July 26

7 Steps to Buying a Vacation Rental Home

Recently my wife and had the privilege of buying a vacation rental home. Through that experience I came up with 7 steps to assist those considering purchasing a short term rental or vacation home.

1. Determine where you love you to vacation and where there are opportunities for short term vacation home rentals.  You might consider speaking with a local real estate agent.  If you’d prefer to not involve an agent until you’re mentally ready for buying your vacation rental home, you might consider searching for your ideal property on a site like Zillow or Redfin.

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?

        c. Get preapproved to by a vacation rental home.  In 2022, it’s a seller’s market in many states.  That means alot of sellers will have cash offers and may possibly getting offers above the listing price.  If your intent is to finance your vacation rental home, you will definitely get a pre approval by a mortgage broker that specializes in fast purchase home loans like LifeSource Mortgage.

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 vacation rental 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.

To dive a little deeper and obtain further info, including the pre-approval process, please reach out to us today.

Contact Life Source Mortgage Today

Shannon Gray – Wednesday, July 26, 2017 (updated March, 2nd 2022)


Tags

buying a vacation home, Buying a Vacation Rental Home, steps to buying a vacation home


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