You are here:Home / How to… / 5 Top Tips for Prospective Vacation Rental Owners
Before you buy your own vacation rental home, here are a few hints and tips from Homes and Rooms for prospective vacation rental owners that may help you make the right choice.
This is the first in an occasional series where we’ll highlight the vital factors you as prospective vacation rental owners need to consider before taking the plunge and becoming an independent vacation rental owner.
1. Recognize your motivation
People want to become vacation rental owners for a variety of reasons. For some, it’s an emotional decision: the realization of a lifetime’s dream to have their own vacation home. Renting it out is just a way of helping pay for it. For other prospective vacation rental owners, the business and its money making potential is the draw. It could be a long term investment, a way to fund a retirement while providing a holiday getaway.
Then there are those prospective vacation rental owners (or perhaps the majority of independent owners?) who fall between the emotional and ‘business’ camps. Those who would like to own and enjoy a property that reflects their own preferences but also see it as a long term investment. They may need their home to be a commercial proposition as a rental helping to pay its way.
There’s another group too – those prospective vacation rental owners who have achieved the dream of owning their own vacation home but now must turn to it as an extra source of income.
So, prospective vacation rental owners should choose carefully the type of property appropriate to their intentions. For example, if your dream is the priority and renting is a way of helping pay for it, put that dream first. The ideal location that suits you should be your aim. Don’t worry about about how much the property will be worth in a few year’s time. Choose a place where you would like to spend your holidays.
2. It’s all about location, location, location!
Having identified their motivation, prospective vacation rental owners looking to own something more than a personal holiday venue should put location at the top of the list. You could choose the best looking place in the world, but its location will generally determine how many guests it attracts.
Unless it’s a purely business proposition, many vacation rental owners want a place they can use as a getaway for themselves and their families. Those prospective vacation rental owners should choose a place that’s accessible to everyone. One that’s not too far from home, perhaps? Not everyone wants to fly to their holiday home and flights can be expensive too.
Those who are more business orientated may be aiming to fill out their reservations calendar year round. Locations with a short rental season may not fit the bill. Choose one with a longer season.
Remember, many guests and travelers choose the rental based on location first, property second. To give you a better chance of success, choose an area with high demand. Ideally, somewhere with many attractions and a well developed tourist industry. You will, of course, pay a premium to get into this prime location in the first place.
The trick here is to ignore the well established resorts and look for those that are up and coming. That means doing your research thoroughly. Property here will be cheaper. Choose the right place and you could enjoy a double whammy of increasing rental income plus a rising resale value of your vacation rental property.
3. Try before you buy
Good research is vital to your success. Prospective vacation rental owners could narrow down their search to a location or several locations and get to know the area from a guest point of view. The best way to do that is to check into another vacation rental in the locality.
This way, you can quickly assess the attractions and drawbacks of a place to help you determine whether it fits the requirements and demographic of your imagined guests.
Try to see it through their eyes. If you’re targeting families with young children, list the attractions and activities. Seek out the restaurants they might use. What’s the local shopping situation? Make notes, as these will be useful as information for your website if you buy into the area.
4. Estimate the time needed to manage your rental
Estimates of the time needed to run an independent vacation rental property will vary. But one thing is for sure: it will take longer than you think if you’ve never done it before!
As prospective vacation rental owners, there are many things to consider. From cleaning and maintenance; marketing and promotion; budgeting; operating and updating a reservations calendar; communicating with guests and potential guests; collecting, recording and dealing with taxes; operating in line with local regulations – ensuring you keep up to date with them…and the list goes on.
One day a week spent on management is a realistic assessment, although you could spend more. In fact, when Homes and Rooms founder Barry Sacks set up his first vacation rental in 2002 he was amazed at the work needed to run it. Back then there was little help available for the independent starting out.
Being an organized sort of person with a background in IT management and systems, Barry soon found ways to streamline the various processes using smart solutions. It was this experience which prompted him to develop the specialized services that Homes and Rooms now provides to help other vacation rental owners.
Visit the Homes and Rooms website to discover all the tools you will need to successfully manage your vacation rental. We’ll show you how to save time, increase reservations and maximize revenues. Then, when you’ve chosen your property, you can try them for yourself with a free, 14-day trial.
5. Be aware of your tax situation
Prospective vacation rental owners are not usually familiar with the tax implications they will face. These will depend on where in the world you live and where your vacation rental is.
Taxes vary not only from country to country, but from region to region and even city to city. Local knowledge is vital, so consult a tax specialist who can advise you on the tax implications of owning and operating a vacation rental in a specific location.
Income tax will almost certainly be payable on your rental income. And there will also be property taxes which can be higher in vacation areas. These can be higher still when the property is not your main residence. In Florida, for instance, taxes on second homes are often much higher than those for primary residences.
You will need to include some taxes in your charges to guests. While increasing the cost of your rental to guests, these do not contribute to your income yet must be allowed for in your financial planning.
Don’t be put off by the apparent workload of running your vacation rental. It can be a very rewarding and enjoyable experience, particularly if you take advantage of the many tools now available to save your time. Prospective vacation rental owners should aim for more time by the pool and less by the phone!