How to Buy a Vacation Rental Property


Buying a vacation rental property is an excellent choice when investing in real estate as it provides a reliable income stream and access to a nice vacation area. It provides vacationers with short-term accommodation.

Investing in vacation rental property requires a unique set of strategies and consideration of certain factors. Below are some of the necessary steps to take when buying a vacation rental property:

1.  Identify a Suitable Location

When looking to purchase a vacation property, location is an essential factor to consider. It is necessary to choose an area with the capacity to positively impact your return on investment and meet future tenants’ requirements. The location should be in strategic areas that are appealing to people and provide luxury. Proximity to places like beaches, lakes, national parks, etc., should all be considered.

2.  Consider Laws and Regulations

Due to the variations in regulations and laws in different places, ensure that the intended vacation property is purchased in a location that allows renting. Renting out properties in areas where the local laws do not allow renting out properties could attract severe penalties. Some places only allow rentals for a limited number of days. Therefore, it is essential to conduct thorough research on any area’s regulations to avoid purchasing properties in the wrong places.

3.  Get Pre-approved for a Mortgage.

When buying a vacation home, the buyer will choose the best suitable financing method. Some of the financing options include portfolio loans, conforming loan, short term loan, etc. In most cases, sellers request the buyers present a mortgage pre-approval letter to show that they are serious. Some of the mortgage pre-approval requirements are proof of income, employment verification, proof of assets, and good credit score.

4.  Calculate the Vacation Rental Expenses

Besides mortgage costs, there are several expenses renters must pay to acquire a vacation rental property. Some of the vacation rental expenses include:

Closing Cost

Lots of real estate investors often overlook the closing cost. It involves expenses consisting of attorney fee, appraisal fee, loan origination fee, and home inspection fee.

Property Taxes

They are paid yearly to the federal or local government.

Occupancy Tax

Also known as lodging or hotel tax, occupancy taxes are paid whenever the buyer rents a room, space, or bed.

Property Insurance

This insurance protects the vacation rental property from potential risks such as earthquakes, theft, floods, and fire.

HOA Fees

Purchasing a vacation home rental in planned communities with common areas requires that the buyer pay HOA fees. The cost is often paid monthly or quarterly, and the few vary based on the amenities, property type, and location.


Utilities consists of all the expenses used for electricity, cooking gas, heating, and cooling. The utility cost estimate is usually obtained from the seller and the local utility companies.

Professional Property Management Fees

Some renters may decide to employ an experienced property manager’s services to oversee the vacation home’s proper management. Payments for property maintenance are generally paid as a percentage of the received rent.

Marketing Costs

Marketing cost consists of all the expenses utilized in advertising a rental property on offline and online platforms.

5.  Hire Operational Services

After acquiring a vacation rental property, the owner may decide to employ different cleaning and maintenance services, mostly if they leave far away from the property. They may choose to hire lawn care maintenance services, pool maintenance companies for houses with pools, and property managers to take care of all the operations.

6.  Finance the Vacation Rental Property

Vacation rental properties can be financed through different methods such as portfolio loans, multifamily loans, bridge or short-term loans, etc.

Portfolio Loan

A portfolio loan is often used by investors that wish to fund several properties simultaneously. Investors can also use this loan to finance multi unit vacation properties. Portfolio loans usually offer lower personal qualifications and fewer property requirements.

Multifamily Loan

The multifamily loan is used when financing a multifamily vacation property comprising two to four units or an apartment building with over four units. Multifamily loans are divided into four types, namely government-backed loans, short-term multifamily financing, conventional mortgages, and portfolio loans. The individual loan types specific lending criteria.

Short-term Loan

Short term loans is often used for temporary financing. It can be used when an investor wants to purchase a property before acquiring long term financing. The criteria for this loan is usually lenient.

7.  Conduct a home inspection

Before making a final choice and closing the deal, it is essential to make a thorough home inspection. Ensure that the necessary appliances and equipment are functional and in good condition. Pay attention to the electrical systems, foundation, asbestos, water drainage, and waste systems. The buyer can request a repair or negotiate lower terms if any structural or mechanical defects are detected during inspection.

8.  Advertise & Manage the Vacation Property

After getting the vacation property, the next step is to expose it to vacationers through advertising them and listing them on websites.

Owners that manage their vacation rental from a distance can use a system to allow staff and guest access to the property. Alternatively, management companies can be employed to handle the day-to-day services and management of the property. Using these management companies is time-saving.

Where to Find Vacation Rental Properties

The easiest way to find vacation rental properties is by browsing the Internet for some places to buy a vacation rental property.

You may also come across a vacation rental property close to your neighborhood, which is great because having a vacation rental nearby makes it easy to efficiently manage the property.

A local real estate agent’s services can also be employed to help find an excellent vacation rental property. They are handy for unfamiliar areas.

Bottom Line

Vacation rental properties provide an excellent opportunity to earn a consistent income and grow long-term wealth. These vacation rentals can also serve as a second home. Buying a vacation rental property requires an in-depth knowledge of local markets and consideration of several vital factors that can affect the investment return.