Are you thinking of buying a rental property in your favorite vacation spot? That could be a very wise investment. In many popular vacation spots, rental properties are always in demand, so you may not have a difficult time keeping it filled. You can use that rental income to offset your costs for the property and even turn a profit. Over time, your rental income could help you pay off the mortgage quickly so you have a free and clear income-producing investment. Vacation rentals aren’t like other rental properties, though. Here are a few costs to consider before you make your purchase:
Property management. Many first-time vacation rental owners try to cut costs by also serving as the property manager. It’s important to remember, though, that managing a vacation rental isn’t like managing other rental properties. Your tenants could change every week or every few days. That means constantly cleaning the property, greeting guests, and dropping off and picking up keys. You’ll also be on-call at all hours for any disruption with the property. Your guests will be paying a lot of money to stay in your home, so they’ll expect quick service if they need it.
Consider whether you have the time, ability, or inclination to deal with all of those stresses. Many owners quickly find that they don’t. By hiring a property management service, you can relieve yourself of that stress and ensure that your guests are properly cared for. Figure management costs into your overall budget.
Furnishings. When you own a traditional rental property, it’s usually the tenant’s responsibility to provide the furnishings. That’s not the case with a vacation rental. You’ll need to provide a fully-furnished house that also has bedding, towels, plates, silverware, and anything else that a guest may need to enjoy their stay. Depending on the size of the house or condo, this could be a big expense.
Consider the locale and expense of your rental. If it’s in an inexpensive party town that’s popular with students, you may not want to splurge on furnishings. They’ll likely get damaged and require replacement at some point. On the other hand, if you’re in a family-friendly or luxury vacation spot, nice furnishings could be a wise investment. Your guests will expect nothing but the best in your property.
Maintenance. In long-term rentals, both you and the tenant have incentive to maintain the house. That’s not always the case with a vacation rental. The guest may only be there for a few days and they may not care about losing their security deposit, so there’s little incentive for them to keep the house clean. You’ll need to invest in a service to regularly clean the house after each guest leaves. You should also address any issues or broken items immediately. While constant repairs can be expensive, damage can be even more expensive because it can give your home a bad reputation among guests.
Vacation properties can be expensive, but they can also be great real estate investments. Talk to a real estate investment company, such as Jakob Pek Fund, for help on finding the right property for you.