Tips for Buying Your Vacation Rental

We thought it might be helpful to put together a few tips that will help you in your quest to purchase the perfect vacation rental home.

Location, Location, Location

This is real estate were talking about, so the location x 3 rule still applies. You may be using your vacation rental for yourself at times, but if your primary intent for the home is as a vacation rental, consider looking at popular destination areas such as the beach or mountains within a 2-3 hour drive of an urban area with a large airport to make travel to your rental easier. The home should also be in a pleasant location with activities such as beach walking, shopping, theater, restaurants, or horseback riding for the whole family to enjoy, and accessibility to these activities is key. An oceanfront home may be outside your budget, but one a block away and still within an easy walk to the beach could be much more affordable and will open you up to a larger pool of potential renters.

The Four Seasons

Palm Springs, California might be a wonderful place for renters to enjoy golf, sun, and 70-80 degree days in the winter, but temps in the 100’s will keep many travelers away in the summer. Similarly, a spot near great hiking trailheads in the summer and fall may have impassable roads in the winter snows. The Oregon coast with its refreshing cooler summer days and cozy winters could be an ideal four-season vacation spot.


You know that your vacation rental will produce some income for you, but do you have a good idea of how much you can count on and what your additional costs will be? First, you need to make an educated guess about how many days a year you expect your home to be rented. Research other vacation rentals using websites such as, or, and talk to vacation rental property managers and ask about homes similar to one you might consider purchasing. How available are they? Are their calendars clear or full? How much business do they seem to get? When you get an estimate of how many weeks your house may be rented, cut that down by 1/3 to be safe, and do the math to come up with your potential rental income. Then add up all of your expenses. Compare that to your potential income, and if your expenses outpace your income, decide whether or not you can afford the difference. Keep in mind, there may be stretches of time your vacation rental sits empty.

You may find a great deal on a home to use as a vacation rental, but the expenses go beyond the purchase price. Put yourself in the shoes of a potential renter. What would you want and expect out of a place you were renting? Then, figure out which of those are ongoing costs. Expect to pay for cable and high-speed wireless internet, landscape maintenance, and pool or hot tub maintenance if applicable. Expect, too, to decorate for the masses. New, clean, simple furniture that is pleasing to the majority of renters will make your guests feel at home.

Remember, too, to budget in typical home costs such as taxes and insurance, as well as maintenance and repairs. A good rule of thumb is to expect that repairs should cost around 1.5% of the value of the house per year. If you buy a $200,000 home, budget for $3000 a year in repairs. You may not need all of it in a given year, but save it for larger repairs down the road.


There are a number of factors that might increase how rentable your new vacation rental might be. When you identify homes you are interested in, find out if they have been rentals in the past, and look at the rental history or talk to the rental agencies if any were used. If it has not been used as a rental, talk to rental agencies about how much vacation homes in the specific areas and of that type tend to be rented. Its also important to look at vacation home rental websites such as,,, or Look at several properties to learn which houses tend to have the busiest calendars. Are they close to shopping? Do they have views? How many bedrooms do they have?

One of the first things to learn in your hunt is whether there any restrictions on short-term rentals in the city or the specific neighborhood you are considering. Talk to your real estate agent and the city’s planning department to find out if there are any zoning restrictions that would prevent you from renting your home on a nightly or weekly basis.

Rent Before You Buy

As you will likely be using this as a vacation home for yourself as well as a rental for others, be sure that you and your family enjoy the area in which you’re considering buying. Find a home or a hotel room to rent for at least a couple weeks. This will give you time to experience the day-to-day life in the town, explore, and experience some of the activities available. You can also spend time driving or walking through different parts of towns with an eye towards neighborhoods you would enjoy as well as any hidden annoyances like noise or traffic. It will also give you time to look at the town and area through the eyes of someone looking for a vacation rental. A real estate agent who knows the area can be very helpful as you are learning its various nuances.

Type of Home

The condo vs. single family home debate comes down to a few basic things. First, how much do you want to manage the property? Condo associations take care of all exterior maintenance while with a single family home, you or someone you hire will need to deal with any and all maintenance issues. Consider amenities as well. A single-family home may have more bedrooms and bathrooms, larger family spaces, and a yard for kids and pets, but many condos have extras such as a hot tub, pool, a tennis court, or fitness center. Most condos have a home owners association with a monthly fee, and there may be restrictions related to renting the condos to third parties. Finally, in your comparison with other rentals in the area, pay attention to whether condos or single-family homes rent better. It may not be a good idea to buy a condo if most of the successful rentals are single-family homes, or vise versa.

Size of Home

Square feet in a home may not be as important as the number of bedrooms and bathrooms available. Families and groups of friends traveling together value their own spaces and accessibility to a bathroom, and the more people they can sleep in one house, the more money they will save, and the more they can enjoy each others company. Again, it is a good idea to see what other successful rentals in the area are like. In general, your goal should be to cater to the typical renters who come to your area.

Tax Implications

Just as you do on your primary home, you will be paying property tax on your new home. Be sure to talk to your real estate agent, county officials who determine property taxes, and/or an accountant to know exactly what you’ll be getting into. You will also be paying income tax on any rental income you receive from the home as well, but you’ll also be able to deduct the expenses of owning the home, including taxes, homeowner dues, and management fees.

The thinking and legwork that needs to be done prior to making an offer on the vacation rental home of your dreams may take some time and energy, but it will pay you back in fewer surprises, rental income, and a vacation home you will enjoy using yourself!

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