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Real estate investment can be a daunting option for wealth building, but the prospect of short-term rentals – or vacation rentals – is becoming increasingly popular routes for investors to take. Much like they would for any long-term investment properties, investors need to do their research thoroughly, not only for the property they choose to invest in, but also the city. Looking at factors like the local market and rental prices can help determine the worth of buying a vacation rental, as well as accurately predict its success. When researching prospective locations, these are four boxes worth checking off before committing to any property.
What makes this city the winning one?
Starting at the beginning makes the most sense and before you go too deep down the investment rabbit hole, begin researching possible cities to scoop up rental properties in. Market research (or lack thereof) can make or break your investment opportunity and you don’t want to blindly pick a destination with little reasoning to back it up. Looking at factors like reliable public transportation, local tourist destinations, or cultural mecca scan help create a smoother decision-making process.
In conjunction with these factors, taking a deep dive into your desired cities’ Airbnb trends – vacancy rates; busy seasons – can more accurately predict success rates. If there is a steady growth of tourism in any given city, it’s a safe bet that Airbnb growth will follow.
What are the local Airbnb regulations?
As vacation rentals have become more popular investment opportunities, many cities around the country have also tightened regulations on what can even constitute as a vacation rental in the first place. Still, regulations are not created equal and familiarizing yourself with local laws and requirements can help create a shortlist of which cities are worth seriously considering. For example, some places allow non-owner occupied Airbnbs to exist while other locations don’t. If you’re not willing to relocate permanently in order to run your vacation rental, make sure the cities that require the latter don’t make the cut.
Is it a beautiful day in the neighborhood?
So, you’ve found the perfect city and within that city, the perfect property. Now what? Explore the neighborhood and become familiar with it. Is it a tourist destination? Is it a primarily older demographic living there, or alternatively, is it a college town? Short-term rentals thrive in places where popular tourist destinations exist; where food, culture, and the promise of unique experiences are notably present. The point is to find a property that is likely to be successful year-round in a destination that inspires visitors to flock to it in any given month. While beach destinations are tempting to consider, you’ll have to be prepared for short seasons and plenty of vacancies.
How does the competition stack up?
Avoid the risk of making bad real estate deals and overpaying for a property that could potentially flop by performing a comparative market analysis, that is, finding the value of a rental property by looking at other Airbnb rentals in the area similar to the one you’re considering. Taking a close look at similar properties may not only inform you of the local vacation rental success rate, but also how to price rental rates so that they are competitive. After all, you don’t want to price yourself outof a market, but you don’t want to undercharge visitors for a prime destination.
The great thing about vacation rentals is that there are various paths to take depending on what you want that investment to look like. Finding a lending partner to finance your investment is a critical first step to putting yourself on the right path and Temple View Capital Funding, LP (“Temple View”) offers nationwide lending for both short-term and long-term rentals. If you’re ready to discuss your shortlist of cities to invest in, contact Temple View today.