How to Find Success with a Vacation Rental as Your First Investment
By Ray Flynn, DiyGuys.net
Are you interested in opportunities for passive income? Some statistics indicate that vacation rentals are growing in popularity, and with sound strategies, they can be a terrific investment for first-time investors. Read on for tips to help put your finances in order, choose the right property, and run it in a manner that will draw a steady flow of guests.
Finances First
People are often surprised at what is required when purchasing their first investment property. Lenders donât view investment properties the same way they do personal residences, and it affects how you prepare your loan application. For example, first-time homebuyers often apply for FHA loans. According to PennyMac loan services, FHA loans are especially good options for people with a limited credit history and small down payment, so it can be the perfect solution when buying a first home. However, one of the requirements applicants must meet is the property they are purchasing will be their primary residence. As such, this rules out FHA loans for investors.
What Kind of Loan Then?
When purchasing an investment property, you can use a standard mortgage loan. Lenders generally prefer a superior credit score, so if you have any hiccups in your history, tidy things up before you apply. You will also need to have cash reserves established, enough to cover six months of payments on both your current mortgage and the investment property mortgage. Lastly, lenders like to see a more substantial down payment on investment properties, usually 15 to 20 percent down. You can use Zillowâs mortgage calculator to help you tally numbers.
Examine Prospective Properties
Choosing a great location is the next step in purchasing a successful investment property. In the case of vacation rentals in the Connecticut area, think in terms of what people look for when taking their getaways. Being in close proximity to a variety of area attractions, easy navigation to and from the rental, creature comforts, and a unique experience are a few things to keep in mind. Choosing a seasoned realtor, like those at Calcagni, can give you a leg up on finding the right property too, as an area realtor will have a better perspective on where to look and the best properties to consider for a vacation rental.
Amenities That Matter
Creating an experience that guests will enjoy can make or break your vacation rental. Properties occasionally require modifications to meet expectations, so youâll want to budget for changes in advance. With that in mind, consider what amenities you intend to offer guests.
As an example, Seachange Vacation Rentals notes that vacationers put a well-outfitted kitchen at the top of their preferences. The cost of kitchen remodels can vary broadly, depending on how much work is necessary and what materials you select. Guests also prefer a pleasing outdoor space, such as a balcony, patio, or deck, with well-maintained furniture and equipment.
There are some other basic items guests prioritize, such as free WiFi, comfortable bedding, laundry access, and parking. Budget for changes, upkeep, and replacements when making your plans. You should also expect to be available to guests should they encounter problems during their stay, or consider hiring a property management company to tackle that on your behalf.
Running the Vacation Rental
If you are a handyman type, are good with paperwork, and have the time and energy to keep up with cleaning and maintenance between guests, chances are you can meet the challenge of running your vacation rental personally. However, many investors find that itâs necessary to hire a professional to address day-to-day concerns.
Bear in mind, however, that if you hire someone else to tackle the management of your vacation rental, they are essentially representing you. So, you want someone who is experienced, professional, and reliable taking on those duties, as bad reviews can spread like wildfire and damage your reputation. To ensure you make a sound choice, read through this guide on how to hire a property manager, and if you decide to go that route, budget accordingly.
The time is ripe for first-time investors to establish themselves with a vacation rental. Prepare your finances, choose a great property, and run it wisely. Your investment can be a terrific source of passive income with a handful of well-thought-out decisions.
Image courtesy of Unsplash
