fact, it’s unlikely to even be in the same state! That means you’ll need someone local to act as your manager. They’ll take care of the day-to-day running of the property (cleaning and maintenance) and can also handle bookings and guest issues. They don’t come cheaply, and will usually charge a percentage of your rental bookings, but are worth it for a hassle-free process.
Key Takeaways
Buying a vacation rental property might feel like something of a grueling process. There’s a pile of research to conduct, multiple visits and searches to make, and a tonne of paperwork. That shouldn’t put you off, this is a worthwhile, exciting purchase that you’ll enjoy either as a vacation property for yourself or as another line of financial gain.
- Remember that location is the most important part of the research process. Get the location right and much else will follow.
- Don’t underestimate the power of knowing a local real estate agent.
- Get the figures right, and be cautious rather than overly optimistic.
- Make buying a vacation rental property easier by using Getaway
