A vacation rental property is often a great way to earn some income, especially given the increasing demand for this kind of place when people want to travel. Many people are “revenge vacationing” or traveling right now to make up for years of being cooped up and locked down, so vacations are big right now despite the economic downturn. It can be a smart property investment that pays off with passive income over time. If you are considering buying this kind of income property but don’t quite know how to get started, here are the steps you should consider following.
Buying an income-producing vacation rental property with cash flow requires a solid property to help you move forward in the first place. Go through various listings online and in the area where you want to buy the passive income property and see if you can visit some of them. Keep factors like weather, location, surroundings, accessibility and tourist habits in mind while shortlisting the properties.
Evaluate the age and condition of properties including infrastructure, safety, appliances, energy use, landscaping requirements, and other real estate essentials. You don’t want to invest in a vacation rental property that ends up being a money pit.
Research The Market
Make sure you also conduct plenty of research about the market around a given property or in a given area. What are the demand and supply like in the market? Is there a saturation in the area where you want to buy the vacation rental property? Consider the mindset of the vacationers here as well. There are also many reports and statistics available online that you can check out.
And don’t forget about the economic headwinds that impact the entire travel industry. This includes the current recession and inflation combination that could potentially undermine your vacation rental revenue.
Understand Costs And Fees
Apart from the cost of purchasing the property, other costs and expenses will also become relevant here. These include taxes, insurance, routine maintenance fees, condo fees, property management fee, mortgage fees and utility fees, among others.
Draft a budget so that you know what you can afford and what to expect. Keep in mind that other unexpected expenses could pop up from time to time, so these should be planned for as well in your budgeting.
Estimate the Income
Given that you want to earn an income from your property, try to estimate how much income you can realistically earn. Access data and speak to other such local property owners to understand how much the common income is in that region.
You can also make an estimate based on the rate or price you intend to charge your renters or customers and how much of it will go into covering the other costs.
You will, of course, need money to buy a vacation rental property. There are various loans you can consider applying for based on your requirements and eligibility criteria. Some examples of these include loans, credit union loans, multifamily loans and short-term loans.
In many situations, some of the requirements might be similar to other rentals while others might have certain specifications in place.
You should have software in place that can help you automate a variety of steps, such as bookings, payments, records and documentation and reports. This can also make the processes of monitoring and verification much simpler.
You might need to invest some money every month to buy such software, so make sure you get some great features and perks in return.
Invest In Security And Maintenance
Security is key to ensuring that people feel safe enough to spend their vacation on your property. If you are also using it for yourself, it is important for the property to remain safe and secure until you return.
Advancements in technology have made this much more efficient, so make it a point to obtain resources well in advance.
You might also need to hire someone to clean and maintain the property for you if you cannot be there at all times.
Market Your Property
Once all the aforementioned steps fall into place, start marketing your property to allow more people to learn about it. With time and positive experiences and reviews, you will be able to see growing demand for the property.
Platforms like Airbnb, VacationRentals.com and VRBO are good places to start. You can also design your own website and market it through social media.
The more people learn about your property, the more demand there will be for it. In such a situation, it might become necessary to verify and screen your renters by confirming their details and taking a look at their behavior and records at other properties.
Make sure you are also just and unbiased while making your decision.
Maintain Open Communication
An important part of managing a vacation rental property is to maintain honest and open communication with everyone involved, most of all with your renters. Take their feedback and make changes based on their suggestions. This will make it easier to build loyalty while also remaining a respectable and reputed property.
Do not leave things stagnant at your property for too long. Even if there is a good demand for what you have to offer, you will still need to make frequent repairs and upgrades to keep your property in good condition.
Examples include changing security systems, making renovations, updating your software and more realty costs.
Final Remarks On Real Estate Rental Property Revenue
Now that you know the steps that go into buying and managing a vacation rental property, go ahead and start doing your research so that you know how to proceed. It is also a good idea to ask a professional agent or realtor to help you see the entire process through.
Throughout the process, make sure you also think about other elements of this transaction, such as the costs, maintenance needs, upgrades and marketing, among others that cut into your new real estate passive income stream profit margins.