1. Acknowledge your long-term financial goals
Before you start the process of buying a vacation home as an investment, you need to define what kind of buyer you are. Do you want to generate positive cash flow as part of your investment strategy? Invest in a property you want to retire in? Or, purchase a vacation home that helps pay for itself between your own vacations there?
It’s rare, but not impossible, to find a vacation rental that can do all three. Get clear on your goals and desired outcomes upfront before starting your investment property search.
2. Research top destinations for investing in vacation rental properties
Location is one of the biggest draws for travelers. And it’s considered the million-dollar question when deciding where to invest. You can look at destinations you personally enjoy, or explore our top 25 vacation rental investment locations. Also consider seasonality. Does a destination’s popularity rely on a certain season? Does the town go quiet off-season, exposing your vacation rental to sit empty for several months? Your property’s location can ultimately help determine your profit potential.
3. Work with a local real estate agent specializing in vacation rentals
You’re already aware that the charming, walkable streets of your favorite mountain town are a tourist draw. The local restaurants dish up local ingredients. The powder during ski season is the talk of skiers everywhere. However, you might not know that every winter, the main access road closes down for avalanche danger, blocking out any potential visitors. A smart, local real estate agent would know that.
Plus, they’ll be able to guide you through all the questions you may not consider: What are the short-term rental regulations in your target area? What are the market trends? What’s the potential for growth? Are there any new hotels and resort developments that could impact vacation rental demand? Work with the right vacation home real estate agent to determine if your target investment could generate income all year long, or if it’s a highly seasonal market.
When negotiating the sale, your negotiations can hinge on your agent’s expertise. Without helpful insights into the local vacation rental landscape, you may be offering too much or too little. Accurate estimates of the home's vacation rental investment potential are also key to making an informed offer.
4. Calculate your potential vacation rental ROI
Before rushing in to purchase a new property, make sure your vacation home investment makes financial sense for your entire portfolio. Run the numbers on expenses, including insurance, taxes, capital expenditures, homeowner association fees, and more. Vacasa can give you personalized reports based on your target home's unique location and features. Plus, we can customize your reports based on upgrades and revenue levers like pet-friendliness. An in-depth report goes beyond gross income projections. Expect our in-depth reports to show monthly cash flow estimates, operating expense estimates, and net income potential.
5. Use dynamic pricing
Pricing isn’t something to take lightly. Your vacation rental rates can help determine if you hit your target profit margins. The right rate hinges on several factors, including the destination, current demand, day of the week, local events, and seasonality. If you use dynamic pricing for vacation rentals that relies on real-time data on these market conditions—like Vacasa’s system—your price will be automatically updated by the minute. No more setting one-size-fits-all rates and hoping for the best. Using data-driven tools can allow you to optimize the rate for each and every night.
Learn more about Vacasa’s dynamic pricing technology for vacation rentals >
6. Choose the right property manager for your vacation rental investment
An inexperienced property manager could break you. If you don’t want the burden of also acting as plumber, housekeeper, and troubleshooter, we suggest working with a full-service vacation rental property manager. A full-service company can handle all the hurdles and hassles of running a successful vacation rental—like marketing your home, fielding guest requests 24/7, and cleaning thoroughly after every stay. Look for a partner who won’t lock you into a long-term contract and relies on technology, not guesswork, to set your vacation rental rates.
Find out what’s included in Vacasa’s full-service vacation rental management >
