7 Things to Know Before Investing in a Vacation Rental

You’re planning on investing in a vacation rental but don’t know where to start.

Embarking on a new business venture can be daunting, but knowing these 7 things before investing in a vacation rental property can help you on the road to success.

1. Be Prepared to Pay a Higher Mortgage

When you apply for an investment property mortgage, expect to face higher interest rates than you see when you buy a home you plan to occupy. You can expect around a .5 to .75 interest increase over what you would pay for your home mortgage.

The reason?

Lenders know that you are much more likely to bail on an investment mortgage than on the mortgage for your residence. Statistics show that investors are 30% more likely to abandon their mortgage obligation than someone who’s paying for the home they occupy.

2. Expect Taxes

Benjamin Franklin once wrote, ‘In this world nothing can be said to be certain, except death and taxes.’

Unless you are renting your property for less than 14 day a year, you can expect to pay income tax on the money that your investment property generates.

Also, you may be required to collect occupancy tax from renters and then pass the money along to the state. Percentage and rules about occupancy taxes vary on a state-by-state basis.

Talk to your tax professional prior to purchasing an investment vacation rental property so that you aren’t blindsided by tax payments that are coming your way.

3. Plan to Protect Your Investment

Think your typical homeowner’s insurance has you covered? If your vacation rental property is working as an investment, than you are likely mistaken.

A homeowners policy is meant to cover a owner-occupied property, which means it is not designed to cover the specific perils and possible losses facing a rental property investment.

It is important to carry vacation rental property insurance to protect your investment. Vacation rental insurance coverage can vary, but typically includes:

  • Comprehensive Property Coverage
  • Named Peril Coverage
  • Optional Replacement Cost
  • Actual Cash Value
  • Liability Coverage
  • Loss of Rents

Also take into account risks specific to the area you’re buying in and be sure that you carry insurance that covers possible losses. Policies that could help protect your investment may include:

Investing in a vacation rental home requires extra insurance protection to ensure your property, guests, and income are all protected.



We offer a variety of coverage options for your vacation rentals and investment properties, so you can get the right amount of coverage you need at a price you can afford.



4. Secure Your Rental

No matter how good the neighborhood your vacation rental is in, it’s at risk of being broken into. Unoccupied homes are a big target for thieves. Everything from home furnishings to copper wiring and plumbing is in danger if someone decides to break in to your vacation rental.

Safeguard your investment from being victim to burglars by taking the proper safety measures, including:

Proper Lighting
Be sure the entry way is well lit, thereby deterring criminal activity.

Indoor Lights on Timers
Make it look like someone is always there, even when your vacation rental sits vacant.

Secure Doors and Windows
Don’t skimp when it comes to being sure that your doors and windows are high quality and protected with good locks.

Security Cameras
Install cameras to be sure that any crime is captured on video, but be careful. You don’t want to install cameras anywhere where renters should have a "reasonable expectation of privacy" or you could get in legal hot water.

Alarm System
Homes without an alarm system are three times more likely to be burglarized. Protect your investment property with an alarm system to deter crime.

Good Neighbors
If possible, make friends with the neighbors. Give them your contact information, let them know you have a rental property next door. Ask them to contact you if they see strange or suspicious activity. Most people are more than willing to help keep the neighborhood safe – and their own home values protected.

5. Choose Location Wisely

When you’re shopping for a vacation rental investment property, location is of paramount importance. You want your property to be somewhere that attracts a high numbers of travelers.

When considering particular properties look for local amenities and features that will attract renters, such as galleries, restaurants, scenic locations, etc. These will become your selling points when marketing your vacation rental.

Also, choose a home that will be usable in all seasons, not just during the area’s peak season. For example, a vacation rental property near Lake Tahoe offers snow lovers plenty of activities such as skiing and snowboarding. When summer rolls around, that same property can welcome sun-loving occupants who want to enjoy the lake.

Choosing a home that will be attractive to renters year-round helps you increase your profitable seasons.

Black Line

What Insurance Do You Need for Your Vacation Rental Property?

What Insurance Do You Need for Your Vacation Rental Property?

Find out how vacation rental property insurance protects your guests, your vacation property, and the income it generates.

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Black Line

6. List on Vacation Rental Site

There are a lot of websites out there to list your vacation rental on, which offer many advantages, including:

  • being in full control of your availability
  • choosing your pricing
  • laying out your house rules
  • choosing how you interact with guests
  • verifying and confirming guests

To list your vacation rental online, you’ll need:

High-resolution images & video tour of the property
The importance of professional images/video can not be overstated. You want your property to be represented at its very best.

Description of the property
Make sure the title and description are catchy but honest. If writing isn’t your thing, hire a professional to describe your property.

A website for your property
While not mandatory, having a website for your property is preferable and gives you a competitive edge over those that don’t.

Your rates and calendar availability
Keep your calendar current with real-time updates and keep factors like location, facilities, and season in mind when setting rates.

7. Market Wisely

Imagine coming into your rental home after a day of travel. Is it everything that it appears to be in your online images? Are you accurately representing the space and grounds?

Be sure that your rental meets (or exceeds) expectations by keeping it up to date and in good working order.

Define the level of service that you want to provide renters – one which aligns with your rates – and be sure that you have a system of maintenance, housekeeping, and service that supports it.

Once you’ve defined your rental properties level and brand, promote it on social channels. Share images regularly on Instagram and Facebook, perhaps also incorporating Facebook ads to get your property in from of more prospective renters.

Having the right plan in place will arm you with everything you need to find success with your vacation rental investment property.




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