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Vacation Rentals: Are They a Good Investment?

Many families enjoy taking annual vacations, but this can be a costly endeavor. Investment in a vacation property can be a great way to offset the expense of your normal vacation plans. By renting out the property during times when it would otherwise be vacant, you can leverage the income generated for family needs or other investments. Here are some areas to consider as you make your dream of owning vacation property a reality:

Use:

Start by asking yourself if you are comfortable sharing your vacation property with other people. Will you be able to find a balance between your personal needs for the property and your ability to generate the income required to maintain the property?

Income and expenses:

The income the property generates will be established by the rent you are able to obtain and the occupancy level you can successfully maintain. A seasonal rental that has a peak season of 16 weeks can achieve a set weekly revenue over that period minus any time set aside for personal use by your family.

Expenses will include taxes, financing costs, repairs, cleaning, landscaping, and, potentially, the cost of a property management company. Subtracting these expenses from the property income will give you the profitability of the investment.

Management:

As with any income property, you will need to decide whether you can manage the property yourself or will need help. Property management companies may be necessary to manage the day-to-day operations. Do you have time to manage maintenance, landscaping, and rent collection? If not, a management company may be your best option.

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