Living in a city, having a good job, meeting your friends at your favorite coffee house, what more could you ask for? Indeed, some people do not need more from life. However, the majority of the population would actually enjoy having a getaway investment property. Wouldn’t you like to escape from the noisy city and stay for a night or a week in paradise whenever you want? Well then, invest in a vacation home.
Besides the fact that vacation home rentals are great investment properties to offer you a place for your next holiday or getaway, such investment properties can also generate additional income. So, should you consider buying an investment property? The answer is YES! Intrigued to know why you should invest in vacation home rentals as well as how to make money in real estate? Then let’s explore this world of real estate investing together.
#1 What Are Vacation Home Rentals?
Vacation home rentals are investment properties categorized as low risk rental properties. The reason they fall into this category is the fact that a real estate investor is buying an investment property with the purpose of having a holiday or second home. For investors to act smart, they should choose the optimal rental strategy for their rental properties. However, it is commonly seen that vacation home rentals are placed on the market of Airbnb rentals. This is because the locations of such rentals are typically favorable for such a rental strategy. Additionally, as sometimes the owner also occupies the rental property, by placing it on Airbnb, the investor can only rent the property when he/she does not stay in it.
Renting out vacation home rentals is a great decision as it will help the investor to cover the monthly mortgage payments. Additionally, renting out holiday homes as short term rentals is one of the answers to: “How to make money in real estate?” This can be easily explained by the higher nightly price of such investments when compared to traditional rentals. Curious to learn more about vacation home rentals? If the answer is yes then make sure to read “Vacation Home Rentals: All You Need to Know as a Real Estate Investor.”
#2 Why Now Is the Time to Invest in Vacation Home Rentals
There are two main reasons that indicate that now is the time to invest in vacation home rentals. They are, namely:
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Prices for Investment Properties Are Only Increasing
Prices for investment properties are only rising up. Consequently, while you are waiting, you have all the chances of buying an investment property for a much higher price. Moreover, it is unclear when the seller’s market will slow down. So, by waiting for the prices of rental properties to go down, the real estate investor has a great chance of missing the opportunity of buying the best real estate investments.
Moreover, many real estate investors finance vacation home rentals with a mortgage loan. Therefore, when a property generates a good Airbnb rental income it is able to pay for itself. Small note, this will happen until you keep the vacancy rates low when renting out on Airbnb.
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Now Is the Best Time of the Year
Well, the second reason is also easy to understand. You will miss the opportunity to make good money with your Airbnb rentals if you wait any longer. However, if you act now, your investment property will be able to generate good Airbnb rental income during the summer, which is considered as the peak season for these investments. Most of the time during the summer Airbnb rentals have high occupancy rates, resulting in good rental income for the Airbnb host.
#3 What Are the Advantages of Investing in Vacation Home Rentals?
In order to understand if you should finance vacation home rentals, let’s explore the advantages of this investment strategy:
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Tax Benefits
The ability to claim tax breaks is another reason to invest in vacation home rentals. Yet, an Airbnb host should carefully establish the amount of time the property is being rented out to Airbnb guests as opposed to “used personally.” The tax break depends exactly on the number of days the property is being used personally and rented out to guests.
For example, if you are renting out your second home to Airbnb guests for 14 days or less, your rental property will be considered as a primary residence. Consequently, the real estate investor will be able to deduct real estate and mortgage interest rates. Furthermore, an Airbnb host will not need to report any rental income his/her second home generates. Curious to learn more about tax deductions when operating Airbnb rentals? Make sure to read “Your Guide to Short-Term Rental Property Tax Deductions.”
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Real Estate Appreciation
One of the great advantages of investing in vacation home rentals is the appreciation. Prices for rental properties are increasing, which means that the value of your second home will rise. Consequently, it is possible that as long as you possess the real estate investing property its value will grow. Thus, when the time comes to sell the second home, the real estate investor will be able to make money. That is how to make money in real estate.
In order to continue the career of an Airbnb host, the investor will need to invest only in the best real estate investments with high return on investment rate, cap rate, cash on cash return, etc. Once again, there is an opportunity that the value of your next real estate investing property will grow through time. However, there are more aspects a real estate investor should know about real estate appreciation. In order to know what are they, make sure to read “6 Things to Know About Real Estate Appreciation.”
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The Rental Income
Vacation home rentals are falling into the category as the best real estate investments. However, in order to generate the great Airbnb rental income, the investor should estimate the exact amount of rent he/she needs to charge potential Airbnb guests. The fact that many travelers prefer short term rentals over hotels is a huge advantage when renting out on Airbnb. Still, an Airbnb host should maintain as well as promote his/her short term rentals to be successful in this sphere. When renting out on Airbnb, you should be ready as the job gets hot during the peak season. No, we do not mean the weather conditions. Get ready for your short term rentals to be fully occupied over the whole season. Consequently, your properties will generate worthy rental income. Thus, the final profit is going to be “sweet.”
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