Are you considering building your real estate portfolio, and starting with a vacation rental? Vacation rentals can be the perfect solution for first-time investors. With good choices, these short-term rentals offer steady, passive income, and you can add to your net worth over time.
Location is key
Many people are familiar with the importance of a great location when it comes to real estate purchases. Just like when choosing a home, a desirable location helps to ensure your investment grows in value over time. On top of future sales potential, vacation rentals routinely perform well in areas with a continual influx of tourists, so the location is a logical influence in all respects.
Know your numbers
A great location is a smart starting point, and you should add to that a realistic idea of your budget. Part of your budget can come from examining vacation rentals in the area you’re considering. By knowing what the competition is charging, and paying attention to which properties stay heavily booked, you get a better feel for how much you will be able to charge vacationers and how steady your income will be. To figure a bottom line, you need to compare potential income with your expenses, which comes in part from knowing the going purchase prices. You can use a home value calculator to help with comparing numbers.
You’ll have other expenses to consider as well. There is cleaning and maintenance to add, which some property owners handle themselves if they have the time, abilities, and energy. Hiring a property manager alleviates those hassles, and while it adds an expense, property managers can also take on concerns like handling bookings, housekeeping, and marketing. The right property manager will also provide day-and-night local support. Even if you intend to tackle all of those issues yourself, there will be costs involved, and much of that will depend on things like location, tools, and materials.
Remember Uncle Sam
All property owners pay taxes of some sort, and that’s the bad news. As the owner of a vacation rental, however, there is also good news. Fit Small Business explains there are a number of tax advantages available to savvy rental property owners. While you won’t see those breaks immediately, they do weigh into the big picture.
In the end, it’s important to ensure you’re happy with your bottom line from the get-go. Starting out in the red is doable in some circumstances, but many investors need to try to break even pretty quickly, and if you have costly or time-consuming renovations you’re considering, you might need to portion them out. Bear in mind that any time you’re doing work, your rental will be unavailable to vacationers, so also budget for the lost income.
Worthwhile renovations
When it comes to amenities and upgrades, some experts suggest there are a few features likely to catch the attention of potential guests. For instance, being able to park in the residence driveway is important, and if the property is dated, bathroom and kitchen upgrades are crucial. As a bonus - and a big one at that - bathroom and kitchen upgrades are considered to be among the remodels with the best ROI. It’s a win-win!
Vacation rentals can be a boon to first-time investors. Do your homework, and find a great property that meets with realistic budgeting. Create a great experience for your guests, and you’re sure to find your rental is a profitable undertaking.
Blog Post courtesy of Britttany Fisher, Creator and Head Writer at Financiallywell.info