In an age where the internet has made it incredibly easy for anyone to rent out property, vacation rentals are increasingly big business. If you have the money to buy a second property, this can become a steady and profitable source of income, and it could even pay for itself. However, if you want to invest in a profitable vacation rental, you’ll need to be organized and take things one step at a time.
Research Your Area
The first thing you need to do is become an expert on your city (or the city you will be buying the property in). If you are thinking of buying a vacation rental, you should familiarize yourself with how the different areas appeal to different tourists. Once you’ve decided on a general location, look to find a home near popular attractions.
Calculate Your Budget
Before you start looking at homes, you need to have a realistic idea of your budget. Bigger Pockets recommends calculating your budget by subtracting your current monthly debts from your monthly gross income, and multiplying that figure by 0.45. What you will get is the figure you cannot exceed on your monthly payments. This will help you decide not only on which houses you can buy, but also which mortgages you should consider.
Learn About Taxes
There are certain specific tax rules you should know if you want to own a vacation rental property. If you live in your home for 14 days or less within a year, your home is classified as a business, and not a personal residence. This is important because any income you make on a personal residence is tax-free, while you need to declare it if it’s a business (but you can claim expenses).
Make Necessary Renovations
Once you have bought the house, it’s wise to limit any renovations to what is necessary and what will add concrete value to your rental. According to Realtor, you should focus on boosting curb appeal and on bedrooms and bathrooms. Replace damaged or outdated items rather than paying for full remodels, and keep a close eye on small details like scuffs and cracks, which can be offputting to guests.
Select a Property Manager
Many people choose to manage their vacation rentals by themselves, but you have to understand that this is hard work. As a first-timer, it’s probably best if you invest in a property management company to guide you through the process. Ideally, a property manager should be able to provide 24-hour assistance, hire maid services for newly arriving guests, and make sure your property is secure. There are several choices out there, so make sure you ask the right questions when selecting one. These include verifying their insurance and certifications, as well as fully understanding their fees, systems for finding tenants, and communication practices.
Narrow Down Your Target Audience
Before you move onto marketing, take a second to establish your ideal persona, or target audience. This will guide your decisions when it comes to the language, platforms, and strategies you use. More concretely, it will help you if you choose to use targeted advertising on social media.
Establish a Marketing Strategy
There are various strategies commonly used to market vacation rentals. You could, for example, create useful content on a blog that attracts readers to your website, or use newsletters to keep former guests engaged. Most strategies involve a mixture of these approaches; don’t be afraid to try several things until you find what works for you.
Create Your Welcome Pack
Finally, you are ready to welcome your guests to your vacation rental. To guarantee an awesome first impression, you need a good welcome pack. Many people go with a physical document, but you can also do something more modern and digital. You can even use Pinterest boards to collect useful tips and recommendations for your guests.
Buying a vacation rental can be a wonderfully profitable investment, but you need to be organized and strategic about it. Take the time to separate the work into individual tasks and to plan your approach. This will not only make for a more successful rental, but it will also be a lot less stressful and overwhelming for you.
By Katie Conroy