September 2th, 2014
Have you ever considered investing in a vacation rental property? Does it seem like a good idea but you are not sure about whether it is a smart investment? There are plenty of reasons why investing in a vacation rental might be an excellent choice.
Because the ROI for investment properties is generally significantly higher than traditional real estate, vacation rentals are a popular investment choice. Before the housing crash of 2008 bottomed out the prices of investment vacation properties, many Baby Boomers purchased second homes in vacation areas such as Hawaii and Florida to use as either investments or vacation homes.
According to the National Association of Realtors, 36% of all homes purchased in 2004 were purchased as investment or vacation properties.
While home prices have risen steadily since the real estate bubble burst in 2008, prices still haven’t completely recovered. And even with the rising prices, it can still be an excellent investment over the long run. Here are some tips to understanding the vacation rental industry and how to get in on this potentially lucrative business.
The vacation lodging landscape is changing. A quick Google search reveals sites cropping up all over that let people participate in non-traditional exchanges. These include HomeAway, a site that lets people rent out their home to travelers, AirBnB, which allows visitors to rent a room short-term in someone’s home, and HomeExchange, a temporary home swapping arrangement. People are rethinking how to do vacations; now is a good time to get in on that trend.
This change in the industry has also introduced a new element to property management companies. Many of these companies do it all: marketing, maintenance, bill pay, etc. Owners half way around the world can rest easy knowing that their properties are being capably cared for. This makes vacation rentals an even more attractive investment.
1. Be patient. Look around until you find a low-priced property in an area that you’d like. When you purchase a property in a place that you would enjoy, chances are you’ll find others who’ll be interested too.
2. Look for homes with the space and amenities that appeal to large crowds. People gathered for family reunions, weddings, college graduations, etc. will be likely to share expenses and help owners make a profit. You will fill your property more quickly and easily if your guests can afford to get more bang for their buck.
3. Look in places that aren’t mainstream. There are plenty of low priced properties in places like the Smoky Mountains or the Ozarks that make beautiful vacation retreats. Many of these places have vacation cabins that are currently selling for half of what they were during the real estate bubble.
There are many reasons to consider adding a vacation rental property to your investment plan. It’s more affordable and easier to manage than ever before. Expand your horizons and your portfolio.