Tips On Investing In Vacation Rental Real Estate
Vacation rental real estate can be a worthwhile investment if you're able to identify good properties to invest in. If you're interested in this type of investing, these tips will help you find properties that may have potential.
Look for Regions with Multiple Seasons
Diversification is important in any form of investing, and one way to diversify your vacation rental real estate is to find a region where people come during multiple times of the year.
If a region is only a tourist destination for one season out of the year, a major disruption could significantly hurt revenue for a whole year. For example, a pandemic that takes place during summer could devastate vacation rentals that are located in summer-only destinations.
In contrast, a region that's a destination at multiple times of year will be less susceptible to this risk. Even if a pandemic were to hurt a summer travel season, a place that's in demand both during summer and winter could still bring in revenue during the colder part of the year.
There are several different types of destinations that are in demand at multiple times of the year:
- Cities like San Diego have pleasant weather year-round, which makes them a go-to destination during every month
- Major cities in all regions bring in conferences and events year-round, which attract attendees who need places to stay
- Regions with major theme parks or national parks are always in demand
- Mountainous, cold regions may have a primary skiing season and a secondary whitewater rafting or mountain biking season
Even if the secondary season isn't as substantial as the main travel season, having a secondary season can still help your vacation rentals financially survive during a down year.
Find Properties That Can Accommodate Different Sizes
When you search for properties, look for ones that can accommodate different sizes of groups. In an ideal situation, a single property could be set up to host a large group or several smaller groups. This isn't always possible, though. If you can't find such a flexible property for sale, incorporate both smaller and larger units into your vacation rental real estate portfolio.
Having properties of different sizes will give you more market exposure. You won't be limited to only small or only large groups.
Calculate Correct Rental Costs
The vacation rental industry is a highly volatile industry, as rental prices vary a lot with the time of year and local events. Make sure you accurately calculate a property's rental rates for different times of the year so that you can accurately project its potential annual revenue.