How To Choose A Vacation Rental Property That Is Right For You?

In addition to giving you a great chance for a getaway, vacation rental properties can provide a secondary source of income. Depending on the mortgage, rate of occupancy, and other important factors, vacation rental property owners can often find themselves breaking even within just a few months. To make this process even easier, many property owners utilize a vacation rental management company to help them manage their property and maximize its value.

Managing Vacation Rental Property

While owning a vacation rental property is generally a profitable endeavor, there are still quite a few important decisions that you will need to make. By choosing the wrong property, or by choosing the wrong vacation property management team, the projected timeline for making a profit will be significantly delayed. After all, if nobody is actively renting your property, you’ll be relying entirely on the property’s appreciation for income.

Thinking about the vacation properties you, personally, would want to stay at is a great way to begin brainstorming. However, your personal preferences are really just one of several factors you’ll need to be keeping in mind. Becoming a successful vacation rental property owner will require you to have a long-term view and a willingness to see the bigger picture.

Choosing A Right Vacation Rental Property

In this article, we will discuss the most important things to consider when selecting a vacation rental property. By taking a little extra time to explore your options and by keeping all of these essential details in mind, you will be much more likely to achieve your earning objectives as a vacation property owner.

#1 Location, Location, Location

By this point, the term “location, location, location” has become a bit of a real estate cliché, but the relevance of location cannot be ignored. Any property can be upgraded or even replaced altogether. Location, on the other hand, cannot be changed and as a result, is considered to be the most important driver of a given property’s price.

The vacation property you purchase doesn’t necessarily need to be in your hometown. In fact, because of the benefits that a vacation property rental team can provide, out of state (or even out of country) property ownership has actually become quite common. Many people from the northern parts of the country choose to visit properties in places such as Arizona, due to the fact it has warm weather (and a reliable tourist stream) year-round. Within the Grand Canyon State, cities with plenty of golf and amenities, such as Scottsdale, have also become especially popular.

Once you have narrowed your search to a specific state, city, and neighborhood, you’ll then need to consider other factors affecting your property as well. Proximity to the airport, local attractions, and to free parking spaces will affect the value of a property. Using a local property heatmap can also help you predict which properties are most likely to increase in value.

#2 Multi-Unit versus Single-Unit Properties

Both multi-unit and stand-alone (also called single-family) properties have pros and cons associated with them. However, unlike most ordinary home buyers, vacation property owners often realistically entertain the concept of purchasing multiple units at once.

A multi-unit vacation property will usually cost more than a single unit property but will cost less than purchasing multiple stand-alone properties on their own. If you are willing to endure these costs, a multi-unit property will allow you to scale your rental operations and, as a result, ultimately increase your profit margins. Furthermore, owning multiple units will allow you to visit the property whenever you want while still having a positive income stream.

#3 Turnkey versus Fixer-Upper

Next, you will need to decide whether you want to purchase a “turnkey” property or purchase a property that will be renovated and then sold. As you might expect, the turnkey properties will usually cost a bit more upfront, but they will also allow you to immediately begin earning rental incomes.

Purchasing a “fixer-upper”, on the other hand, will make it easier to enter the property market, but will delay when you can realistically begin renting properties. Generally speaking, if you are able to make effective renovations, investing $100,000 into upgrades will produce more than $100,000 worth of value. As a result, purchasing a fixer-upper should not necessarily be ruled out, but you will need to recognize the amount of work and initial equity that will be involved. Your property management team can help you predict how much a full renovation will cost.

#4 Special Features and Amenities

In the vacation rental market, adding a few special amenities can really go a long way. At the very least, having Wi-Fi, basic guest services, and a modern streaming service (such as Netflix or Hulu) should be considered the bare minimum.

Additional amenities, such as an entertainment system or a pool table will also usually be worth the initial investment. Furthermore, in warm states such as Arizona, incorporating an outdoor pool or sundeck will be especially lucrative for vacation property owners.

#5 Partnering with a Vacation Property Management Team

Lastly, when purchasing a vacation rental property, you will also want to consider which rental property management team you’ll be actively partnering with. Vacation property management teams can add a lot of value to your overall experience and can even help you decide between the multiple properties you are currently considering.

By choosing a local property management company, you will be able to better understand (and address) the nuances that are specific to your market. The team will also be on hand to help with local marketing efforts and consistently address potential problems within 24 hours of their occurrence.

Conclusion – Choosing A Right Vacation Rental Property

The vacation rental property market can be incredibly beneficial for property owners. When compared directly, vacation rental properties—especially in states like Arizona—almost always produce a greater return on investment than you could achieve with an ordinary index fund. By making an additional effort to ensure the property you are choosing is the right one for you, you will be taking a productive step in the right direction.