A vacation home that brings rental income is a dream come true, but how do you buy one? Use this quick guide on how to invest in vocational rental property to help you prepare. Let’s begin.
Select a Place
Consider your preferences, but don’t forget to evaluate each location from the point of view of an investor and think in perspective. How long is the peak season and what is there to attract potential visitors during the low season? How popular is the place compared to other vacation spots nearby and ones that are further away, but are considered to be its major competitors? How is the local tourist industry developing?
Do Market Research
Once you know where your vacation rental property will be, you should go over the listings on popular websites to get a clear idea of the sales prices. Check how the inventory and the number of sales have been changing over the past six months to one year to get a clear understanding of the market trends. The next step in this research involves going through the rental rates to try to estimate how much you will be able to charge tenants. It pays off to take into account the vacancy rates at any given time and any cyclical changes in the rental property market.
Crunch the Numbers
Check your credit score to determine the size of the mortgage you will take out. Calculate any other expenses you will have on a monthly basis along with your mortgage payments such as association fees and property management fees. The next step is to determine how much you should charge for the vacation rental property to cover your costs. Then compare this number to the current rental rates that you’ve already researched to get an idea of your profit margin. The financial aspect of the investment planning process is the most important and most complex, so it makes sense to use expert help.
Pick a Property
It’s natural to make your personal needs and requirements a top priority, but don’t forget that the place should satisfy those of potential tenants too. The location is naturally the top factor to base your choice on. The ideal rental property should be close to the major attractions. The more beds and baths there are, the better, but the comfort of the guests is important too. The view is another key factor to take into account. A property offering amenities that could provide for a great vacation during the low tourist season has a greater earning potential.
Prepare for Renting
It’s common for vacation properties for rent to be included in special rental programs, so the owners don’t have to do anything to attract guests. Still, sharing about your place on the social networks and possibly creating a blog where you describe your vacation experiences could prove to be an effective marketing move which doesn’t require any spending on your part.
Finally, experts recommend that you stay on your vacation rental property for a week or two to get a feel of what it’s like and make any changes and improvements, if needed. Then you just have to wait for your investment income to start pouring in.