Choosing a Short-Term Investment/Vacation Rental Property

Strange as it sounds, a short-term investment property is generally intended to last a long time.

 

A vacation rental home.‘Short-term,’ here, refers specifically to properties that are intended to be rented out to tenants for short terms — several days, maybe a month on the outside. Short-term properties have become very popular in destination cities as apps like VRBO and AirBnB have exploded in popularity. Like a classical rental property, the big advantage of a vacation rental property is the income stream/cashflow, with a side helping of growing equity over time. The downside is that the vacation-rental market is a bit chaotic at times, and laws and regulations in this area are a bit up in the air, making it noticeably riskier than a traditional rental. So what makes for a viable short-term investment property?

Location x3

Location is the number one deal-killer for vacation rental properties. If your short-term investment home is in a location that people generally don’t want to vacation, you’re barking up the wrong tree, no matter how gorgeous the home.

So before you look into anything else about a potential vacation rental, brainstorm everything in the area that a tourist would go to visit (Google it if you don’t live nearby), and then bust out your Maps app of choice and figure out which ones the property is actually convenient to (i.e. 20 minutes or less in realistic weekend traffic). If you’ve got several solid attractions or a few genuine hotspots within that radius, you’ve got the Location box checked. Alternately, if you have just one super attraction or a cluster of solid locations within walking distance — say, a Six Flags or a monorail to some big city’s tourist district — you can score big. Finally, if the home is epic enough on its own and is secluded enough, you can attract folks who are looking to get away from it all…but it had better be epic. And that means having all the right…

 Amenities

Like the Location, the Amenities that are important to a vacation rental aren’t what you might expect for a typical rental home. If you’re setting up a short-term investment property near a bunch of attractions, you can expect that your tourist visitors aren’t really going to spend that long in the home itself, so you can get away with a pleasant and functional home with plenty of places to sleep and easy access to public transportation. If you’re working on an ‘epic getaway’ kind of house, you need to focus on four things: amazing visuals, easy comfort, a kitchen of legend, and bathrooms that people will want to hang out in.

Cost/Benefit

No matter what the other factors are, no property is a good investment if you pay more for it than it’s worth. Also, obviously, your ability to invest is limited by your absolute budget, both in upfront costs and in terms of your monthly balance sheets. Hopefully, all of you can put together a basic cost-benefit analysis — the key is knowing what your costs will be. Most of this can be determined with some research on Google, but as with all research, you have to know what you’re looking for. HOA fees, landlord’s insurance, and all the typical costs for owning a rental apply, but many states also have different taxes and fees for short-term vacation rentals.

Once you know that the benefits are worth the costs and you have a clear idea of what locations and amenities will attract your target market, all that’s left is to find a home within your budget. Good luck!

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Comments:

  1. These are some great tips for choosing a vacation rental. You’re right, the amenities I would expect are better than a regular home, for sure. When on vacation, a pool, or something like that, would be welcome!

  2. Very informative.

    Thanks

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