The advantages and disadvantages of investing in a vacation rental

Vacation Rental: Is It Worth Investing?

Buying real estate for a short-term rental business is a serious step. Such a decision cannot be taken lightly. You have to weigh all the pros and cons, calculate the possible risks so that they do not become a bad surprise for you. We invite you to learn important points about vacation rental property.

Benefits of investing in real estate for short term rentals

Platforms like Airbnb and VRBO are teeming with millions of vacation property rental listings due to the undeniable advantages of this type of business:

Additional income

One of the main reasons people decide to invest in vacation rentals. Renting a well-furnished home in a popular location can generate a good income for your additional needs – around $ 900 per month. And if the owner has multiple homes for short-term rent, that can become the main source of money.

The Airbnb, Booking.com, FlipKey, VRBO platforms come to the aid of the host of the property. There you can find all the information on prices and demand for housing in your preferred neighborhood, as well as regularly finding customers for your business and competing with other owners.

Don’t worry about not being able to handle your potential guest’s requests. With software https://www.hostyapp.com, you can aggregate your rental property information across multiple platforms. The program allows you to always be in contact with customers and to quickly manage the tasks of the company.

A good investment for the future

You can sell your home after retirement and live on the money from the sale or cover other expenses. The product will allow you to spend money on your health, travel or other major purchases.

Holiday home for your family

You can always plan a rental schedule to suit your needs. Whether you’re looking for a change of scenery for the holidays, reuniting with family, or even just relaxing on your own, you don’t have to search for a place to stay. Owning a house by the sea or in a mountainous area will allow you to break with the routine.

Amortize certain costs

Renting accommodation for more than 14 days is considered a taxable business. However, it also allows the owner to amortize certain maintenance and repair costs of his property:

  • cleaning,
  • Insurance premium,
  • hosting on sites,
  • mortgage interest,
  • procurement and stuff.

Disadvantages of vacation rental property investments

Now you need to assess the disadvantages that the owner of a rented house may face.

Rising costs

A vacation rental is not something that can be left unattended. You will need to monitor the cleanliness inside the house and in the yard, fix communications on time, repair facades and pay utility bills. It requires funds, otherwise a client will not covet a poorly maintained home. Also, don’t forget to pay for the insurance.

Hosts can hire a dedicated manager to look after the house, but this must also be paid.

If you buy a home on credit, your monthly expenses go up dramatically. And it is not a fact that the rental income will cover them until the end of the payments.

Constant advertising and customer research

Prepare to place your ads on a variety of popular platforms. You must constantly review the proposals of competitors and improve your rental terms to attract customers.

You will need to update repairs, take care of the lawn, take new high quality photos of your rental home. Landlords should keep an eye on prices during vacations and a small influx of people, so as not to underestimate or overestimate the rental price.

It may be necessary to create special conditions, such as staying with animals or having a swimming pool. Such amenities increase customer demand by 10-15%. The increased comfort level can easily attract guests, and the cost of the mortgage and house maintenance will pay off very soon.

Restrictions for rental companies

Rental properties may be banned in some areas. The Homeowners Association (HOA) regulates this issue. When buying a house, specify how long it is allowed to rent a house in that area, whether you need to get a permit (which is not cheap), etc.

How to prepare before investing in the vacation rental?

Before investing in a vacation rental, there are several important factors to consider, so that the business brings not only money but also fun:

  1. Get complete information on permits for a rental business in the area where you are purchasing a property. Will you be happy with the conditions and have enough funds to pay for the license, if necessary? Short term rentals may be prohibited in the chosen area, so you should look for other variations.
  2. Choose a suitable place for customers: with a beautiful view, not too far from the main attractions and civilization.
  3. Analyze the rental housing market: what apartment do clients need, how much they pay per night on average, how many similar offers are available in the area. Besides the prices of competitors, one must also take into account the condition of their property. Higher prices provide a higher level of comfort.
  4. Find out about the demand for rental housing depending on the season. What you can count on: a steady stream of customers, or their visits only in summer. This has a big impact on income.
  5. Calculate your possible costs: mortgage, insurance, home maintenance, utility bills, and more. Compare your potential income level. Determine the percentage of ROI (return on investment). Will it be profitable to rent accommodation?
  6. Save money for the unexpected and home improvements. Customer needs are increasing, so make your property more attractive to customers than its competition. Update the furniture and think about the design.
  7. Consider, if you can regularly clean the house, so that its unkempt appearance does not frighten the guests. It may be necessary to hire a manager, who will take care of the order in the rented house and promptly report any issues and needs.

The bottom line

Short-term rental housing can be a worthwhile investment with proper budget preparation and management. When purchasing a rental property, you should be well aware of the area’s rental demand, prices, as well as costs. Prepare the accommodation for the guests: don’t think about what you like, but about the things that attract the guests.

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