Five Steps to Buying Vacation Rentals

Investing in real estate is a wise use of your hard-earned cash. Buying a holiday rental offers the chance to increase income and develop a company at the same time, particularly at the moment when the vacation rental industry—also known as the cottage industry—is flourishing.

Keep in mind these five simple (but crucial!) procedures if you’re prepared to enter as this new sector develops.

1. Set objectives.

Ask yourself: What is the purpose of this rental property before you start looking at possible homes (and after you’ve been pre-approved and dealt with the first few rounds of financial documentation)? If earning additional money is your major objective, be more precise by stating your monthly revenue target. How about yearly? When it comes time to evaluate the prospective cash opportunity, you’ll know exactly what makes sense for you and what doesn’t.

Setting a timetable can help you stay on track with what may be a lengthy process, advises real estate investor and business and financial expert Mark J. Kohler:

“Set a date by which you must buy your first rental. Remain devoted. Make sure they are aware of your objectives. Instead of merely saying, “Buy rental by X date,” put it in writing and establish small targets to start looking at property and making choices. Set more reasonable objectives to help you close.

PRO TIP: Learn how to make money through Airbnb Rental Arbitrage without having to invest!

2. Examine the home’s worth

Spend some time learning about the worth of the house, both financially and practically, after finding a few possible rentals you like. There are a few techniques to evaluate the worth financially:

House Worth Estimator: This tool evaluates the value of your home based on estimates from five authoritative sources using its own unique machine learning algorithm. You may then decide whether the property is fairly priced, overpriced, or underpriced.

Consider the following while planning logistics: Is it appealing to tenants? Does there exist a demand? How is the local infrastructure? Is it becoming too busy? What are the typical prices? Is there a price increase? 

Don’t forget to consider crime statistics and the walk score, which may appeal to renters who are active and would rather walk than drive or don’t want to spend money on a rental vehicle.

3. Establish the available funding.

Calculate your earning potential before investing in a holiday rental property and believing that you would always generate money. Use this straightforward calculator from, where you may enter the average number of occupants, the average rental time (enabling you to enter a few days rather than the standard rental length of 6 to 12 months), and the average rental price.

Remember to deduct your mortgage payment to determine how much money you would have left over each month (or put back into the home).

You may eliminate features that don’t align with your financial objectives using this formula. This is an easy approach to whittle down your possibilities when you have several choices and concentrate on the ones with the greatest potential value.

4. Estimate probable maintenance and upkeep expenses

Owning a rental property will need at least as much care and maintenance as owning a primary residence. In addition to normal deep cleaning activities like paint touch-ups and drain unclogging, you also need to consider improvements including modern technology like smart locks and app-controlled heating and air conditioning (among other innovations), all of which will have a cost.

PRO TIP: Learn how to make money through Airbnb Rental Arbitrage without having to invest!

There are a few quick methods to evaluate these expenditures.

  • Ask the local property managers what frequent maintenance difficulties they deal with. Depending on where the property is located, you could also have to deal with maintenance connected to the weather. Consider being near a lake, the ocean, or a mountain.
  • ring up nearby businesses and organizations: Uncertain about the normal heating costs? How much is the water bill? The responsible local business or organization can probably provide you with an estimate of the going rate.

5. Consider the dangers.

Discovered the ideal rental? The documentation must not yet be signed. First, consider any possible dangers associated with rental property ownership. Financial analyst Dana Anspach advises taking into account the following possible risks:

  • Between tenants, your home can remain vacant, which might reduce your total return.
  • You could have to pay legal fees if you have to evict a problematic visitor.
  • You could have to pay more for repairs if a visitor damages your property.

While certain hazards cannot be avoided, such as having a water heater fail unexpectedly, others may be reduced with the proper documentation. Visit to see our example rental agreement and learn more about short-term lease agreements (ideal for holiday rentals).

Bonus advice begin the procedure

Make the most of the vacation rental you acquire by following this advice. Set objectives, evaluate financial potential, and put the appropriate contracts in place so that you may be informed while you explore your possibilities and look at houses. Ultimately, owning and running the business will be as stress-free as possible, and you’ll discover a profitable opportunity that will pay you as the cottage industry expands.

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