A Guide to Investing in a Vacation Home for the Short-Term Rental Market
If you’ve been toying with the idea of owning a vacation rental property, now is the time to turn your dreams into a reality. With domestic travel booming in Australia, investing in a home - for business or for your own pleasure - has the potential to truly improve your quality of life.
While this all may seem daunting, understanding the basics of the short-term rental industry is simpler than you think. To get you started, we’ve put together a basic guide to help you make the right decisions when it comes to finding the perfect vacation rental.
Find your location
When we talk about location, we encompass everything from the surrounding neighbourhood and all it entails. Part of prioritising location comes down to understanding whether your ideal guest wants to be close to the sights and public transport, where the action is and how safe the area is. If you want to buy a property in a location that is favourable toward short-term rentals, we encourage you to get familiar with local laws and regulations governing the real estate market. Additionally, you should also find out the rules for a hosting platform like Airbnb.
Our advice? Think big and don’t limit your thinking to vacation homes. You can make a profit renting a home to many types of travellers and guests, from remote workers to your friendly neighbour who is renovating and needs a short-term stay. Keep this in mind when considering the location.
Understand rental property returns
Before investing in property, it is important to understand the return that your rental property will give you so that you can make informed decisions about how to invest.
To calculate the ROI of a property, here are a few things you should know:
- Average annual rental income
- Average annual operating expenses
- Annual cash flow
- Determine down payment and other upfront cash
- Divide the annual cash flow by the total amount of cash invested to calculate your return
- We also recommend working with an Airbnb management company to advise you when it comes to leveraging a powerful pricing strategy. This helps you make decisions like property pricing and a cancellation policy selection.
Invest in the right property
Throughout the process of finding your perfect rental, research is key. Don’t just buy a house that’s cheap, because it may be cheap for a reason! Take your time and be patient. We recommend going over to see the property firsthand as photos can be deceiving. Walk around the building, drive through the neighbourhood, and get a feel for the surrounding environment as well as the local community. Some considerations to keep in mind when choosing the right rental property include:
- Job and population growth
- Percentage of renter-occupied households
- Rising rent prices and declining vacancy rates
- Neighbourhood rating, including school district quality and employment rates
- Property tax rates
Hire a property manager
Being a homeowner as well as a property manager is extremely time-consuming. From sourcing and screening tenants to taking care of repairs and handovers - the responsibilities required for successfully managing a rental property are not for the fainthearted. That's why we recommend working with a property management company that can do the heavy lifting for you and who understands not only the market but guests’ expectations and how to manage these.
From guest-hosting, cleaning, maintenance, listing optimisation to occupancy management, a company like Hometime can proactively manage the performance of your home, to keep your occupancy high and your guests happy.