Seizing the Opportunity: Jumping into Vacation Rental Property Investing
As the world emerges from the grip of the pandemic, real estate investors are eyeing the lucrative realm of vacation rental property investing. With the post-pandemic tourism boom and a surging demand for vacation rentals, the numbers speak for themselves. By the end of 2021, average yearly earnings from vacation rental investments soared to a record $56,000, and the number of vacation rental listings is projected to exceed 1.2 million by the close of this year. In this article, we’ll explore the significant benefits of jumping into vacation rental property investing, potential drawbacks to consider, and valuable insights on selecting and locating the perfect investment property.
Benefits of Jumping into Vacation Rental Property Investing:
- Huge Market Potential: The vacation rental market is expansive, catering to practically every market in the United States, from small towns to bustling metropolitan centers. With over 1.1 million vacation rentals currently available, the sector is set to grow by 20.5% by the end of 2022. This diversity offers investors the flexibility to choose locations that align with their investment goals.
- Appreciation and Long-Term Profit: Historically, real estate has appreciated at a faster pace than inflation, providing a dual benefit of long-term profit and a hedge against inflation. The housing market, even amidst a pandemic, is projected to perform better in 2021 than it has in the past 15 years, according to the National Association of Realtors (NAR).
- Tax Benefits: Investors in vacation rentals enjoy the same tax breaks and write-offs as traditional real estate investors. The IRS allows tax deductions for vacation rental properties rented out for 14 days or more each tax year. Investors can explore detailed tax information in IRS Topic No. 415 and use tools like Stessa for automatic tracking and categorization of spending.
- Recession-Resistance: Vacation rentals in domestic leisure destinations have historically demonstrated resilience during economic downturns. Proximity to major cities and affordability compared to overseas travel positions vacation rentals as an attractive option for cost-conscious travelers during recessions.
How to Select an Exceptional Vacation Rental Investment:
- Seasonality: Consider the seasonality of your chosen location. Some properties may experience high demand in specific seasons, such as beachfront homes during the summer. Understanding the seasonal trends helps optimize rental income.
- Occupancy Rate: Evaluate the property’s occupancy rate by assessing the ratio of booked nights to available nights. Factors such as the property’s size, amenities, and accessibility to attractions influence occupancy levels.
- ROI Considerations: While potential returns on investment (ROI) can be enticing, it’s crucial to factor in operational costs. Account for property management fees, maintenance, taxes, insurance, and additional costs like furnishings, decor, and cleaning fees associated with frequent turnover.
Jumping into vacation rental property investing presents a golden opportunity to capitalize on the thriving post-pandemic tourism industry. With careful consideration of market potential, appreciation, tax benefits, and recession resistance, investors can navigate the vacation rental landscape successfully. Whether you’re eyeing a beachfront escape or an urban retreat, the key lies in understanding the unique factors that make a vacation rental a profitable investment. Utilize reputable online marketplaces to discover and secure your next vacation rental investment, and embark on a journey to both financial success and the satisfaction of providing unforgettable experiences for travelers. Happy investing!