Vacation properties

Vacation properties differs a lot from regular residential real estate and the renters is going to expect other things. They are often willing to forgo some of the things they would require in a regular residential property as long as they get a good location and some extra luxury on the side.


tropicalMany people who chose to invest in vacation properties do so because they want somewhere to live themselves when they are on vacation. It is also common that they plan to retire in the house. They often chose the house they want and then chose to rent it out when they are not there. This can help pay for the property (partly or completely) but is far from an ideal way to do it. A better way to do it is to consider the rent-ability of the house from day one and make that an important factor in deciding what property to buy. Choosing a vacation property with your brain instead of just your heart will give you a lot better return on your investment and will enable you to start making money from your vacation property from year one. A well chosen property will pay for the mortgage and give you a yearly profit even after the rental managers fee have been paid.


It is possible to build a profitable portfolio of rental properties if you are a smart investor that invest in under priced properties and up and coming destinations. Doing so will give you a lot of pleasure visiting your properties but will also cause more stress as you will have to manage everything remotely. This can be daunting even if you choose to use a good rental manager.


Below we are going to look at some of the things that you should think about before you start investing in this type of rental properties.


Know the area

It is very important to know the area before you invest in it. It is not enough to like it yourself. All to often we see people who have spent a couple of weeks in a location. They then buy what they want without ever considering what other tourist to the area want. This can often cause you to end up with a house that don’t offer what the majority of the renters wants and hence will not get as high a occupancy rate as is required to make it a successful investment. A high occupancy rate is the number one factor deciding how profitable a vacation rental will be.


It is easy to think, this is on the beach, people will love it. But just being on the beach is not always enough. It is very easy to end up with a property that is not luxurious enough or to expensive for the clientele that visit the area where you bought your house.


Talk to a rental manager about the area. Ask what she gets a lot of interest for and what she feel that she is lacking in the portfolio she is managing. This gives you a good insight into the market and if there is any gap you could fill. If there is you should consider buying a property that could fill this gap. Filling a gap in the rental agents inventory can be very profitable regardless of whether they need high or low class properties. The reason for this is that you can get a very high occupancy rate.


Do not overpay

payIt is very common that foreign buyers overpay when they buy vacation rentals. They get quoted a price that seems cheap compared to US prices but that is over market value in the maket where they buy their house. It is very important to know the real market values before buying something. To get to know the true market values in an area you should talk directly to the locals and directly to the seller. It is very common that brokers inflate prices since it is in their interest to make prices appear as high as possible. This is especially common in third world countries where there isn’t much comparison data available.


Another very good option can be to befriend a local expat and ask them to keep an eye out for a suitable property (Offer them good compensation.) and be ready to act quickly when they have found something. It is common that someone for one reason or another want to sell their vacation home quickly and you can often get a very good price if you are willing to close the deal quickly.


Development can be hard

I do not recommend that you buy fixer uppers abroad unless you know the culture and the language. Even then you should only consider it if you can be on site while the renovations are done. Most people who invest abroad and try to renovate their house will end up getting screwed. They usually have to overpay a lot and the eye for details can sometimes be lacking. It is also way to common that the work is started but never finished because the contractor leaves with the money.


In most cases it best to buy houses that require as little work as possible. A little paint and some new furniture.


Do not save on the wrong things

It is all to common that people spend hundreds of thousands to buy a vacation property that they want to rent out and then they are too cheap to pay a couple of thousands on new furniture to make the house inviting. This is a really dumb move. You have invested a lot of money but you are not going to get a high price or a high occupancy unless you spend the money required to make it well furnished and inviting. It does not matter if you think it is okay with a few old pieces of furniture. It is what the renters want that is important. You will usually get the money you spend on furnishing back within a few months if you do it well and everything you get in after that will be a bonus.


This is true regardless of whether you offer a budget property or a luxury apartment. You always need to keep it suitable furnished.


Another common mistake is to skimp on the up keep of the property. Stay pro active and make sure that everything always looks great. I recommend repainting everything every 18-24 month if you have a busy rental. Any damage should be repaired immediately.


Make it easy for the guest

easyMost of your guests will be there to relax. Make things as easy as possible for them. Make sure that the house has everything they need once they get there and provided them with an information booklet so that they can find nearby restaurants, convenience stores etc. All this will help to make sure that your property get a good rating on rental sites and will help you get more business.


A tip is to offer something cheap that they do not expect. An example of this is to make sure that a chilled bottle of wine is waiting in the property when they arrive. It doesn’t cost much. Especially for renters that is going to stay several days. But it can dramatically improve what they think of you. They will look at everything else in a better light if they get a good first impression.


Use a good rental manager

I always recommend using a good rental agent / manager that looks after and rents out your house. It is very hard to do this yourself if you do not live where the property is located. Using a good agent is usually more than worth it because they can generate a high occupancy rate and can make sure that everything is running smoothly so that you do not have to worry about anything.