Chances are you know someone who owns a vacation property. Maybe it’s a condo in Wisconsin Dells, a studio apartment above a quaint shop in Door County, or a lakeside getaway in Manitowish Waters. You’ve heard a lot of success stories and are intrigued by the potential for an added revenue stream.
But do you know everything you need to know before getting started?
Understanding vacation property ownership
Vacation property ownership involves buying and managing real estate intended for short-term rentals or personal use during holidays and vacations. This type of ownership allows you to generate income while enjoying your own private getaway.
One huge benefit of owning a vacation rental is the opportunity for passive income. Renting out the property during peak seasons or weekends can offset the costs of ownership, such as mortgage payments, maintenance, and property taxes.
Pete and Dina Borremans purchased a vacation getaway several years ago in Florence, WI, near the U.P. border. Pete says their realtor gave them the idea to start renting it out, rather than just using it for themselves.
“Our realtor mentioned it was a shame most of the properties he sells are only used a few times a year,” says Pete. “It was at that moment we thought seriously about renting it out. We eventually said ‘let’s do it,’ and haven’t looked back!”
Like many vacation property owners, the Borremans also make time to enjoy the property themselves and create lasting memories with family and friends.
It’s worth noting vacation property ownership does come with challenges. Owners must navigate property management complexities, including marketing the rental, handling bookings, and addressing maintenance issues. Legal considerations, such as Wisconsin zoning laws and rental regulations, vary by location and can affect property use. It’s important to understand these hurdles before jumping right into things.
Assessing your financial readiness
Evaluating your finances is another “must-do” before jumping into owning a vacation property.
Calculate your initial investment and ongoing costs: This includes the purchase price of the property, closing costs, and any immediate renovations needed to make the space appealing to renters. Additionally, consider ongoing expenses such as property taxes, insurance, utilities, and maintenance.
Understand the rental income potential: Research the local market to gauge average rental rates for comparable properties in your area. Keep in mind factors like location, amenities, and seasonal demand, as these can significantly influence your rental income. Estimating your occupancy rate lets you know how much revenue you can realistically expect throughout the year. In some cases, the money you make can exceed expectations.
“Our yearly rental income far surpasses what we thought it would be when we first entertained the idea of renting,” adds Pete.
Figure out financing options: Many lenders offer specific loans for investment properties, which can result in favorable terms. Be mindful of your credit score and financial history, as these will impact your interest rates and loan eligibility.
Choosing the right location
Begin by considering factors such as accessibility, local attractions, and the overall appeal of the area. Properties that are easily reachable by major highways or airports tend to attract more visitors. Proximity to popular tourist spots, natural wonders, or cultural landmarks will greatly enhance the desirability of your property.
Evaluate market demand and tourism trends. Research the seasonal flow of travelers in your chosen area; understanding peak seasons will help you refine your rental rates and occupancy levels. Tools like local tourism boards and real estate reports will let you know which are experiencing growth in tourism, helping you make a smart decision.
Preparing your property for rent
Let’s say you’ve chosen a property, signed all the closing documents, and have been handed the keys. Now it’s time to attract guests by properly preparing your property.
Renovations and upgrades: These might include updating outdated fixtures, refreshing paint, or enhancing curb appeal through landscaping. Investing in modern amenities, like high-speed Wi-Fi and smart home technology, will set your property apart in a competitive market.
Furnishings and décor: Choose comfortable, durable furniture that reflects the style of your property, and opt for neutral colors that appeal to a wide range of tastes. Incorporate local art or decorative elements that highlight the uniqueness of your location. Don’t forget the importance of quality bedding and linens; a good night’s sleep makes for a satisfied guest.
Welcoming atmosphere: Consider small touches that make a significant impact, such as a welcome basket with granola bars and candy or a hand-written note introducing guests to your property. Make sure the space is clean, well-lit, and free of clutter. Providing clear instructions for appliances and local attractions will also enhance your guests’ experience, making them feel at home.
Marketing your vacation rental
Successfully marketing your vacation rental requires a multi-channel approach that maximizes your property’s visibility and appeal.
Start by listing your property on popular vacation rental platforms like Vrbo (what Pete and Dina use), Airbnb, and Booking.com. Make sure your listing has high-quality photos, a compelling description, and clear pricing details. Use keywords like ‘cozy retreat’ or ‘family-friendly getaway’ to enhance searchability.
Use social media to engage potential guests and show off your property. Create dedicated accounts on platforms like Instagram and Facebook to share stunning images, guest testimonials, and local attractions. Include hashtags relevant to your location and audience to reach a broader audience.
It’s also wise to partner with nearby businesses or take part in community events to attract visitors looking for unique experiences.
Make sure your vacation property and everything inside it are protected. Connect with a local Rural Mutual agent to create the right coverage plan for your new investment.
