What are the pros and cons of owning a vacation rental property?

Vacation rentals have catapulted in popularity over the past decade. While they were already favored by many savvy families looking for more space and more savings, vacation homes blossomed even more when millennial travelers took notice. These adventure-seekers started choosing one-of-a-kind stays over been-there-done-that hotel rooms. Now, even more people are desiring short-term rentals for another reason.

With this landscape, vacation rentals can be attractive investments. However, as with any endeavor, investing in vacation rental properties comes with hard work and some hurdles. It’s smart to weigh the vacation rental pros and cons before purchasing one of your own. Good news: we’ve done the research for you.

First up: The perks.

Benefits of buying an investment property

More income

The obvious upside: The extra income you can earn by renting your vacation home to travelers. Homeowners renting on Airbnb make an average of $924 per month.* And that’s just one platform. If you list your home on the other most-visited vacation rental sites, such as Vrbo and Booking.com, you’ll have even more opportunities to fill your calendar and make your maximum revenue. The right vacation rental property, in the right place, with the right amenities can be a fantastic earner. Here are some factors that can tip the scales in your favor:

Location and seasonality

Consider popular vacation destinations that draw visitors year-round or for more than one season.

Amenities and inclusions

Consider what guests are willing to pay extra for. For example, our research shows that pet-friendly vacation homes can earn up to 10–20% more income.

Personal visits

What good is a vacation home if you can’t vacation in it? We recommend staying off-season so you can make the most during peak season from paying guests.

Learn more: How to make money on a vacation rental

Equity appreciation

A vacation rental can be a smart way to lock in a healthy financial future. Real estate properties tend to appreciate in value over time. A vacation home is no different. If the economy permits and if we see steadily climbing inflation, the value of your investment property could climb over time, too. Consider investing in upgrades and amenities that can draw in guests and boost your appreciation. For instance, our studies show that vacation homes with hot tubs make 15–20% more revenue. When the time comes, you can cash in on the profits from selling your home.

A personal and private getaway

Escape with your partner for a weekend on the coast. Take the kids to the mountains for some sledding and snowshoeing. Plan for a family reunion one day. Whether it’s investing in a cabin in your favorite ski resort or purchasing a beach condo in your favorite seaside destination, you can look forward to more than just making extra money. You’ll make a ton of new memories as well. Precious time with your favorite people? That’s priceless.

More tax deductions

Renting out your vacation home is a business, so you may be able to write off business-related expenses that you’ll incur maintaining and repairing the property. Here’s a list of possible deductions you can claim:

• Hosting fees for sites like Airbnb and Vrbo
• Housekeeping
• Utilities
• Guest supplies
• Property management fees
• Occupancy taxes
• Insurance premiums
• Mortgage interest
• Lawn or garden maintenance

Tax law can be complex, so we recommend consulting a tax professional to discuss your tax obligations and how to maximize your deductions.

Disadvantages of owning an investment property

Unexpected expenses

As in life, stuff happens. Things break, wear down, go missing. Same with your vacation home. After you carefully estimate projected expenses (mortgage, garden and lawn maintenance, insurance, utilities, etc.), have a plan for the unplanned. The smartest (and easiest) solution? We recommend setting aside funds to cover unforeseen costs. This will better allow you to manage your cash flow and protect your ROI from taking an unexpected hit. Having the right vacation rental management partner is also key. With Vacasa, you can rely on a local team to maintain your property on your behalf.

Learn more: Advice and tips from a vacation rental investor

Varying local vacation rental laws and regulations

Every destination has different rules, laws, and regulations surrounding short-term rentals. Some cities place stifling restrictions on homeowners’ ability to rent to travelers, while other destinations support their residents’ efforts to capitalize on tourism. This can easily complicate your home search. Your best bet? Refer to our latest list of top vacation rental markets. This list only features destinations that both allow short-term rentals and are big draws for travelers. Then, work with an experienced real estate expert who specializes in vacation rentals in your chosen market. Local real estate agents know their markets inside and out and can assist with regulations and permits.

Property upkeep and maintenance

Thinking of managing your vacation rental on your own? Brace yourself for an avalanche of work. As the owner, you might also fill in as the front desk agent, the housekeeper, the repair technician, and more. You’ll be responsible for things like regular maintenance, restocking linens and towels, repairing any broken items, and answering all of your guests’ requests. Partner with a full-service vacation rental management company like Vacasa to take those responsibilities off your shoulders. They’ll have a team watching and working on your property, making sure that your home is kept pristine and in top condition for every guest stay.

Learn more: What’s included in Vacasa’s full-service vacation rental management

Nonstop marketing

Guests have to find your vacation rental before they can book it. That requires marketing. Right out of the gate, that means taking eye-catching property photos, writing compelling listing descriptions that sell, and decorating with furniture and accents that both complement your destination and appeal to modern guests. Then comes listing your home on all the major booking sites like Vrbo, Airbnb, and Booking.com.

From that point on, you’ll have to continually optimize your vacation rental listing to appeal to the most customers, update your rates and calendars, and respond to questions and reviews. When you hire a full-service property manager, they’ll take care of all these marketing tasks. At Vacasa, we go even further by running digital marketing campaigns (like emails and ads) to keep our homes in front of travelers.

Learn more: Vacasa’s digital marketing strategies that get guests booking

Once you’ve purchased your home, we can help you earn more R&R, too (reservations and rental income, that is).