With the increase in vacation rental popularity, it is important to research the area you plan to buy in. Your vacation rental property’s location has a variety of financial impacts.
What do you intend to use your property for?
Second Family Home
According to the NAR, in 2013 87% of vacation rental home purchases were for family vacation homes.
Is your first intention to buy a property as a second home? And maybe, down the line, turn it into a vacation rental? If so, the location when buying a family/rental home is going to change.
For a second family home, your location (most likely) will focus on ease of access. Young children and elderly grandparents do not want to fly to spend a weekend at a second vacation home. Most family vacation rentals are “180 miles from their primary home.”
Buying a vacation home within driving distance is a priority. This distance from your permanent home will influence the type of locations you research. With a family vacation home, your lifestyle and design preference also influence the type of property you buy.
Renting Your Property
The second reason for buying a property is if you plan to rent it. If this is the case, you should pick an area which offers many seasons of rental use. “25% of property purchasers plan to rent their home.” They try to rent for more than 3 months of the year.
If you buy a vacation rental home, your decisions revolve around your investment. Unlike family vacation homes, you do not focus on the emotional value of the home.
Consider your finances. Can you meet your fixed costs without losing money? These costs include your mortgage, maintenance, and taxes. You’ll want to buy a location with many seasons of use. The more renters you have the more income you will earn.
What is the Location Like?
Part of considering the property’s location is for the most productive bookings. Your goal is to have your rental booked all year, not just the busy season.
The National Association of Realtors (NAR) study found that in 2014, the United States sold 1.13 million vacation rental homes. This is the highest number since their study in 2003. Which is great, since “vacation rentals make up 21% of residential transactions in 2014.”
With the increased number of market rentals, you want to make sure your location is perfect. You don’t want to invest in a property which sits vacant.
You should consider how busy the area gets during popular times of the year. Is it suffocating? Too difficult to go out to eat? How does that affect a renter’s likelihood of choosing your property?
And how slow is it in the off-season? Is there anything to do in town? What special events or activities can you market to renters?
Location as a Selling Point
Your location is the biggest selling feature of your property.
Don’t know if a property is right for you? Think about its nearby activities. Does it offer museums or scenic places? Does it reflect your personal brand? Is your answer “no?” then continue looking.
If you want a quiet, mountain retreat – you know not to bother looking in the city. If you’re researching properties in the city, what eateries or businesses add value to your property/experience?
Having nearby features, and promoting them in your favor, adds to your property. This allows you to boost your rates and add to your income.
Is Your Location Convenient & Accessible?
Specify the distance between your property and its selling features. Renters do not want surprises when it comes to travel. You should consider your areas modes of transportation. Some questions to consider are:
- Can a renter take a train or subway?
- Is there only a bus system?
- How many buses run, and how often?
- Does your rental offer private parking?
- If not, where should renters park?
- Is there a car rental service nearby?
Access, or lack thereof, to transportation can influence a renter’s experience/ trip. If your location offers convenient transportation, there can be positive results for your bookings.
Visit Many Times to Study the Landscaping
It is important to visit a location many times before investing. A property may seem perfect during a summer day in the busy season. But in the winter, there may be damaging storms and other geographical complications.
It is important to research and experience a property in all seasons. That way, you see if it is likely to flood, have earthquakes, wildfires, etc. These situations can have financial consequences you weren’t expecting.
Positive Economic Signs
Looking at the economy of an area will also shed light on the type of investment you are making. You want to buy a vacation rental property in an area with successful businesses. This will increase your property value and add to your guests’ vacation.
Be sure to research if there are high rates of business bankruptcies or unemployment. See why this is. Are there natural disasters, lack of customers, environmental issues, etc? This will inform you if this location is a smart investment for you.
Buy a Vacation Rental Property you can afford
Do not assume that your property will always book, especially when making an investment. It is better to buy a home within (or under!) your original budget. That way, you have extra money to rely on within your first year.
You do not want to buy a vacation rental that is over your budget. It will be difficult to maintain the home’s fixed costs. These include the taxes, mortgage, and HOA fees. And this does not include any unexpected expenses, such as:
- Insurance / liability coverage
- Interior furnishings
- Property Management
- The maintenance of the property
- Cost of hiring a landscaper
- The interior upkeep of the property
- Cost of hiring a cleaning service
- Condition / Age of home
- Unexpected repairs
You should research houses in a location that are in your price range. You want to cover all your property expenses, even if you do not have rental income.
Location is everything for Vacation Rental Properties!
Researching the location of your vacation rental home is the most important decision. You should understand the economy, weather, community, and budget before you buy your vacation home. All these factors tie back to the location of your property and impact the success of your rental. Now you can plan:
- Everything you need to know about the vacation rental industry
- Ways to get your vacation rental business started
- What costs to avoid as a vacation rental owner
- Manage your property like a small business
If you already purchased a vacation rental, what location did you decide on? Was it the best decision? Share your thoughts and comments below.