Should you or should you not rent your vacation home out? This is a quandary faced by many homeowners with vacation properties. On one hand, renting your vacation home out can help to generate additional income while offsetting the costs of owning a second home. On the other hand, however, there can be challenges associated with renting out your vacation home, and if it is not handled properly, you could run the risk of losing money.
If you’re considering renting out your vacation home or even buying a second home with an eye toward renting it out, it’s important to recognize that such a move can be a great investment, provided the property is in the right location.
Prior to purchasing a property as a vacation home, make sure that you approach it as you would with any other investment. Remember to think of the property as an investment first and a vacation home second. Along with identifying relevant trends, you also need to think about the long term. For instance, is the property located in an area where there will be a steady supply of renters available? One of the biggest mistakes that buyers make when purchasing a vacation home is overestimating the demand for the property. Consider how well vacation homes in the nearby area perform. It’s also a good idea to speak to a vacation rental company or real estate agent in the local area regarding long-term demand.
Before investing in a vacation property, you should also take the time to become familiar with the area. Conduct some research regarding state laws and regulations as well as property taxes. One area that could affect property values is future developments, so it’s a good idea to find out whether any developments are in the works that might prove to be competition. You should also ascertain whether you would even be able to rent out the property in question, if it is located in a homeowner’s association. Not all HOAs will allow properties to be rented, while others have certain restrictions.
Most property owners who consider renting out their vacation properties plan to do so for one-week durations. A better option is often to rent your property out long term. If you rent the property out by the week, you won’t be able to charge as much as you would if you rented it long term, and long-term rentals are also less time-consuming. Additionally, you could save a tremendous amount of money if you opt to manage the rentals yourself, using a service like VerticalRent. Long-term rentals can range from three months to a year. If you already own rental properties, a long-term vacation rental is actually similar in nature. You need to screen tenants and prepare a lease in advance, preferably with a clause for personal use. Tenants would have the utilities put in their own name for the duration of the rental. Another great benefit of a long-term vacation rental is that you do not have to worry about vacancies, as you would when renting by the week. At the same time, you will still generate monthly income, giving you the opportunity to enjoy having a vacation home while still offsetting the expense of doing so.