Your Guide to Buying Your First
Vacation Rental
With experts recommending multiple income streams to build wealth, adding a vacation rental home to your
portfolio is a smart way to boost your balance sheet. Here’s how to get started
once you’ve decided to purchase your first investment property.
Buying Your Vacation Rental
Choosing the right location for your rental purchase is the
top consideration for netting maximum income. To guarantee consistent demand,
buy near a tourist draw so the home has a built-in market. Look into a region
like Northern Michigan, as hidden gems like this lake-and forest-studded locale
are less saturated with rentals than better-known draws such as Florida or the
New England coast.
Even if you’re familiar with the Northern Michigan area in
which you’re looking, work with Diane Ives, an experienced local realtor
to find options that are suited for tourists. Real estate professionals provide
detailed assessments regarding access to attractions and public transportation
that might not be of concern if the home was your main residence.
Setting Up Your Rental Business
When you’ve settled on a property, it’s time to secure a
loan. Be forewarned that buying your first investment home usually requires a
larger down payment than what was needed to finance your primary dwelling, so
be prepared to put down 20% or more. Work with a lending advisor to understand
your options, which may include obtaining a home equity loan or a second mortgage on your existing house.
Another consideration is what structure
you’ll use to run your rental business. While sole proprietorship may seem the
most straightforward and cheapest choice, investigate protecting your personal
assets by establishing a limited liability company. A formation service will
handle the Michigan LLC setup process, and using one is much cheaper than paying a
lawyer.
Your final decision is whether you’ll take care of the
rental yourself or hire a property manager. Even if you live close enough to run everything, engaging
a professional to oversee bookings and arrange maintenance and upkeep is a
worthwhile expenditure.
Getting Your Rental Ready to List
With everything else in place, it’s time to ready your home
for clients. Invest in attractive but sturdy furnishings and opt for a neutral color scheme for wide appeal. Hardwood flooring is good-looking yet
stands up to high traffic, and microfiber fabrics on furnishings are forgiving
of spills. Work with an interior designer to strike the right balance between
tastefulness, durability, and comfort.
Adding plentiful and flexible sleeping options broadens your
audience, as does installing extras like a pool, hot tub, and grill. A kitchen
well-stocked with dinnerware and small appliances makes your rental feel more
like a home-away-from-home. Bonus features like a state-of-the-art
entertainment center and game tables draw folks who are hoping for a little
extra fun during their getaway.
Once you’ve pulled everything together, hire a professional
to photograph the home. Showcasing high-quality images in your rental listing
results in more views and, ultimately, more bookings. It also signals to
clients that your property is well cared for by a committed owner. Include
interior and exterior views so guests see everything the home offers.
From picking the right location to maximizing the home’s appeal, purchasing a vacation
rental is a big undertaking. Use these tips to simplify the process, and you’ll
soon be enjoying the extra income generated by your first investment property.