The vacation industry is booming! According to HomeAway’s vacation rental marketplace report, 75% of vacation rental property owners reported occupancy rates of 76 percent or higher, up from 68 percent last summer. This rise also takes into account that competition is increasing within the owner’s market, which is being balanced out by a sharp increase in those who are renting vacation rental properties.
Investing in a vacation rental property is known to generate a nice profit when managed properly. However, myths are abundant on the internet about the difficulties of buying a vacation rental property. Below we look deeper into the common myths that scare many investors from purchasing a vacation rental property:
MYTH 1: The time it takes to manage bookings and reservations isn’t worth the ROI
Truth: This myth might have been true a decade ago, but with great Vacation Rental Software on the market, the time it takes to manage a vacation rental property has decreased significantly. Now property managers can automate their inquiry and check-in/check-out emails, automatically sync their property information and calendars, generate reports in minutes, and use dynamic pricing to automatically adjust the pricing during peak/low seasons.
MYTH 2: I have to purchase a vacation rental property near to where I live, so I can manage it in person
Truth: As the vacation rental industry grows, so does the number of agencies that can manage these properties. As long as you find a reliable vacation rental agency, you can purchase a rental property on the other side of the world. The vacation rental agency will handle guest management, housekeeping, booking management, as well as unexpected property issues.
MYTH 3: It is hard to find renters
Truth: The rise of vacation rental portals, such as HomeAway, Booking.com, is a problem of the past. Yes, competition is increasing but you can outpace your competition with investment in marketing. Having your own vacation rental website, listing your properties on numerous portals, providing excellent customer service will help you fully book your property.
MYTH 4: Many renters will damage the vacation rental property
Truth: Damage to the property can occur in rare cases, but there are numerous ways to prevent and compensate for this damage. You can purchase independent insurance that is specifically catered to the needs of vacation rental properties. You can also charge a damage deposit for your property that you can claim if there is damage. If you are using portals such as Evolve, offer Accidental Rental Damage Insurance that the traveler pays to protect homeowners for up to $3,000 damage.
MYTH 5: If I purchase a vacation rental property, I will be a newcomer and won’t be able to compete with property managers who are industry veterans.
Truth: Yes, it will be tough to initially compete with a vacation rental manager who has been in the market for a long time. But there are numerous ways to counter-act this problem when you get started: You can carve yourself into a niche centered around pet-friendly, romantic getaways, elderly-friendly properties, etc.
What common myths have you encountered about purchasing a vacation rental? Do you agree/disagree with any of these points? Feel free to join the conversation in the comment section below
Reasons for investing in a Vacation Rental
When it comes to Vacation Rental owners, there are several different kinds. Determine where you fit and let it guide your investment strategy.
The first type I would call the “Investor”. The investor looks for a property that they can acquire at a good price, spend as little as possible outfitting as a rental and generally turns renting over to a property management company. They may or may not come out on a regular basis – generally not. Their primary interest in the property is its appreciation over time. They are betting that the real estate market will increase and that as some future point in time they can sell at a nice profit. Requirements here are
- Buy at the right time.
- Find a property management company you can trust.
- Don’t over-invest.
The second type is the “vacationer”. The vacationer loves going on vacation in this area and in order to have a place “of their own” decides to buy a property and then rents it out so that they can have other people pay for their vacation. The vacationer comes out on a regular basis and will block off their home for personal use on holidays and other peak times when they could be making the most rent out of their property. The vacationer may not make a profit on their rental, but it is more important that their vacations are paid for by their guests. Requirements here are
- Buy a place that you will enjoy year in and year out.
- Don’t over-personalize the house, remember that it should be rented out more often than your staying there.
- Buy in the best location possible for what you enjoy and then share your enthusiasm with your guests.
Vacation Rental Professional
The third is the vacation rental professional. This is the person that may already own a vacation rental home somewhere else and is looking at vacation rentals as an income-producing business. They know exactly what kind of house they need to attract the right guest and have a high occupancy rate. They shop right, decorate the home with low-cost furniture and art and know-how to set the right rates for their property. Requirements here are:
- Low investment in order to maximize profits.
- Experience with managing other properties.
- A tremendous amount of work since you will probably manage and market it yourself.
Recognize yourself in one of these profiles? Or is there a little bit of you in each one? Or, do you not fit into any of these? If so, let us know and perhaps there is a new one out there!