Real estate is known for being a solid investment, and recent travel trends like eco-friendly staycations, solo travel, and luxurious amenities all highlight the strong demand for accommodations that are unique to vacation rentals. As the market continues to grow, investing in short-term rental today can be a great play for long-term income.
Here are eight major benefits of owning vacation rental property to underscore exactly why it’s a good investment.
In This Article:
Increased Income Potential
Varied Market Opportunity
Offsetting Owner Costs
Even More Revenue Opportunity
A Built-In Vacation
Regular Maintenance & Upkeep
Tenant Flexibility
Home Appreciation
1. Increased Income Potential
Not only is the vacation rental industry showing plenty of income potential, it’s also creating opportunity for what our real estate experts consider a “high-reward profile.”
Most investors look at cap rate — the ratio between a property’s net income and its market value — as a key measure of success, because it indicates return on investment. Our experts say long-term rental cap rates can hover around an average 4-5% in metro markets (where investors are typically drawn), but short-term rental cap rates can frequently come in at 10% or higher. That’s because long-term rentals lock in rates for longer periods of time, while short-term rentals have more room to dynamically change rates based on demand, seasonality, and other market conditions.
This means your ceiling for profitability is significantly higher when investing in short term rentals vs. long term rentals — and that’s more money that could land in your pocket.
2. Varied Market Opportunity
While finding success in long-term rental generally requires a purchase near a major metro area, buyers can find vacation rental properties with profit potential in a wide variety of markets.
And since travelers’ favorite locations are scattered from coast to coast, you’re spoiled with choices for vacation rental investment properties –– whether you’re looking for a beachfront property, lakeside rental, mountainous ski house, or cozy cabin.
Ready to explore your options? Our team helps investors find success in vacation rental investment markets all across the country.
3. Offsetting Owner Costs
Creating solid revenue streams and growing your income property portfolio are the main investment goals for many second home owners. But there’s also massive value, particularly when it comes to investing for beginners, in offsetting owner expenses from the start.
From mortgage payments and utilities to insurance fees and maintenance costs, vacation rental income can cover monthly expenses and help your home pay for itself in a shorter time frame. Vacation rental owners are also eligible for certain tax deductions, which could help close the gap between income and expenses.
Bonus benefit: using a vacation rental management company with especially low fees (like Evolve) can help owners break even and start earning profit faster.
4. Even More Revenue Opportunity (with Five-Star Hospitality)
The best part about investing in vacation rental properties is that great guest feedback makes your home more lucrative over time.
When rental properties hit new listing sites, they have to compete with established competitors for visibility and bookings. But the more five-star experiences you deliver (along with smart responses to any poor reviews), the more sites like Airbnb and Vrbo will show your property to browsing travelers — making it more likely to earn bookings.
Best-in-class hospitality also makes it easier to raise daily rates (when the market allows for it), increasing your profit margins on any given stay as you establish the value of your vacation rental property.
5. A Built-In Vacation
Unlike long-term rental properties, a vacation rental investment is also a place where you can get away. It provides the luxury of carving out time to spend with family and friends, or to switch up your work-from-home space — without necessarily needing to spend money on accommodations each time you travel.
In other words, you earn rental income and boost revenue when you’re not there, but also save money when you’d like a change of scenery yourself.
6. Regular Maintenance & Upkeep
When you frequently host new guests, you’ll be able to keep close tabs on your property during cleanings and maintenance. This regular upkeep can prevent long-term issues and maintain your property’s condition better than long-term rentals, which may suffer from a neglectful tenant.
With frequent access to your property, you can inspect for damages or wear, prep for seasonal changes, and quickly address any issues while they’re still manageable.
7. Tenant Flexibility
While some owners prefer the stability of a long-term tenant, short-term rental investments can help mitigate the impact of ending up with a problematic person leasing for a year or more, or having to weather lengthy vacancies between renters.
Payment is also more streamlined with vacation rentals. Since stays are typically paid for upfront, it can reduce the risk of rent arrears or non-payment issues that are more common with long-term tenants.
8. Home Appreciation
As with all smart real estate investments, you can expect your vacation rental’s market value to appreciate over time. So, if and when you become ready to sell, you’d likely earn more than the previous owners did when you bought it.
Your home will also have a track record as a vacation rental to appeal to the next investors, so you can use its earning potential to your advantage. If you work with Evolve, we’ll provide you with historical performance metrics, as well as feature your property on our website and connect you with vetted realtors that specialize in short-term rentals.
To help you target the right people when your home goes on the market, Evolve’s real estate experts can help you sell directly to buyers who are looking to invest in vacation rentals.
Take the Next Step Toward Investing in Vacation Rental
Investing in vacation rentals might feel like a big undertaking, but Evolve is here to guide you at every stage of the journey — whether you’re just starting out or consider yourself an industry pro. Our experts can help you:
- Define your personal and financial goals
- Understand the nuances and earning potential of any market
- Connect with preferred real estate agents in the area for expert local assistance
- Manage your new property to maximize income and stay ahead of the competition
And if you’re hoping to lock in a short term vacation rental investment with proof of performance, our listings for sale page features homes that already have a successful track record.
No matter where you are or plan to buy, we’re here to help you reach your vacation rental goals.