Rick Weiss
Coldwell Banker Realty 408.799.1366


Tips for First-Time Investors to Maximize Your Bottom Line
on a Vacation Rental Property

If you’ve been on any vacation rental websites over the last few years, you probably have a
pretty good idea of how hot the short-term rental market has become. Travelers love the
freedom of being able to search for and rent the perfect place for their trip, and owners love how
easy it is to keep a property rented and turn a profit. With all of these benefits, getting into the
vacation property market can be a smart decision, but it isn’t one to make lightly. In order to
ensure your property is profitable for the short term and for building long-term wealth, it’s
essential to consider all the key factors involved.

Expenses vs. Income

What ultimately affects your bottom line is finding a property where the income potential is
greater than what it will cost. This sounds like a simple idea, but you need to have a clear
picture of all costs and factors that affect income before purchasing a property.

Cost Considerations

Home loan: Unless you have the means to buy a property outright, you’re probably
looking at getting a home loan to finance it. The important thing to know going into this
process is that different types of loans are best depending on the type of purchase
you’re making. For example, some first-time homeowners get FHA loans, which are
ideal for people who can’t afford a high down payment or can’t qualify for a conventional
loan because they don’t have a strong credit history. However, FHA loans cannot be
used for investment properties, which means that your options are limited to more
conventional home loans.

 Insurance: Insuring a rental property is a little different from homeowners insurance for
your primary residence. According to Fit Small Business, factors that affect your
insurance costs include location, amenities that could add to potential risk, and how
frequently the property is rented.

Maintenance: Every home requires maintenance, including regular upkeep and
unexpected repairs that pop up. This is why you need a cushion in your home-buying
budget to cover whatever maintenance is required. You also need to decide whether you
will take care of regular maintenance yourself or if you will need to hire a local company
to handle regular maintenance tasks when you can’t be there, such as lawn care and
cleaning between guests.

Income Potential

Location: You may already have a location in mind for your vacation property, but
Forbes cautions against letting emotions cloud your judgment, especially when it comes
to location. Before making a decision, consider the demand for rentals in the area you’re
considering. Even if your chosen location is already popular with travelers, it’s important
to consider the potential for growth as well as convenience and safety. All of these
factors will make a big difference in how much you can expect to get in rent and your
ability to keep the property rented consistently.

Property design and amenities: Assuming your property is in a desirable location, you
will face competition, which means your home needs to stand apart so that it’s a top
choice for travelers. When you’re looking at properties, seek out popular amenities and
features that make renters choose your home and return for repeat trips.

Marketing: One of the biggest decisions you will make is how to market and rent your
home. Many property owners choose online services for marketing. Another option is to
hire a local property management company that offers comprehensive services, which
usually include marketing, rental details, and additional services like cleaning. Either
way, you can’t expect to just list your property and forget it. The key to seeing financial
success from owning a vacation rental property is to treat it like a business, and that
means having a strategic marketing plan.

The most important thing is to crunch all the numbers before making a decision. Then, look at
your bottom line regularly, including how the investment projects into the future. Remember that
even though a vacation property is a short-term rental, it’s a long-term investment with rewards
you can reap for years to come.

Image from Pixabay