Vacation Homes - What Investors Need to Know

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Real Estate

The Best Advice for First-Time Investors Considering a Vacation Rental


If you’re looking for ways to improve your net worth, a vacation rental can be the perfect solution. Tourists are seeking the homey environment of rentals over hotels more and more, and when located in an area that draws ample vacationers, a well-chosen and well-run rental can quickly pay for itself. Read on for information to help you make a sound investment so your decision doesn’t turn into a drain on your time, money, and energy. 


Smart Investment or Money Tossed Away?


New investors are wise to be cautious, and it’s only logical to examine any market before investing your funds. When weighing the advantages and disadvantages, investors can earn steady passive income with this sustainable business model without needing to jump over too many hurdles. On the other hand, it can be expensive to finance the property, and managing it comes with several challenges including maintenance and keeping occupancy rates high. With a solid foothold in consumer spending, it’s a smart investment so long as you make thoughtful choices regarding funding the purchase, selecting the property, and management.


How Will You Finance Your Investment?


Unless you are able to purchase a property with cash, financing will weigh heavily into your decision-making. Loan options vary greatly, depending on your circumstances. For example, according to Dave Ramsey, an FHA loan is an excellent choice for first-time homeowners who can’t qualify for a traditional mortgage. To qualify, buyers don’t need a powerful credit history, and on top of that, they don’t need to come up with as much money down as with a conventional mortgage. However, although desirable, FHA loans can become expensive due to long-term costs. 

A conventional mortgage is a typical loan for investment properties, but bear in mind that lenders have more stringent requirements than for a personal residence. When it comes to investment properties, you’ll want your credit rating as tidy as possible. Mashvisor explains you’ll get the best interest rates if your score is at least 740, and you’re expected to make a 20% down payment.  


A Well-Chosen Location Equals Success


With your finances in order, you’ll be ready to start hunting for that perfect investment property. While it’s no secret that location weighs heavily into a property’s value, it’s less widely understood how location impacts a vacation rental. Forbes suggests that owners can expect to see success with properties in high-volume tourist areas, with many desirable locations boasting palm trees, warm weather, ocean waters, and beaches. 

Any time you’re purchasing a property to appeal to other people, it helps to view prospects through their eyes. As you’re hunting, think about things guests might find preferable, especially while on vacation. Again, location weighs into the equation, but there is no single focus. Things like beach access, public transportation, and proximity to airports are a few potential pluses. 

Of course, amenities can be key points as well. For instance, a swimming pool, balcony, patio, or hot tub can catch the eyes of potential guests, and many vacation rentals offer hotel-like basics, such as free coffee, a parking space, and free WiFi. 


The Management Question


Many vacation rentals are run entirely by their owners, and it’s an economical choice if you have the time and skills to do so properly. However, if cleaning, maintenance, and bookkeeping are either beyond your abilities and/or time constraints, a professional property manager is most likely the way to go. However, be sure to budget appropriately for whichever direction you choose, and if you hire a pro, screen candidates carefully. 

If you don't live near your vacation rental, then you’ll definitely want to consider hiring a management company to take care of the property. Since your guests will expect to stay in a secure rental, consider hiring a vacation rental company like Turnkey to ensure that high-tech security measurements, including digital locks, are put into place. Another perk of hiring a management company is offering a smooth booking experience for your guests and ensuring your rental is cleaned and ready for the next occupants.

A vacation rental can be an ideal first investment property. Ensure that you arrange finances appropriately, choose a great location, and make smart decisions on management. Good choices mean good earning power, and you’ll have a satisfying money-maker in your portfolio. 


Article courtesy of  Brittany Fisher