Starting any kind of business is tricky – from drafting the business plan to deciding on your mission statement. It can be even harder in certain industries such as real estate. However, you have probably seen how lucrative the real estate industry is, and you are keen to take advantage of it. The funny part about starting a real estate business is that you do not know where to start.
Many investors are left confused at the next step to take once they have decided on delving into the real estate market. They are faced with the difficult situation of choosing what kind of properties to invest in, the location and the price range. Doing this requires them to be fairly knowledgeable of the working mechanisms of the market, especially the local one.
The vacation rental industry is coming of age, and if you have decided on starting a vacation rental business, then this article will help educate you about the industry and its operations.
What Is a Vacation Rental?
A vacation rental is a private property that is rented out on a short-term basis to tourists, travelers or vacationers. They are different from hotels as they provide customers with more amenities such as kitchens, yard space, privacy and even access to the local culture.
Vacation rentals can take various forms, that is, they can be beach houses, log cabins, cottages, apartments and villas. The fact that they can take any form means that customers get to experience different options. The popularity of vacation rentals has increased over the years especially in areas with high tourist traffic. Little wonder many investors are looking to get involved in the business.
The growth of the vacation rental market has resulted in the birth of websites such as Airbnb and Booking.com, which showcase vacation rental listings to prospective clients.
How Profitable Are Vacation Rentals?
You’ve probably been asking yourself this question: “Is a vacation home a good investment?” The truth is, real estate investments are generally profitable and present a good avenue to earn steady passive income. Nevertheless, it’s not uncommon to see some vacation rental owners complain about the poor profit returns of their investments.
This may be as a result of many factors, the most common of which is the location of the rental. Other factors include the demand, the occupancy level, rates and competition. Also, it is worthy to note that location and demand are directly proportional, that is, a great location will draw in a higher amount of traffic and vice versa.
Overall, if the said factors are favorable, then the profitability of the investment increases. Another factor that contributes to the increased profitability of vacation rentals is its short-term nature. This allows it to outpace long term rentals in income returns and affordability.
Beginning a Vacation Rental Business
Prior to starting a vacation rental business whether in the real estate industry or not, it’s important to know what you seek to achieve and how to get there. It’s common to jump into the business frenzy full of adrenaline, only to make avoidable mistakes. A good way to prevent that from happening is to carefully follow a few guidelines. They include:
- Developing a Business Plan
Many investors have continuously failed to see real estate as a true business, rather, they believe it is a mere investment outlet. This misconception not only hampers the prospects of the vacation rental investment properties, but it also limits the income possibilities that may occur should the investment be treated as businesses.
A great business plan helps outline the vision and goals of your business, alongside the future opportunities you wish to explore. It further allows you to get your ideas and expectations in an orderly fashion, making accountability and evaluation easy.
Businesses plans work well when they are supported with documents such as marketing plans, operation plans and financial plans.
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- Look for Affordable Homes to Buy
If you are keen on owning a vacation home to rent out, then the next thing to do is to find one. Do well to prioritize location whenever you decide to purchase a house, as it has previously been explained to be a crucial determining factor for profitability. Ensure that the location is easily accessible and free from environmental and health hazards.
If choosing a property seems hard for you, you can employ the services of an expert real estate agent who is a vacation rental pro.
- Setup the Rental Home
After drafting a great business plan, the next thing to strike off the list is home staging if necessary. Your property may not look as fancy as you want it upon purchase; hence, home staging will be a great way to get the house ready for clients. The activity may involve repainting, furniture change, appliance fixing, reroofing etcetera, especially in the core areas of the house.
Such areas include the bathrooms, the bedrooms, the living room and the kitchen. These four places are usually the first zones any client will want to check out before lodging. Make sure to equip your rentals in a way that makes your prospective clients feel at home.
- Set Your Rental Price
With upstaging crossed off the list, the next thing to do is to set your price. Pricing is tricky as it can be the bane or the catalyst to customer traffic. Set your prices too high and no one will want to rent your property. Set it too low and you find yourself at a loss or attracting the wrong crowd. The trick is to find a middle ground that will favor everyone.
A common mistake made by vacation rental business people is that they set their prices based on sentiments and emotions. Instead, it’s advisable to check the prices of comparable properties to know the best price range. Great pricing equals greater profit maximization.
- Prepare Documents
We are almost at the end of the list as we have crossed most of the important steps off. After buying condos to rent and setting your price, the next thing to cross off is document preparation. Ensure that all required documents such as booking papers, contract forms, payment procedures amongst others, are in place. Carefully arrange the required documents prior to the start of the contract reduces stress.
- Advertise
It is time to put your business out there. Let the world know what you have to offer in the booming industry. Advertising also involves writing detailed descriptions of your properties, highlighting their great features and other perks associated with the house. Social media is a great and inexpensive tool to achieve this. Do well to be honest and creative while advertising.
Start Your Vacation Rental Business Today
Starting a vacation rental business is fun and there is no better time to start than now. Take that big step today to reap massive profit in future. However, before starting, ensure you do your due diligence and work with a trusted real estate agent to find a great rental property and kickstart your investment journey.
