With the proliferation of services like Airbnb and Vrbo, thousands of individuals are making their dreams come true by purchasing and subsequently profiting from vacation rentals. However, there are definitely potential pitfalls along the way, and research is required in order to improve your chances of success. There’s a thin line between a vacation rental that brings in little to no income and one that virtually prints money. Here are the steps you need to take that can help you achieve the latter.
Select the area
The first step to finding the perfect vacation rental is to narrow down your focus in terms of location. The best way to begin is to list places you and potential guests enjoy visiting. If you need guidance, look toward the water because many travelers prefer to be by an ocean or a lake. Mountains are another strong option, as many travelers also prefer these regions.
Research the market
Once you’ve settled on a location, it’s time to begin researching the local housing market. Considering that affordability can vary greatly from market to market, this will give you an idea of whether your selected location has vacation rentals that fit your budget. Online real estate tools can quickly and accurately allow you to gauge home prices. For example, homes in Naples have sold for an average of $349,000 in the last month.
While the price of the vacation rental is an important part of the equation, it’s not the only variable you should research. You should look for a home in a desirable area close to amenities for renters.
You’ll also need to consider if there is adequate access to the vacation rental property all year long. Does the property have central air (if not, and if it’s an older home, you’ll likely pay $3,000 to $15,000 for it to be installed). Is high-speed internet available at that address? Don’t overlook that last question because many travelers look for vacation rentals with Wi-Fi.
Compare the competition
To figure out how much money you can potentially make per night from your vacation rental, the easiest thing to do is to hop on Airbnb, Vrbo, or another similar site and look at the listings for comparable properties in the area. But before you do the math, you should know that it’s unreasonable to expect the vacation rental to be booked every day of the year. In fact, Mashvisor found that the average occupancy rate on Airbnb is close to 45 percent.
To get an idea of the occupancy rate in the specific location that you’re researching, look at the booking calendars for each comparable rental. If most of the properties are booked out a year in advance, you can expect a higher than average occupancy rate. The opposite is true if the calendars are mostly untouched.
Finalizing the deal
Once your research is complete, the next step is to hire a local real estate professional to help you complete the purchase. Be sure to select someone who is knowledgeable about the area. Preferably, you should select a real estate agent who deals extensively in investments and knows what to look for in a profitable property.
Once the purchase is complete and your new vacation rental is ready to be listed, the lone remaining major question mark is how much to charge per night. Generally, since your new property won’t have any reviews, you should price it below the comparable competition. As the positive reviews accumulate, you can proceed to increase the rent.
One way to earn more positive reviews is to hire a property manager. A management company can take care of regular cleanings and offer your guests on-site support so that their stay in your home is as comfortable as possible. They can also help protect your home by screening potential tenants.
Renting out vacation homes has become an extremely lucrative industry. As travelers increasingly look to services like Airbnb instead of hotels, the industry’s growth sees no end in sight. If you do your research and find the right vacation rental, you, too, can successfully grab your piece of the pie.
Photo via Pixabay
Source: Henry Moore firstname.lastname@example.org