Finding a vacation rental house to invest in can be a wise business decision that provides lots of rewards and opportunities. In order to be successful you have to find an investment property that is right for you and your tenants. It is therefore important to exercise some caution and spend some quality time looking for the investment rental that is right for you during the selection process.
There are certain things to consider when looking for that perfect vacation rental investment property. It is necessary to decide from the start what you are looking for and write them down so that you won’t get distracted.
The first thing to look for is property that is close to the attractions, restaurants and shopping areas. As any real estate agent can tell you “location, location, location” is one of the main things to consider when you are looking for a nice house. This is one of the things that your clients will be looking for when they are planning their vacation. A great location makes the vacation rental more desirable and attractive to your clients increasing the demand on the house, and in turn allowing you to increase the amount of money that you can charge for your rental.Credit: Clint Engelage
Log Cabin at Lake Millstone
Make sure that your vacation rental is reasonably close to a big city with a major airport nearby, no more then two or three hours driving from the city. The main reason for this is because people don’t like to drive very far after flying to get to their final destination. They might be tired, hungry, and most importantly they will be ready to start their vacation.
After you have found a few potential vacation rentals your next step should be to find out what the economic conditions are like in the area. If the price of real estate in the area is steady or improving, your investment has a better chance of increasing in value, and you will have better results finding tenants for your vacation rental.
Remember that tourist area vacation rentals have appreciation rates that are different than houses in other areas. This can help the property increase in value in the long run, and help buffer you from downward economic trends.
On the other hand, if the value of property is falling it could indicate that the area is loosing its appeal as a destination hot spot and might not be worth investing in at this time. If this is the case you might consider looking at other vacation areas. Find out exactly why prices are falling and how close to the bottom the market is to help you decide if investing in a vacation house is a smart move for the area.
By now you should have a list of a few possible pieces of property that would make good investments. The next step is to narrow the selection of possible rentals down to one. Inspecting the properties is a good place to start for this task because you don't want to invest your hard earned money into a money pit.
Inspect the remaining houses to weed out any lemons that might be in the group. Some houses may look fine on the outside, but might have hidden damage and other problem areas that will need to be fixed. This could result in unforeseen expenses costing more then expected maybe even more then the house is worth. Unless you are interested in the real estate so that you can build a new house on the property you should stay away from the trash houses.
During the inspection phase you might find a few gems that might just need a little work to make it rentable. Buying a fixer upper and flipping it could save you some money if you take some time and do it right, but it could cost more money to fix up the house then it is worth.
The next thing to look for when looking for a vacation rental is to make sure there is no zoning issues or other restrictions.
Finally you should discover how much money you can make when you start renting. Look and see how much money your competition is making with their houses that are close to yours. This will give you a good estimate of how much the rent income will be. The rental income should generate between 5% and 15% per year of the houses market value. Make sure that you can charge enough to pay the bills, for maintenance and cleaning the vacation rental.
Finding the vacation rental house that is just right for you could take some time, and it is not a decision that you should take lightly. When you find that perfect investment you can feel confident about your investment.