As an alternative to traditional buy-and-hold rental properties, investors have increasingly turned to vacation rentals in recent years. In this article, we’ll explore the possibilities that purchasing vacation rental properties offer investors and whether these properties are something to consider adding to your portfolio.
First, some definitions. It is also known as a short-term rental (STR), and it is the type of property you will see advertised. Wikipedia describes it this way:
A vacation rental means renting out a furnished home, apartment, or resort-condominium building on a short-term basis to tourists.
This is different from homes that are rented at the end of an annual lease and are also not in line with corporate housing. These houses are often rented to executives moving into central business districts (CBDs) for months.
Why Is This A Good Time in Our History to Buy Vacation Rental Property?
During the financial crisis, you could have bought homes very easily. Do this today. Timing matters. So, why not consider vacation rental investments now?
Low Inventory of Housing
If you’ve been searching for investment property recently, you’ll know that there isn’t much inventory of single-family homes on the market, and there is plenty of competition. There are simply not enough investors out there looking for the right deals. This is even taking into account the many potential buyers looking for a place of their own.
Vacation rentals Key West Florida properties can shine because they are priced higher than other investors. A 1031 investor will find it much easier to find a vacation property at a higher price than trying to find traditional long-term rentals.
Level of Comfort
For single-family house investors with experience, investing is easy in a vacation rental. It is not difficult for single-family investors to make the transition to vacation rental investing. Other options include medical office buildings, self-storage facilities, or warehouses. These property types are entirely different and can be a learning curve.
Another reason that now is a good moment to buy a vacation property is that interest rates have been historically low. This means that you can purchase more houses for the same investment.
Investors often plan to rent the vacation rental out for their personal vacations and as a primary residence. The sooner you buy your property, the more you can enjoy it. If you want to eventually move in and make it a “forever home,” buying it now is much cheaper than purchasing it 20 years later.
Precautions to Know Before Building a Vacation-Rental Property
You must first realize that you are buying a vacation rental home. You aren’t a landlord. Instead, you’re a host. You have guests and not tenants. This means that you are constantly advertising for guests. You may also be competing with other nearby short-term rentals. After each stay, maid service, cleaning, laundry, and other tasks must be completed. This is why a property manager that specializes in vacation rentals is crucial.
Higher Price Points
A vacation rental can often be considered a luxury property located in the most desirable locations. Imagine granite countertops with brushed nickel finishes, stainless appliances package, and a pool.