Have you been pondering ways to bring in some extra income? However, the notion of a second job is not desirable. Considering these parameters, you are probably exploring the idea of investing.
However, not all investments are guaranteed to provide a significant supplemental income. Even so, some can offer extremely higher chances of a positive return on your investment than others. It probably comes at no surprise that the type of investing we are discussing is real estate investing.
When it comes to real estate investing, there are several sub-categories you can consider. The type of real estate investing we are going to focus on is vacation rental properties. The popularity of this type of real estate investing has skyrocketed, even through the pandemic. According to the National Association of Realtors, vacation home sales were up 44% year-over-year in July-Sept 2020.
If investing in a vacation rental property sounds enticing to you, first contemplate the pros and cons of investing before making your decision.
Pros
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- Extra Income
For most, it is this pro that is the entire reason for wanting to invest in a vacation rental property in the first place. Even though it might not be the entire reason for others to invest, it is one of the greatest advantages to owning a vacation rental. It could also mean that for some, it provides enough supplemental income as a side business that they don’t have to work a second job. Many people with families just do not have the time to work another job but still need more money coming in than they currently do. Owning a vacation rental could be a very lucrative side business.
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- Instant Vacation
Maybe the extra income isn’t enough to convince you to invest in a vacation rental property. The pro that could be more important than money to some would be a vacation home that is available at their leisure, without the hassle of reservations or real planning. For example, if you are a surfer you might want to look into Whaler Maui real estate.
Many choose to purchase a vacation rental for this reason; they just black out the days they want and only rent on the other days. However, fewer rental days available means less money, so that has to truly be the most important pro to you.
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- Nest Egg
It doesn’t have to be instant gratification that pushes you into investing in a vacation rental. It could be that you are looking towards the future. A vacation rental can be a great way to build long-term wealth and prepare your finances for retirement. You can also sell it and have the cash to cover cost concerns in the future.
There are many ways to make it work for you and there are companies that are designed to specifically handle investments in vacation rental properties that specialize in making your investment work for you in the way that you want it to.
Cons
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- Property Management
One of the downfalls of renting out your vacation home is that it does require year-round work. Unfortunately, many times investors do not live anywhere near their rental properties. This means that even if you had the time to maintain the home yourself it would not be feasible. There are solutions to this problem by way of property management companies. They will handle turnover tasks, repairs, maintenance, and other hassles of the home, however, their fees usually take a large chunk out of your return on investment.
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- Guest Marketing
Investing in a vacation rental should be treated as a side business. Every business has to find a way to market itself. The same must be said for finding guests to rent your vacation home. How do you make the public aware of your opportunity? Fortunately, due to the popularity in vacation rentals, there are now numerous platforms available to advertise your rental. Sites like: Airbnb, VRBO, and others. However, like everything else they are not free and will charge hosting fees.
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- Location Accessibility
Believe it or not, vacation rentals are not favorable in many places. Many cities, municipalities, and homeowners associations have strict regulations around rentals. It is imperative that you do diligent research into the area in which you are considering investing in a property. Check for regulations and possible required licenses before you invest.
As you can see, there are just as many reasons to invest in a vacation rental property as there are not to. It all depends on your desired goal for the property and your reason for investing. Once you have that nailed down in your mind, and weigh your pros and cons, you can feel rest assured that whatever decision you came to was the right choice for you.
