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Who wouldn't love to get in on the growing U.S. vacation rental market and use some of the extra income earned to travel or finance other goals?

If you're thinking about buying a vacation rental property, don't start your house hunt before considering these five requirements to ensure that the investment pays off.

1. The Right Location

Location is an important decision-making factor in any real estate investment, but it's especially crucial when considering which locations would be most appealing to those traveling. The best scenario would be to pick a property in an area that's growing in popularity and where the demand for vacation lodging is greater than the supply. To keep a steady flow of bookings, consider buying something in a place that boasts year-round, or at least multi-season, attractions.

Keep in mind that making a good return on your investment also depends on choosing a location where the residential real estate is affordable.

2. The Lowdown on Regulations

Before you start thinking about the income you'll enjoy from weekly guests at your vacation home, make sure you know the local regulations regarding short-term rentals. In some communities, affordable housing shortages have led to restrictions with these arrangements. Talk to area real estate agents and search the official website of the municipality where the property is located to find out whether it's feasible to operate a vacation rental there.

Include a collection of local and state lodging taxes in your rental agreement, and make sure you're prepared to purchase the necessary insurance on your property. A standard homeowners policy may not provide enough coverage; so check with your insurance agent to make sure all your bases are covered.

3. The Comforts of Home with Other Amenities

Travelers who choose to rent a home instead of a hotel room want a place that feels and functions like a home. But they also want something a little out of the ordinary. That's the balance you must strike when furnishing your vacation property.

First, check out your potential competition. If most of the other vacation rentals in the area have pools, a grill, a big-screen TV, and at least two bedrooms you'll probably want to be on par. Then think about something extra you might add to make your property stand out. It might be an outdoor shower in a balmy, tropical location or a fire pit when the evenings get chilly. In a kid-friendly destination, you might want to provide a playroom or a dorm-like sleeping space furnished with bunk beds.

4. A Maintenance Budget

You might decide to have a property management company take over the maintenance of your vacation rental. If you're handling it yourself, it might be worth it to hire a cleaning service and someone to take care of simple repairs. You may also need lawn and pool services. Keep a list handy of other professional service companies to call if major fixes are needed.

Your maintenance budget will also need to include enough funds to keep the utilities, cable, and internet services on - even when the property is unoccupied.

5. A Renovation Plan

If the look and layout of your vacation rental property are in good shape when you buy it, you can probably skip the expense of a major renovation. But if the place lacks curb appeal, has a poorly functioning kitchen, or a worn-out roof, you'll need to have a realistic budget to address those issues.

If you're redoing the kitchen or bathroom, you can save money and time on upkeep by selecting materials that are durable and easy to clean when renovating a kitchen or bathroom. For an outdoor deck that's easier to maintain, consider building it from a composite material instead of wood. Remember that a home improvement loan can help you finance the upgrades to make your vacation rental more appealing to guests.

Buying a vacation rental property can be a smart investment if you choose the right piece of real estate in the right location and have a plan to create a guest home that is inviting, comfortable, and well-maintained. For a top-dollar return on your investment, include these five must-haves in that plan.

This information and recommendations contained herein is compiled from sources deemed reliable, but is not represented to be accurate or complete. In providing this information, neither KeyBank nor its affiliates are acting as your agent or is offering any tax, accounting, or legal advice.

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