Where to Purchase Short-Term Rental Properties and How to Do It

When planning for a rental property investment, you must understand the industry’s supply and demand rules. It’s like every other business. So it is important that you understand the business landscape and not just buy a house in a place you’d like to live in.

The property market is volatile and needs careful monitoring in the areas you feel will maximize your returns. Consequently, the higher the demand in that area, the longer you’re likely to stay and earn more.

While investing in vacation rental property is lucrative, it has its drawbacks. Research is everything. Searching for where to buy rental property is not enough. You need to analyse and understand whether your investment would yield you the returns you have in mind. For this reason, you need to have the best buying rental property tips on fingertips.

With the easening of travel restrictions and the remote model of working, came the need for people to have the ease to travel and stay in a place of their choice.  Short-term rental (STR) refers to leasing accommodation for short-term purposes. It can range anywhere from a week to about a year. Most landlords will provide furnished accommodation. 

Why are short-term rentals a good investment option?  How can you choose the right property to invest in?  Let’s find out!

How to Buy Short-Term Rental Properties

Before buying a vacation property, it would be best to identify your target audience. It’ll help you know what they expect and prefer. This way, meeting their needs and requirements will be easier.

For instance, many Airbnb’s cater to working travelers. When choosing a place for a short stay, they consider things like:

  • A central location to the business district or one with excellent commuting options to neighboring areas
  • Added home-office tech
  • High-speed internet
  • Adequate and functional space for both work and relaxation with necessary appliances

You don’t have to sweat too much trying to find out where and how to purchase short-term rental properties. The are real estate investment experts who help you invest your money in short-term rentals.  If you a novice and wish to invest your money in short-term rentals as a source of passive income, it is prudent to seek the help of real estate professionals. 

The expert will make work almost effortless for you. Once you engage them and agree, they will help you find the perfect property and design. They go ahead to advertise, maintain and manage it for you. 

Still, if financing and accounting are not your interests, they also offer assistance. The best part? You start getting ROI in the shortest period, about 3-6 months after investing. That sounds like the best deal.

As you decide about doing it yourself or using experts, here is what you should know about buying vacation rental property.

  • Market Evaluation

Are rental properties a good investment? This is the first question to ask before attempting to enter the short-term rental business.

As a beginner, you tend to fantasize about the high-income rates of top tourist destinations like the U.S, Dubai, and Hawaii, to name a few. Though these markets boast of solid demand, it doesn’t mean it’s the right one for you.

In such areas, the competition for STRs is very high. Thus, the prices for a property are unreachable, making it hard to find a good deal. Even if you find it, it’s likely an old property requiring more repairs and improvements than you bargained for. So what do you do?

Evaluate the market by looking at the occupancy rate for the last year. Fortunately, finding such data is straightforward from the internet, but others would require digging up.

What’s the rate of visitors for the rental home in the previous year? With the answer to this question, you’ll know if the market is appreciating or depreciating with the correct data. Plus, you’ll be better positioned to avoid vacancies should you choose a place.

Moreover, watching the news and reading special market reports will help you know the economy of your desired location. Look for information about new hotels, clubs, concerts, and sports events that attract tourists. 

If there’s a lot of news about the place’s tourist attractions, then be sure that the area is doing well in tourism infrastructure. So, it gives you an excellent reason to buy a vacation rental property there.

  • Season Analysis

To learn how to make money with rental properties, analyze the seasonality of the market you’re planning to buy. Usually, many areas experience high tourist attractions at specific times of the year. For instance, coastal areas with lovely beaches lag during the winter.

Some markets push away tourists due to harsh winter effects, while the same markets attract visitors during the leafy autumn. When analyzing the market’s seasonality, consider the weather and geological and geographical factors.

Finding a market with tourist attractions is like winning a lottery. Consequently, investing in a market with robust seasonality is worth it.

  • Demand Evaluation

Demand is a consequence of the economy and tourism. Research adequate data on the occupancy rate of the market you’re looking to enter.

Here, the ideal occupancy rate is entirely on you. But, you must be realistic. Though a 100% occupancy rate is a dream come true, it’s close to impossible. The occupancy rate differs, where a strong market has 65% and above, and a middle market is 50%.

Anything below average is undesirable to invest in. However, an average market would be ideal for favoring your numbers.

  • Financing

Obtaining a loan for your short-term rental investment is slightly different from getting a primary residence mortgage. Du to the higher default rates on rental property loans, lenders manage the risk by charging higher interest rates.

Additionally, financing standards are usually stricter on rental property applicants. So, before verifying your loan application, lenders focus on credit score, down payment, savings, and debt-to-income ratio. 

While there are several options for funding your STR strategy, lenders raise the standards on stringent credit scores, down payment, and savings with higher minimum rates.

It would be best to buy the rental property with cash. However, it depends on your savings and goals. While this may not be an option for many investors, it’s an excellent way to generate instant passive income from a rental property.

  • Local Regulations

Some locations have more regulations for short-term rental property than others. You’ll find places that have banned short-term rentals completely. Others might have enforced costly processes for licensing.

For example, the local European authority projected a drop in their city’s culture from the high rate of tourism. They felt their cities would turn into tourism theme parks, replacing the existing revered values the city bears testimony to. So, to protect residents of the local housing markets, Europe now limits short-term rentals to a defined number of nights annually.

Before starting your search for properties, ensure you find and read local regulations affecting short-term rentals in your desired market. Be aware of the vacation rental laws and regulations in your chosen location.  The best place to start searching would be government websites to get accurate, updated information.

Parting Shot

Short-term rental investment can be both risky and rewarding. Therefore, it would help to critically research and strategically purchase the best vacation rental property. This way, you’ll impact your cash flow and investment positively.

Above all, vacation rental investment is an ideal way to break into passive income real estate. Using the above buying rental property tips will help you prepare adequately and invest right. Hence, you manage to make your investment worth your time, efforts and money.