Important Things to Know Before Buying Your First Investment Property

Important Things to Know Before Buying Your First Investment Property

Written by Katie Conroy

Buying real estate is an exciting and appealing investment strategy for many people, and for good reason. According to Forbes, purchasing real estate can help people build wealth more consistently than other investments. Vacation rentals, specifically, generate regular cash flow so you can be successful whether or not your property appreciates in value over time. Here are some important things to keep in mind before investing in your very first vacation rental property.

 Location Is Everything 

Location is key to success for any vacation rental. If you don’t know where you want to set up your rental, consider cities that attract many annual visitors, and make sure you choose a great neighborhood for your rental as well. If the home is located far from local attractions, services, shops, and public transportation, you’ll have a much harder time filling vacancies and pulling in consistent rental income. 

Unexpected Expenses Can Spell Disaster

Every property comes with several expected and unexpected expenses. If you don’t budget and plan for these expenses, you’ll jeopardize your investment income. Monthly mortgage payments, property taxes, insurance, maintenance, management services, and utilities can all add up. 

Before buying your property, make sure you can charge rental rates that are high enough to cover all of your expenses and still make a profit. Bigger Profits offers some great tips to help you price your rental realistically. One way to do this is to check out other rentals in the area and take note of how much they charge per night. Importantly, check your competitors’ booking calendars to make sure people are actually willing to pay the rental rates you intend to charge.

Managing a Property Is Hard Work

Many people think that investing in real estate is an easy way to earn some passive income, but owning a vacation rental requires a lot of hands-on work. Some of your duties as a vacation rental owner will include marketing, cleaning, and performing regular maintenance. On top of this, you’ll have to handle many administrative tasks, such as taking bookings and filing taxes. Fortunately, you can outsource most of these jobs to professionals, like house cleaners and property managers. A property manager can also provide tenant screenings and rental platforms to streamline your business operations.

Finding Rental Guests Can Be Difficult

Buying an attractive vacation rental in a great location may not be enough to secure consistent bookings. Finding rental guests can be hard. If you’re unable to fill your vacancies, you can lose a significant amount of income. You may even end up paying your rental expenses out of pocket!

Learn how to market your rental to guests. These days, it’s important that your business has a good website and social media accounts—you can use these to reach new guests and influence people who may want to book your place again. That said, make sure you can withstand some periods of vacancy. If you won’t be able to book as many guests during the winter months, you may want to increase your rental rates during the peak season. 

Renting out a vacation home can be a profitable business strategy, but it’s not for everyone. Avoid jumping into this investment. You may be tempted to buy a property quickly so you can start earning an income as soon as possible. However, your investment is more likely to be successful if you take the time to plan and evaluate your options before choosing a property to purchase.

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