If you are looking to expand your real estate portfolio, searching for the best places to buy vacation rental property is a good way to start. Your aim is to identify profitable opportunities with excellent long-term prospects.
Identifying the Best Vacation Rental Markets in 2021
In your search for vacation rental properties, keep in mind that the market is seasonal. This means your cash flow estimates should account for significant differences in the number of guests depending on the time of year.
Regardless, there are key factors to consider that improve your chances of finding the best investment opportunities.
Rental Property Regulations
Vacation rentals are highly beneficial for investors. However, not all cities are open to this type of accommodation. Tourism regulatory boards set strict policies that pose a challenge to both travelers and property owners.
A big reason for this is the vacation rental industry’s impact on the local market. For example, some regulators argue that short-term rentals affect the business of other typical accommodation options, such as hostels and hotels already present for years in their locations. Also, a lot of travelers would rather book private residential communities, which leads to the invasion of the residents’ privacy. So, looking into the city’s regulations on this type of business should be the first thing you investigate when looking for a vacation rental property for sale. Cities, such as Santa Monica, San Francisco, and New York, have some of the strictest vacation rental rules.
Now, for a hassle-free transaction, know how to purchase rental property and choose areas with favorable short-term rental regulations.
Many American cities highly depend on tourism as a source of income. Expect such areas to be more open to different accommodation types, including short-term rentals.
Tourism is an important economic driver for states like Nevada, California, Florida, Texas, and New Jersey. The best places to purchase your vacation rental property are those with high tourism numbers, as they ensure a high return on investment (ROI) each year.
A vacation rental is not for every city. But renting an apartment or a beach house has been popular even before short-term rental platforms came to be.
Such cities are used to having a large influx of tourists looking for holiday accommodation within their communities. This means you will not have a problem with the regulations over renting out your property. Plus, guests are more comfortable knowing that locals are used to the sight of visitors in their neighborhoods.
Fortunately, you don’t always have to go to the bigger cities when investing in a rental property. It is easy to find an excellent vacation investment property in out-of-the-way destinations that are beautiful. Such areas also most likely depend on tourism, so they are more welcoming to visitors—an enormous advantage for an investor like yourself!
Proximity to Attractions
Major attractions, such as national parks, ski resorts, and beach towns, indicate a thriving vacation rental market. You can have your piece of the pie when you purchase a property in the same area.
But again, It’s best to arm yourself with knowledge of the best vacation rental markets 2021 has in store for you and learn how to purchase rental properties in these areas. Check for confirmed tourist spots that bring in high numbers of tourists annually.
Taxes may be an advantage and a disadvantage in your search for the ideal vacation rental market. Make sure you can afford the federal, state, and local property taxes.
Pay attention to income taxes that come with your rental activities. The best markets provide tax write-offs that are specific to the vacation rental business.
All investments are prone to risk, so vacation rental investors should carefully evaluate the risks of owning such properties. Some of these include economic instability and adverse weather conditions.
Investigating different vacation rental markets allows you to minimize risk while sufficiently protecting your interests with comprehensive and affordable property and business insurance policies.
Purchasing a property in a hot market offers good ROI when you maximize bookings throughout the year. However, make sure that you properly calculate the potential cash flow to the property to ensure constant profitability.
The primary purpose of a vacation rental investment is to generate rental income. But this does not translate to profitability necessarily.
Profitability is the difference between your rental income and expenditure on a property, which should be positive. So, rental income profitability means a positive cash flow.
The characteristics of the property and its location play a critical role in its ability to generate a positive cash flow. The best vacation rental properties do so with qualities, like high demand for such type of accommodation.
Real Estate Appreciation
A positive cash flow is not the only profitability indicator of the best vacation rental markets. The best places to buy vacation rental property also make your investment profitable in terms of value. An increase in property value over time is what experts call real estate appreciation.
However, the rates can range widely, but the appreciation benefit is relative to the location of your investment. Increased home values mean you can sell your vacation rental at a higher price in the future.
Benefits of Investing in a Vacation Rental Property
Owning a vacation rental offers you several advantages. They are the reason short-term stay platforms are experiencing exponential growth over the last decade.
The following are just a few of them:
- You can generate extra passive income, especially when you advertise your property on some of the most popular vacation rental sites.
- You have a place to stay when you get away for a vacation. You can use the property to celebrate a friend’s party, host a girls’ weekend, take the kids for a summer vacation, or even host your annual family reunion.
- Renting the property for over 14 days might enable you to write off expenses you incur to maintain and repair it.
Make the Best Decision Today
If you are looking to grow your portfolio, knowing the best places to buy vacation rental property is a good way to go. However, make sure to carry out your research, crunch those numbers, and seek the advice of a professional before investing. Then, optimize and automate your income!
Are you on the lookout for exotic travel destinations but don’t know where to start? The Unfinished Man lifestyle and entertainment blog can help. Check out our travel section for the answers you seek!