6 Replies Latest reply: Oct 29, 2019 10:23 AM by amanda_ha RSS

    Investing in vacation rentals

    amanda_ha HomeAway Employee

                                                          


      Essential tips that will help you invest in the right vacation rental home:

      1) Choose your market

      • Check that the municipality they allow vacation rentals
      • Visit the market you're interested in and book a vacation there. You'll to experience the town, what your guests might encounter, and see what the competition is doing.

      2) Choose the right neighborhood

      • Choose an area that is close to restaurants, beaches, and top attractions
      • Search the HomeAway/Vrbo website to check the average nightly rental rate

      3) The perfect home

      • Make sure you can profit from it if you have to sell it
      • Get something that is less than 15 years old and is well maintained

      4) Furnished property

      • Look for a fully furnished to help reduce initial costs -You can renovate the furniture cheaply

      5) Upgrade to increase equity

      • Use high-end finishes
      • Install quality blinds
      • Add great lighting
      • High-end kitchen appliances
      • If you have an extra space that can be used as a room add a bed (if it doesn't exceed your maximum capacity)
        • Re: Investing in vacation rentals
          u0999 Premier Contributor

          4) Furnished property

          • Look for a fully furnished to help reduce initial costs -You can renovate the furniture cheaply

          In many cases "furnished" means the furniture left behind by previous owner that even thrift store does not want. Also most mass-store Chinese made particle board furniture does not hold up in a vacation rental situation. If you are paying more for a "furnished" house, in a lot of cases you will overpay for the stuff that is not worth the extra price you pay

          5) Upgrade to increase equity

          • Use high-end finishes
          • Install quality blinds
          • Add great lighting
          • High-end kitchen appliances - negative on high end appliances. Mid grade - yes. The ones that look / function nice but have SIMPLEST controls and are common brand that is easy to find repair people and parts for. Between mid grade and high end you will not a red cent more in rentals. The refrigerator for $900 will look nice and function just the same as $2900 one. The fewer fancy controls (that kids will push and play with because they glow)  - the better.
          • If you have an extra space that can be used as a room add a bed (if it doesn't exceed your maximum capacity)
          • Re: Investing in vacation rentals
            feibus Senior Contributor

            Make sure you have 6-12 months operating capital just in case it takes that long to get the revenue from your bookings (especially if you're in a market that has a short "high season", like UP Michigan).

             

            Make sure you understand that a VR is an investment and carries risks that you probably didn't realize.  Make sure you have enough money and insurance to mitigate those risks.

             

            Learn about your local tax laws related to real estate and rental homes. Alternatively, get a good accountant to explain the tax laws to you.  Either way, ignorance of tax law is not a good defense.  Just sayin'.

             

            Booking platforms vary in quality and market penetration in each market.  Figure out which booking platforms matter in your market and which are just a waste of time.  Then figure out if you can live with the rules those booking platforms impose... along with the trend that they'll change the rules at a moment's notice and expect you to just deal with it.

            • Re: Investing in vacation rentals
              ambidextrous Active Contributor

              No.

               

              Step 1: Determine the number of nights you can expect to rent in your market. Realize that your guess of the number of nights will be just that, a guess. Without this number, it does not matter what your average nightly rate is. Take that gross revenue and start subtracting: HA's fees, utilities, HOA fees, property and liability insurance, that sports club membership you'll need, property taxes, maintenance, marketing, cleaning. (You were not trying to make money doing this, were you?)

               

              Now, aside from this being an incomplete list of things you ought to do -- any reason this is being shared with us -- owners who have already joined the game?

                • Re: Investing in vacation rentals
                  bonesxxx Active Contributor

                  Trying to convince us it was a smart decision?

                   

                  Or, better yet, softening up a batch of shiny new prospects we can dump our rentals on?

                   

                   

                  • Re: Investing in vacation rentals
                    amanda_ha HomeAway Employee

                    ambidextrous,

                     

                    Great question! While this is by no means an exhaustive list, and given the fact that Community is a place for owners to learn from one another, we also like to hear from members like you about what they have found to be best practice or helpful. Every reader (both Community members and outside readers) have a different level of vacation rental experience, which is why we post content like this for those who may be interested in purchasing another property or are considering buying for the first time. Thank you for contributing to other owners Community experience by sharing your knowledge about investing in vacation rentals.

                     

                    Best,

                    Amanda