Investing In A Vacation Home For Short Term Rentals: How It Works

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Just about everybody with a second home or extra space in theirs has decided to turn it into an Airbnb rental to make some money off of any tourists coming to their area. While this is an obvious way to go, there are other ways that you can rent out a property for short termers.

Having a second investment property is a good way to protect money that you’ve saved in case of a recession and a wonderful way to make extra money when the economy is booming. It can be as much or as little work as you need it to be to make it work.

For the sake of this guide, we will assume that you haven’t bought the property yet. Yet, if you do already have your property and are considering transforming it into a vacation rental then many of these steps can apply as well.


Read on for the things you need to keep in mind when thinking about investing in property as a vacation rental.


Do the research

Everybody knows the old cliche by now. Location, location, location. When doing your research it goes without saying that you need to find a place in the best location if you want to make money.

However, there is more to it than that. Let’s suppose you are picking a city that draws a lot of tourists and you plan to buy a property to rent out there. Whether you list it on Airbnb or list it yourself, you want to make the best feature where it is. Just being in that city isn’t enough. Find out what the areas are where people want to spend the most time. 

If a museum is popular there, then it may make sense to set up nearby, but if people are just going to the museum and then going somewhere else to spend most of their time, then that might not be a good option. Talk to the hotel concierges in the area and ask them where people like to hang out. You may find yourself surprised at the answers and find a better location than you’d thought.


Figure out your expenses and income

Now that you have a better idea of where to look into buying, you can figure out roughly what you will likely spend on the mortgage and property taxes. At this point you can do an analysis of how much you think you’ll be able to make in profit.

Find out what the average rental prices are and how much of the year the places are full so you can get a couple of ideas. One is how much to charge. You don’t want to charge too much and the place sits empty because the competition is cheaper. But, you also don’t want to sell short. Find a reasonable price to keep the place as full as possible.

Then think of how much you can reasonably take in over the course of the year. This is your estimated revenue.

Now deduct your expenses. Mortgage, taxes, are obvious but there are other expenses. You may have to pay out a hotel tax depending on the city. And then there is also the upkeep like having the place cleaned and maintained.

You will likely also need to hire a Property Management company to look after the place if you don’t live nearby. If you have several properties then this is a must as you will have trouble taking care of things yourself.

Once you have everything listed, you can get a good idea of how much money this will make for you in profit. Think of a number that will help you decide if it is worth it or not. After doing the math, the numbers might not make sense for you to go with this property which could send you back to the first step.


Do some marketing

Everybody lists on Airbnb as that is usually where people look first when deciding on a place to stay. People like it because they are usually located in the right area and cost less than a hotel or suite with the amenities of a home.

The problem with Airbnb is the fees. It can take a good chunk of your profit away from you. You can keep all of the money for yourself if you market the place rather than list it on Airbnb.

Start by making a website with a blog. Have articles written about the area where your property is located. People looking for information about the place will come to the blog where they can also then find out where to stay. Which is then going to direct them to the page about your property. Let them book it through the website and you don’t have to pay any fees.

You should also have your social media set up the same way with the links going back to the property page so people can see where they can stay. 

If you also add a Youtube channel, then you can keep the traffic coming to the website and end up with loads of bookings without spending a dime. This is called inbound marketing and is very effective.


Ask what people want

The next step is to make improvements or additions to your property based on what people are looking for. The best way to find this out is to ask them. On your social media pages or the website itself, you can create a poll and ask people to leave some feedback on what they look for in a vacation rental. You will find some areas of opportunity to improve doing this.

You should also give people who have already stayed at the property a chance to leave you some feedback. Ask them specifically what they liked and what they didn’t like. Then ask them what they would have liked to have had but wasn’t provided. 

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