Short-term vacation rentals have seen an increase of 105% over the last three years, with guests looking for more unique accommodations.
As a renter, you can benefit from flexibility, high profits, and many more advantages when buying a vacation rental. You should understand what to know before buying a vacation rental property, so here are three things to consider.
1. Familiarize Yourself With the Area Before Buying a Vacation Rental
It’s all about location, and it’s important to find a vacation rental in a top travel destination. The best markets to ensure you’re creating a valuable investment include those with many business travelers and tourists. The assistance of a real estate agent can help you understand the area and any unforeseen obstacles.
Many locations are prime tourist spots only during specific seasons. Make sure that you can make a large profit during the peak seasons so that it won’t put a damper on your investment when it’s the off-season. If you’re not confident, it may be best to find a vacation rental that’s good for year-round use.
2. Calculate the Property Value
With many factors that determine the value of a property, you need to analyze and calculate all of the costs with a vacation rental. This doesn’t just include the price of buying a vacation property. Your calculation should also consider public transit, the crime rate, local businesses, and other location factors.
There are other upkeep expenses you’ll need to prepare for, whether they’re out-of-pocket or recurring costs. Don’t overlook these costs before buying a vacation rental:
- Property, hospitality, and income taxes
- Cleaning fees in between guest stays
- Furnishing and appliances
- Marketing costs for renting the home out
- Insurance (mortgage and property)
It’s also advantageous to purchase a vacation rental under an LLC. This can certainly help you avoid risks with assets while gaining tax benefits when you rent out a second home as a vacation rental.
3. Consider Local Regulations and Laws
Many states and towns now have specific laws for vacation properties since there has been an increase in short-term rentals. Certain areas have regulations on how many days guests can stay at a vacation rental. You may also face penalty fees, noise restrictions, unique taxes, and varying fees.
There also different definitions of what a short-term rental is. Some states have restrictions on how many bedrooms there must be, or whether you’re able to rent a private room or entire property. You should check your city, state, or county websites to stay up to date on the specific laws and regulations in the area you plan on buying a vacation rental.
A Short-Term Rental Is a Long-Term Investment
With profits soaring with short-term vacation rentals, it’s a wise investment with numerous benefits. It’s crucial to weigh your options and understand many factors before buying a vacation rental. With these tips, you’ll soon be reaping the rewards with the option to have a relaxing vacation of your own.
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