Who doesn’t want to own a beach house or a cabin in the mountains? Especially if that beach house or cabin can be paid for (almost) exclusively by someone else? Keep reading to find out the 5 steps we have discovered to choosing a great vacation rental investment property!
Budget
This is the most important consideration when looking at investment property. Too many people have lost their fortunes in real estate for this to be taken lightly. Have a realistic idea of what you can afford before seriously beginning your property search. Reach out to a trusted mortgage lender to have your credit checked and to get an idea of how much house you can afford. Also make sure to take into account expenses such as furnishings, taxes insurance, HOA fees, utilities, repairs, etc!
Location, location, location
There are many companies that put out lists of the top vacation rental markets in the country. Here is one from Vacasa that I read every year: https://www.vacasa.com/top-markets/2021-best-places-to-buy-a-vacation-home
While these lists are helpful to give you a starting point for your research, they ignore smaller and more local vacation rental trends. For instance, our 2 top performing vacation rentals don’t even crack the Vacasa top 25 list!
So, where to start? I recommend looking at places that you love to vacation or markets that you are familiar with. Zillow and Realtor apps make it easy to search home listings in different cities.
Do your research
This step is incredibly important for finding a vacation investment property with a positive cash flow. Lots of people own beach houses that lose money. You want to be one of the few that make money! Learn about the location you are interested in. How many vacationers visit that area per year? Is this location best for year round or seasonal rentals? What types of homes are in demand and of which type are there a surplus?
Get professional help
We always talk to multiple local realtors to learn about the market area and what features are desirable for that rental market. We always talk to several sources to make sure the information we are getting is reliable.
After speaking with local realtors, next we call local management companies that manage vacation rentals for that area. Again, you should call several of these to make sure you get to speak with someone knowledgeable about the area. These companies can answer questions about what kind of property you need to get to be most competitive in your market area.
Beat the competition
Now that you have done your research and spoken with several local professionals, you should have an idea of how vacation rentals perform in the area you are researching. You should understand what features your property will need to be competitive in that area.
When researching ou purchase of our cabin we discovered that hot tubs and mountain views are essential in that rental market. Theatre rooms and indoor pools can also help your rental outperform it’s peers. In that market, 4 and 5 bedroom cabins offer significantly better returns than cheaper priced 1 and 2 bedroom cabins.
The bottom line, is that you want your vacation rental to rent well (and be recession proof), you need to make sure you stand out from your competition. Often paying extra for more bedrooms or a nicer view, will offer big dividends down the road!
Keep following my posts for info on leveraging debt and financing your vacation investment home! Please comment or message me which questions or topics you would like covered!
Also, if you missed my first post in the series, check it out below!
