Buying a vacation home is an exciting purchase, and an investment that your friends and family will enjoy, too. While your property will be a source of relaxation, it can also be a nice stream of income that can help fund your mortgage. Here’s what you need to know before you buy so you can effectively market your second home as a vacation rental:
1. Research Locations and Rates
If you don’t have your heart set on a certain location, do some research about the rental prices in popular vacation areas, says Bruce Wakefield, partner at Talbot, a marketing and publicity firm. Sites like VRBO and Airbnb can help you find the rental market value of certain properties, allowing you to better evaluate your rental rates and the investment potential of a vacation home purchase.
2. Think About Seasonality
Certain areas, such as those in milder climates like Tennessee, can attract renters year-round, while other locations, such as Colorado, have peak seasons. When researching rental rates on VRBO and Airbnb, be sure to check various times of year. “Since these sites allow you to look at rates based on time period, it’s important to set your rates based on small increments,” says Wakefield. “For instance, Christmas in Hawaii is very popular, and rates skyrocket. Christmas in Los Angeles, on the other hand, is barren, so the prices are low.” By taking a look at property rental rates throughout the year, you’ll get a more accurate picture of your vacation home’s potential.
3. Take Into Consideration Added Expenses
Keep in mind that buying a vacation rental isn’t just about the initial purchase price. You also need to take into account the additional expenses that will help you maintain or market the property. Consider the cost of cleaning your rental and managing it during off-peak vacancy when setting a price, says investment property lender Elizabeth Jenkins of Source Capital Funding. “You don’t have to be the lowest price on the market to have regular renters, and you shouldn’t let other ‘low-quality’ rentals deter your pricing model,” she says.
When marketing a rental property, Jenkins suggests including the cleaning fee in the rental cost to avoid additional fees at the end of the booking. “Seeing the price change because of a cleaning fee or a maintenance fee often results in the user reverting back to look at different options,” she says.
4. Add Extras Boost Your Property’s Appeal
You may also want to factor your property’s appeal into both your evaluation of its potential and the way you market it. Make a list of events and attractions in your second home’s area to determine its value. You should also share this information with renters after you purchase the property. “Provide a document with tips, good places to eat and suggestions for activities,” says Jenkins. “Guests enjoy having a simple ‘menu’ of activities and food options to choose from.”
If you are looking at homes in a hot market where there is plenty of supply, you might need to do a little more to help your vacation rental stand out. You can add perks as part of the rental package, but remember to include this expense in your evaluation of the property’s potential. According to Jenkins, “Investing in amenities like bicycles, boogie boards, coffee and breakfast will go a long way to help your rental stick out from the rest of the pack and save your renters extra money they would have to spend on these amenities.”
5. Invest Time Into Handling Inquiries
Renting your property takes work, so be sure you include that time in your assessment of a rental property. If you don’t have time to manage it or handle inquiries, consider hiring a property management firm that will do the job for you in exchange for a percentage of the rent. When it comes to successfully renting a vacation home, this step is where the rubber meets the road, says Wakefield. “The most important thing to know here is that for every email or phone call that comes in on a property, that same customer has inquired with at least two other properties,” he says. “Following up is absolutely key. You could send a customer additional requested information, but if you don’t hear back from them after that, your job isn’t done; you need to follow up. The squeaky wheel gets the oil.”
A second home can provide extra income, so it’s important to choose the right location and invest time and thought into your marketing tactics. Keep in mind that while you’re the owner of the property, you’ll want your guests to feel like they’re at home. Ready to start your search for your second home? Head to Owners.com for all the listings and resources you need.