7 Essential Tips for Owning Vacation Rentals
Every year, people are beyond excited to go on vacation. Whether it’s a family trip, weekend getaway or backpacking across Europe, vacation is a time to disconnect from regular life and focus your time on relaxing.
All those people heading out on vacation have to stay somewhere. A decade or two ago, all you could find were hotels, hostels or condos. Now? You can find anything from a townhouse downtown to a 12-bedroom house out in the country. AirBNB has been a huge catalyst for vacation rentals and many vacationers are turning from the traditional way to vacation rentals.
One way to capitalize on this trend is to start renting out vacation homes yourself. But what should you consider first? Are there any guidelines to follow? For a start, try looking at the following list to help you get started.
Location is Key
No matter what kind of real estate it is, the biggest rule of real estate reigns supreme: location, location, location.
Forget about floor plans, bathrooms, cleaning fees or anything else. It can be hard to get ahead of yourself, but when you’re looking for a rental property, it’s important to think about why people would come to your property.
You could be in or around a major city and you have your answer in a matter of seconds. One way to check is to see if there are other rental properties around you and to see how many people are visiting the area. There’s no point in going through a lot of work if no one ends up coming.
Consider Your Relevant Experience
While there is no clear path to becoming a landlord or rental property owner, you’ll want to think about any relevant experience you have that can translate over.
Most of your time is going to be spent working with people, so if you’re not a people person then maybe this isn’t the job for you.
In addition, any management experience is going to be incredibly helpful. There will be a lot of planning, organization and communication going on to make sure everything stays up and running.
Become Mr. Fix-it
As the property owner, you’re going to be responsible for anything that breaks or stops working. When this does happen, you’ll have two options: call someone to fix it or fix it yourself.
Fixing the sink, toilet or whatever on your own is going to save you plenty of money over time. There is nothing wrong with calling someone (especially if a professional is needed), but just know that doing anything yourself puts less strain on your wallet.
Organize Your Finances
If you’re planning on entering the vacation rental business, especially if it’s on the luxury side, you’re going to be needing some equity before purchasing the property.
Rental property loans are a bit different than home loans, as they require at minimum 20%, as opposed to 3% on some home loans. Making sure you have your financial ducks in a row before searching for a loan.
You might have to look for a partner before making such a big investment. Because such a big investment…
Map Out Your Returns
When purchasing property, you’re not doing so just to give vacationers a possible destination. You’re looking to gain returns on your initial investment
Even after purchasing the property, there could be renovations or additional taxes to pay. Before you make the purchase, figure out how you’re going to be managing the money made. Similar to small businesses, it may take time before you see a profit, especially if you have just one property.
Consider Hiring Help
If you’re only purchasing one property, it may not be worth it to hire someone. If you’re purchasing multiple lots or units in a building, it might be worth it to add a property manager to your payroll.
A property manager can help you manage the little things while you take care of the big picture. People that are checking in late, those who can’t figure out how to turn on the water heater or tenants that lose their keys can all be dealt with by the property manager so you don’t have to. Having a property manager can save you from headache.