Recently my wife and I purchased a short-term rental/vacation home. Through that experience I came up with 7 steps to assist those considering purchasing a short-term rental/vacation home.
1. Determine where you love you to visit and where there are opportunities for short term vacation home rentals.
2. Figure out your financing.
a. Down Payment: How much will you need to put down? Are you going to use savings for the down payment, will you sell stock or will you take equity out of another property you own?
b. Monthly Payment: What will your monthly payment be including property taxes, insurance and HOA?
3. Ascertain the present demand for vacation rentals: Is it a destination where people want to visit? Are there vacation properties there already? Is there an overabundance of vacation rentals? Does the city regulate and/or allow short term rentals?
a. How much can you charge? What type of occupancy can you expect? Meaning, how many days of the month can you reasonably expect your home to be rented? What is the total estimated gross revenue?
4. Determine the costs in addition to your housing payments. Some of these may include transient taxes, cleaning service, utilities, cable, cleaning supplies, toilet paper, coffee, etc.
5. Now crunch the numbers. Take your estimated monthly revenue and subtract your housing payment and non-housing related expenses. Your estimated positive or negative cash flow will help determine if this investment is a worthy risk for you.
6. Find your dream home with an experienced Realtor’s help. They should also be able to assist you with determining reasonable estimates for the demand of the property as well as the costs. If the property you are purchasing isn’t already a vacation home you will need to buy furniture and appliances to make your property a “home.”
7. Okay, you closed on your property. Set up listings on AirBNB, VRBO and possibly Flip Key. You’ll want great pictures and good description of the area and your property.