If you are interested in some passive side income, vacation rental properties are a great place to start. In the beginning, you can become so overwhelmed with all the information out there that you can seemingly feel stuck. We have compiled a list of six of the most asked questions people have when first starting.
How to Find the Right Location
Research market trends and see where people are going on vacations. It may not always be the place you expect. The type of vacation individuals book depends on who they are going with and what experiences they want to have. Someone interested in booking a family vacation will look for different vacation rentals than people on spring break.
Lists are available online that show where people are renting vacation homes. Utilize these lists and pick a few different towns to visit. During your visit, explore the area. You are looking for places close to shops, food, and local attractions. Make sure your potential rental property is in a safe location as well. After all, it’s all about location, location, location!
Find Out the Local Regulations
The type of vacation rental home you buy will determine if you can rent short-term or long-term. The category your property falls under will vary by city and state. For example, if an individual rents your property for less than 14 days, that could be prohibited because it would fall into the hotel/motel category. This provision can be found in a few different states, so in these areas, you could only book stays for over 14 days, depending on the location of the property.
Look Into all Expenses
- Maintenance expenses
- Taxes
- HOA fees
- Mortgage payment
- Any booking fees you may incur
- Occupancy taxes
- Utilities
- Mortgage fees
Depending on the area you choose, there can be additional fees. In some places, you will have to pay a rental expense. The state and local regulations also factor into the cost of the vacation rental. When you file your taxes, you will be responsible for paying rental income taxes. The Tax applies if you rent your property for more than 14 days.
Financing Your Vacation Rental Investment
When looking for a vacation property rental loan, there are a few different things you should consider. Typically, you will find that rental property mortgage interest rates are higher than standard interest rates. A home mortgage is a low-risk investment, while vacation rental loans are high-risk, affecting the interest rate.
There are three types of loans to consider when looking to finance your vacation rental.
- Agency loans are government-sponsored
- Bank loans are loans owned entirely by the bank
- Non-QM loans are 30-year loans based on your credit and your investment income.
Should You Hire a Property Manager
If you are not local and do not want to spend all of your time dealing with individual renters and taking the time to clean the property after each renter, you may want a property manager. Some people do not need the added expense and instead, look for more affordable options. There are a few ways to make your vacation rental run smoothly without a property manager.
You can hire a company to come in and clean once the renter leaves. The downside of that is you are reliant on how well they clean. If you hire the wrong person or company, this can lead to negative experiences for your renters. Meet the person face to face and get references of other places they clean.
Marketing Your Vacation Rental
There are so many vacation rentals on the market that you’ll need someone to help make yours stand out. Marketing firms know how to accomplish this. As soon as you contact a marketing firm, they will set up a meeting with you about the best ways to get your vacation rental business started.
Marketing agencies can help in various ways, such as how to boost your search engine results. These firms show you the benefits of using blogs to increase your website traffic and they know how to use the right keywords to attract your target audience.
Investing in vacation rentals can be highly profitable when done the right way. Before jumping into purchasing a property, do your research. With a lot of work and hiring the right people, you will be highly successful.
