Should You Buy a Vacation Rental Property?
If you’re like many investors, the allure of owning a vacation rental property – or even a temporary rental property – is strong. But is it a good idea? This guide explains the pros and cons of buying a vacation rental property in Silicon Valley so you can make the right choice.
Should You Buy a Vacation Rental Property?
For many investors, it’s a great idea to buy a vacation rental property. However, if it’s something you’re interested in, you need to know that owning a vacation rental isn’t the same thing as traditional real estate investing. It’s important that you find a property that’s going to rent frequently with few vacancies.
Related: The ABCs of buying your first investment property
The Vacation Rental Business, Explained
The vacation rental business can be exceptionally lucrative. It involves an investor, like you, purchasing a property with the express purpose of renting it out for short periods of time. Generally, these properties are alternatives to hotels and are more suitable for long-term stays (several weeks to a few months) than hotels are.
Because you’re looking at properties you can rent on short terms, you can choose from a wide range of property styles – you’re not limited to traditional houses. You may choose to buy a cozy villa, a condo, a beach house or something else entirely. You can choose to look for budget-friendly investment properties or spring for a luxury property that you can command luxury prices for; the choice is yours.
Related: How to avoid capital gains tax on the sale of a rental property
How Much Money Can You Make With Short-Term Rentals?
On average, short-term rental property owners make $924 per month. However, that’s a national average – and if your property is in a higher-priced area (especially one where there are hotels that cost upward of a few hundred dollars a night), you may be able to make a significantly higher amount. The more days of the month your property is rented, the more money you’ll make, too.
Related: How to generate passive income by buying a duplex in Silicon Valley
What’s the Legal Side of the Deal When You Buy a Vacation Rental Property in Silicon Valley?
You’ll want to consult with an attorney before you buy a vacation rental property. Different localities have different laws and ordinances, which means if you want to stay out of hot water, you’ll need professional guidance. A recent law in Los Angeles prohibits some landlords from renting out their properties for the short-term, for example, so you’ll need to look before you leap.
Do You Need a Business Plan Before You Buy a Short-Term Vacation Rental Property?
As with any other business venture, it’s smart to develop a plan before you dive in with both feet. Ask yourself:
- How much money do I want to make?
- How much time can I dedicate to property management?
- Do I need to hire a property manager?
- Am I looking in an area where I’d like to vacation?
- Are there popular attractions nearby?
- Why would a person choose my house over a hotel?
- Is there really a demand for short-term rentals here?
- Does this area have all-season appeal?
You’ll also want to consider whether you can earn enough through short-term rentals, using a reasonable occupancy estimate, to pay for the mortgage loan on the property. If you won’t break even, you’re better off investing elsewhere.
Are You Buying or Selling a Duplex, Triplex or Fourplex in Silicon Valley?
If you’re selling a duplex, triplex or fourplex in Campbell, Cambrian Park, Los Gatos, San Jose, Santa Clara, Saratoga, Willow Glen or another community in Silicon Valley, we’re here to help. Call today or fill out the form below to find out about our innovative marketing plans that can put your investment property in front of all the right buyers.
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