How to Invest in the Right Vacation Rental Home

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How to Invest in the Right Vacation Rental Home

In every business, the goal is to create positive cash flow and maximum profit. It goes to say that a positive cash flow equals more profit. More profit means you can reap the rewards of your investment. However, earning good cash flow is not an easy feat, especially for vacation rental homes. You need to learn how to choose the right property investment to do so. There are basic things you need to remember to get more income flowing from your properties.

This article will go through all the steps one by one, helping you ensure you invest in the right property.

 

Choose the Best Location

The first thing you need to consider if you want to create profit from your investment is the location. Location may not be everything there is to consider when investing for a rental, but it constitutes a large chunk of the pie.

When it comes to real estate investments, location is one of the core pillars and something you can’t forget when you do your market research. Location is the only thing that is never changing in your investment. Guests come and go, seasons come and go, the rental home can have a few renovations, but the location remains the same when you buy a rental property.

Each location has its own occupancy rates, daily and monthly rates, average monthly income and property expense rate. These variables affect your income. A location with high income potential is the best choice for you. This means manageable property expenses and enough room to earn profit.

 

 

Another thing to consider is the vacation rental home laws and regulations in the city or state. Since it has become popular, most cities and municipalities have placed strict rules and imposed fines on violators.

The local authorities will be the best reference for rules and regulations governing the rental property you’re eyeing. For instance, the Dubai Department of Economy and Tourism has maintained that hotel and hotel apartment buildings are not allowed to host holiday homes. Moreover, not all residential villas can be used for short term rentals in Dubai. There are certain requirements to host vacation rentals:

-          Property must be in a gated community

-          The gated community where property is located must comprise at least 4 units

-          Commercial villas located on main roads can also be considered holiday homes

Check the license and taxes (if any) that you may pay. And most importantly, ensure the rules are comfortable to guests.

 

Maintain a Pricing Strategy

One of the most common mistakes a property owner can make is to set a fixed nightly rate for all seasons of the year. Short term vacation rentals offer you flexible pricing, compared to long term ones.

Consider these things when identifying your pricing strategy:

        Seasons

        Major or global events hosted in the location

        Occupancy rates

        Competitor prices

        Nearby hotel prices

        Weekends (this may vary from one country to another)

Make a comprehensive study on these factors and update your prices accordingly. During peak season, prices can be higher. Rates can also cool down during the low season to attract guests.

It’s also important to note that you can offer a lower rate compared to your competitors when you’re still starting with luxury vacation rentals. The focus during the first phase is to increase bookings until you have built a good reputation in the market.

 

Do an Extensive Analysis of the Market

Once you’ve decided on the location, now you can dive into the market and the demands of the market.  A high occupancy rate in the location of your choice means the demand can be enough to support your business.

If you were vacationing, would you like to stay in this vacation rental home? How about tourist sites? Are they accessible from your property? What is the occupancy rate? Is demand enough?

 

Calculate your Cash Flow

The fun part is calculating your property’s potential cash flow, before you even invest in a property. This gives you an idea how much you can potentially make for this investment.

Simply put, a good cash flow means you are making more money than what you spend on the property.

 

Consider Property Management

Property management is often overlooked. The operations is also an important part in the whole short term rental business. It involves managing inquiries and bookings, ensuring guests have a pleasant stay, check-out and even cleaning.

How Baytik Holiday Homes Can Help

Hiring a professional property management company like Baytik Holiday Homes is the best investment you can do for your short-term rental business. Baytik Holiday Homes ensures you have a good occupancy rate and a sustainable passive income source.

Created At: Jul 22 2022