If you are planning to enter the vacation rental business with a property you already own, the upfront costs may be added as you may need to renovate and re-decorate your home or apartment. You will also need to include expenses such as building association fees, city licenses you need to start your business, paid marketing campaigns you want to run, and so on. In addition to the costs mentioned above, you will need to make the most of your investment and make the right decisions for the future of your small, short-term rental business.
Of course, there are risks when investing in something as expensive as a secondary property and the laws still have to fully adapt to the needs of this new type of business. Nevertheless, buying a property to convert it into a vacation rental is one thing that Americans are doing more and more. Revenues generated by vacation rentals already amounted to $ 14,540 million in 2019.
To help you get started, we tell you the 7 mistakes that seasonal rental owners often make. Be sure to avoid them!
- YOU ARE NOT SAFE THAT IT WILL WORTH THE PENALTY OF INVESTING
To find out if it's a good idea to invest in a vacation rental for tourists, you must first have a financial statement and then calculate a real budget. Can you afford all the upcoming expenses? It is also better not to expect immediate bookings and set aside a sum of your budget in case the deal takes a few months to take off.
- YOU DO NOT KNOW THE ADDITIONAL COSTS YOU WILL PAY AT START-UP
Investing in a second home for a short term rental does not just mean paying the price of the property. There are also additional costs that accumulate. These include insurance, accounting expenses, depreciation, supplies, furniture, taxes, repairs and maintenance, etc. In addition, you must take into account the city's licenses, taxes and more.
- YOU DO NOT KNOW THE AREA
Having a good understanding of your property's position in terms of price and value will help you make the best decision. Ask yourself a few questions, such as, why is your potential property three times cheaper than neighbors' homes? If you have an idea of the demand in your area and are aware of the competition, you can make an informed and correct decision. You may want to buy in a different neighborhood or build an on-site pool to differentiate yourself from your future competitors. In addition, you must know the trends in the vacation rental sector and know the wishes of customers. You will know exactly what you need to offer them.
- YOU CAN NOT CALCULATE THE VALUE OF THE PROPERTY
Many factors determine the value of your property. Give yourself time and analyze all the factors. When it comes to value, it's not only about the price, but also other factors that make the property more valuable. For example, the location, the proximity of public transportation or interests, the new facilities, its potential and opportunities to improve it, the crime rate and so on.
- YOU DO NOT CONSULT A LOCAL EXPERT
If you are not an expert in your sector or seasonal rental investment, or if you do not know what the prices are in the area, ask someone who can help you throughout process. It will also help you negotiate, what you can ask for and how much you can counter-offer.
- YOU DECIDE WITH YOUR EMOTIONS AND FORGET THE FINANCIAL DATA
Many homeowners fall in love with a property or a specific area and forget what they will have to do to make their property profitable. Why buy the largest house in the street if you can not rent it regularly. Do not make the mistake of investing irrationally. Be courageous and recognize your limits.
- YOU THINK YOU CAN NOT MANAGE A LONG-RANGE PROPERTY
Many homeowners decide to invest in an area close to their home, although this may mean less demand and fewer visitors to the area. This can be a huge mistake! Nowadays, it is quite possible to manage a property remotely or to get help from a professional - many property managers already do it! With automated records, such as WIFI door locks and other solutions on the market, you do not have to be there to get started.