Landing the Best Vacation Rental for Your Needs
With the rise of the private accommodation sector, more first-time and seasoned investors gravitate to vacation rental properties. Owning a vacation rental not only can boost your monthly income but also position you for tax write-offs, provide a place for family getaways, and help secure your long-term financial plans.
Of course, there are many moving parts to finding and buying the right property. One of the most important factors is location; if you already have a desired location in mind, you’re halfway to a successful purchase! Below, Screening Guy shares some advice for navigating the other essential steps to securing the perfect vacation rental.
Assess Expenses and Income
Assuming you have the location picked out, your first step will be to evaluate the expenses and income of any property you are considering. And it’s essential to remember that you should expect vacancies during certain times of the year.
Research the area to see the purchase prices and rental rates of vacation rentals, and then compare those numbers to your estimated financing and operational costs. You will also need to factor in average occupancy rates to get an idea of the income you can expect.
Various expenses come with owning a vacation rental. For instance, you should prepare for paying several different types of taxes, property insurance, utilities, HOA fees, and management fees (if you work with a property manager).
Figure Out Financing
Financing investment property is a little different than financing a primary residence. If you need a little help starting, consider the equity in your current home. You could potentially refinance your home to get cash for your vacation rental purchase. In the simplest terms, refinancing gives you a new home loan, potentially with a lower interest rate. And you can receive the difference between the two loans in cash that you can then put towards your investment opportunity.
There are a few different types of loans to consider when financing your vacation home. One of the most common options is a conforming loan, which typically requires a 20% down payment and a credit score of at least 680.
For investors looking to finance several properties in one go, a portfolio loan could be the best option. If you are looking at a vacation property that includes two or more units, you might consider a multifamily loan. A short-term loan (i.e., bridge loan or hard money loan) is worth considering if you need financing before making a longer-term commitment.
Plan for Operations
Buying a property is one thing; managing it is another. Some landlords manage their own vacation rentals, especially when they have just one property. But it’s essential to understand all the factors involved in being a landlord. Not only are you responsible for cleaning between guests, upkeep, and repair, but you also need to maintain guest relations and ensure that the property has a consistent turnover to make the most of your investment.
If you follow the lead of some other landlords and transition your property to a long-term rental, you will need to change parts of your strategy. Whether you choose to hire a property manager or do it yourself, you could benefit from having professionals screen tenants before agreeing to lease the property. Check out Screening Guy for more great resources like improving landlord-tenant relations.
No question that investing in a vacation home can prove well worth it. Along with boosting your income and portfolio, purchasing a vacation property can give yourself and your family an ideal destination throughout the year. Consider the information and advice above as you navigate finding and purchasing the best home, and don’t forget to consider the management requirements necessary to run the property.
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