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.