Some of the world’s wealthiest people made their fortune from real estate, proving that it is among the best ways to invest your money. Investing in vacation rentals is compelling; not
4 Things to Do Before Buying Your First Investment Property to Turn it Into a Profitable Vacation Rental
Some of the world’s wealthiest people made their fortune from real estate, proving that it is among the best ways to invest your money. Investing in vacation rentals is compelling; not only is it the American Dream come true, but its potential for high returns is considerable.
While beginner investors would certainly do well in considering vacation rentals as investment property, they would do even better in recognizing that, like everything else, this comes with risks. It’s a good idea, therefore, to take these tips to heart when you buy your first investment property and attempt to turn a profit from it as a vacation rental.
Do know if you can afford it.
It sounds obvious, yes, but you really do need to be sure that you have the financial capacity to buy investment property. Too many would-be investors take the plunge without considering their financial obligations. While this could work for savvy, experienced investors, newbies are urged not to carry debt in their investment portfolio. So, as a rule of thumb, debts like student loans and medical bills should be paid off first before dabbling in real estate.
Do your due diligence.
Of course, like all major financial ventures, buying investment property demands that you go into it with your eyes wide open. There are just so many variables to consider when trying to turn a profit from a vacation rental, so the more you know right off the bat, the higher the likelihood that you’ll see your just returns.
No doubt, one of the most important factors to consider is the location. Simply put, some areas are just more profitable than others, so being strategic in this regard matters a great deal. Another important aspect that’s also worth some thought is whether you should rent out your investment property long- or short-term. And while you should know the pros and cons of each strategy, you should also take into account the legality, profitability, and even your level of obligation for each, to name just a few.
Do the math.
Yes, even after you’ve purchased your investment property, there’s more math to be done, especially if you want to get your ROI from it as a vacation rental. In a nutshell, while you need to take into account other vacation rentals in the area and use them as a benchmark to pricing yours, you also need to consider your mortgage payments, how much you spent on interior design and renovations, and the like.
And it doesn’t end there. You will also need to factor in contract fees and terms, set aside a budget for marketing and listing, and finally, determine ‘management’ fees that cover cleaning, maintenance, utilities, and security. To give an example of costs, installing a home security system costs an average of $600 to $850, though security cameras and lighting can amp up the total cost. All these (and more) invariably take us to the next point...
Do the legwork (or not).
With thousands of vacation rentals on the market, it’s not enough to be in a great location, have well-appointed amenities, and provide great service. You also need to have a marketing strategy to stand out and for people to actually find you. Indeed, it’s no longer enough to be listed on a rental website; your occupancy rate depends heavily on effective marketing, customer reviews, and even social media presence, too.
While it’s within the realm of possibility to vet tenants, clean the property for the next occupancy, and handle complaints on your own, you can also consider using a property management company like Turnkey to do them for you. These companies will even include security installation in the form of keyless door locks or other methods that will provide peace of mind for you and the property’s occupants. While this, of course, means parting with a percentage of your profits, it could actually translate to bigger savings on both your time and money in the long run. At the very least, the convenience will be well worth it.
Indeed, buying an investment property, coupled with the demands of running a vacation rental, can be quite a gamble. However, with adequate knowledge and the right approach, it’s one that could potentially pay off in spades.
Photo via Unsplash
Article provided by: Katie Conroy
Providing guidance and assisting sellers and buyers in marketing and purchasing property for the right price under the best terms. Trusted Advisor, Skilled Negotiator, Expert Facilitator.....
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