Smart Tips on Buying and Owning a Vacation Rental Property

Smart Tips on Buying and Owning a Vacation Rental Property

Real estate is a lucrative industry. Investors buy properties for different reasons. Some consider it to be an addition to their portfolio, while others take the chance to flip fast for profit. But one of the smartest strategies you can do is to convert it into a vacation rental. 

What are the perks of owning vacation rental property? According to Grand View Research, the vacation rental revenue for 2019 was $87.09 billion. The forecast also says that the market may expand at a compound annual growth rate (CAGR) of 3.4% from 2020 to 2027. More travelers are choosing vacation rentals over hotels as they are cheaper, provide additional privacy, and accommodations are more kid- and pet-friendly.

The industry is booming! With proper management, you can earn a steady stream of income. Your vacation rental property can also serve as a private getaway for you and your family. And because properties naturally increase value, you also have the option to sell yours in the future and receive a good return on investment.

Factors to Consider When Buying Vacation Rentals

Purchasing a vacation rental property isn’t something to rush. It should be an informed and guided decision. There are certain things you need to consider to make sure that you are indeed making a smart investment.


The most important aspect when looking for a vacation rental property is the location. This will be your selling point to your future guests. The location of your property should appeal not only to you but also to your potential renters. Remember that your market is people who would want to take a break from their busy lives. So, you probably want a property near the beach, ski resorts, or other tourist destinations. Your property should also be ideally located near facilities like clinics or malls to accommodate your tenants’ other needs.

Laws and Regulations

Short-term rental regulations vary per city and state. In New York, for example, an entire apartment cannot be rented out unless the hosts are present. Meanwhile, in San Francisco, properties can be rented up to 90 nights per year even without the hosts. Before buying vacation rentals, you must first know the laws and regulations in the area you’re eyeing because you don’t want to be investing illegally. Also, if caught, you may have to pay a high amount of fines and even lose your license.

Maintenance Costs

Experts say that you should set aside at least 1% to 2% of the annual value of the property for maintenance and upkeep expenses. If you live close to the property, you can save money by taking care of the repairs yourself. But if the property you’ll be buying is far away, you may need to hire a property manager to attend to the maintenance needs of the property, which is an added expense for you.


Applying for a loan for a second property may come at higher rates. Second-home loans don’t even qualify for VA or FHA loans. Don’t be surprised if you will have a slightly higher mortgage rate than that of your first home.

In order to qualify for a loan, you need to prove that you can pay a mortgage for your main home and vacation rental for two to five months. Note that you may have to pay a higher mortgage if you will be renting out the property for more than a couple of weeks per year. This is because the property will be considered an “investment” and not just a vacation home.


Your investment should be protected with insurance. Should there be any damages that may take place, an insurance policy can help in covering expenses. Since you will be using your vacation rental property to generate revenue, it’s better to apply for a stand-alone commercial or business liability policy. As per the National Association of Insurance Commissioners, a policy for vacation home rentals may cost more than primary homes as they are more susceptible to insurance claims.


In order to make the most out of your vacation rental property, you need to also do the work—and that means you have to market it. You need to think through how you’re going to enlist your property. Moreover, be aware of the marketing fees you’ll have to pay.

What Are the Best Places with High Vacation Rental Potential?

The location will have a huge impact on the direction of your vacation rental business. That is why it’s important to take time to study the demands in a certain location before jumping in with a deal. We’ve listed some places in the U.S.A. with high vacation rental potential.

Huntington, VT

This small town in the mountains of Vermont is known for its lush views and hiking spots. Camels Hump is a favorite hiking spot of many here. Many streams and rivers are also waiting to be explored and open for fishing or simply dipping in. Indeed, tourists who are into nature will enjoy this place. Vacation rentals are most profitable during the fall.

Tuscaloosa, AL

This city is known for being a hub for education and sports. There are a lot of museums to explore in this area. If you’re a car enthusiast, you’ll be thrilled to have a tour of the Mercedes Benz Factory. And if you’re looking for something nature-related, you can always pass by the two-mile path along the Black Warrior River or go fishing or boating in Lake Tuscaloosa. It is reported that tourism grew here by almost 10% in 2019, making vacation rentals profitable.

Sevierville, TN

Sevierville attracts a lot of vacationers because of its proximity to the Great Smoky Mountains. People who are on a vacation here also make time to shop at Tanger Outlets Sevierville as this mall offers a wide selection of designer merchandise at deeply discounted prices. Furthermore, this city is popular among vacationers because of the peace and quiet it brings as the population is only around 16,000.

Buffalo, NY

New York already carries a bustling name for tourists. But one particular city that is highly popular in this state is Buffalo because it’s home to one of the U.S.A.’s grandest natural attractions, Niagara Falls. About 15 million travelers visit this spot every year. People also keep coming back for the city’s other attractions like the Outer Harbor and Buffalo Riverworks. It’s fun to be there during Christmas as well, when you can try ice biking.

Gatlinburg, TN

Another entry from Tennessee is Gatlinburg. More than 11 million tourists visit here every year to explore the Great Smoky Mountains, including its parts like the Sugarlands and Cades Cove. Ober Gatlinburg is also open all-year-round, offering recreational activities like skiing and indoor ice skating. Families truly love mountain-top adventures such as flying over gondolas, chairlifts, and aerial tram cars. 

You can learn more about which cities make a good vacation rental investment from The Short Term Shop blog: What are the best places to own a vacation rental property?

Managing Your Vacation Rental to Maximize Profit

Owning vacation rental property can bring you a high return on investment if you work hard for it. To maximize your profit, here’s what you can do:

Be Your Own Property Manager

Choosing to manage your property by yourself can help you avoid management fees. In the long run, you can earn a valuable amount of experience. However, hiring a property manager is helpful if you are new to the business. Once you get the hang of it, then you can consider taking care of the property by yourself.

Advertise on Marketplaces

We’re talking about platforms such as Airbnb, HomeAway,, and more. These companies employ marketing strategies that can put your vacation rental in front of your potential customers. Plus, it’s easy to sign up on their websites.

Decorate and Upgrade Amenities

Guests are attracted to vacation rentals that look nice. Decorate your vacation rental property according to your target market. If you’re targeting families with kids, make sure that fragile and sharp objects will be out of the children’s reach. On the other hand, adding a jacuzzi may attract couples wanting to have a romantic getaway.

Take Amazing Pictures

Once you’re done redecorating your property, it’s time to take pictures of it. Include every detail so potential customers online will have an idea of how great your vacation rental is. If you have room in your budget, hire a professional photographer to ensure magnificent pictures.

Write Inviting Descriptions

Don’t forget to include the capacity of your property, the number of bedrooms, the number of bathrooms, and other important details. Bank on your property’s location. Mention the nearby spots they can visit and what they can expect to see within the area.

Set the Right Pricing

You don’t want to charge too high or too low. To determine the right price, you have to study the demand in the property area, the competition, maintenance costs, and more. It may take some time to find the sweet spot, but don’t give up. The right price will help you maximize your bookings and rental income.

Leave Them with an Unforgettable Experience

Guests will not only remember how comfortable they are with staying in their property but also how you make them feel during their stay. Make their booking worthwhile by giving them a welcoming package or a handwritten note upon their arrival. You can learn from the hospitality game of resorts and hotels and apply their tricks to your business.

Get Positive Reviews

Since vacation rentals are mostly seen online, people can leave reviews about them. Encourage your guests to leave a review after their stay so that your future guests can see your vacation rental’s potential.

Final Thoughts

When it comes to buying and owning vacation rental property, the biggest consideration is the location. An ideally located vacation rental can easily attract potential guests. But it doesn’t stop there. You need to study the competition, market the property, and do other work.

There’s a lot to learn about vacation rentals, but with our help, you can become an expert. Learn more about how to handle a vacation rental business and other real estate market trends by browsing AgentTrend’s website!

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.