BUYING A VACATION RENTAL PROPERTY IN ZANZIBAR
Another way to invest in rental property is by buying and renting out a residence in a vacation destination.
But as exciting as the idea of owning a vacation rental can be, you need to understand the realities of such an investment — and subject it to the same business calculations you would with any other rental investment.
One challenge to owning a vacation rental is that, because they will likely not be rented 100% of the year — and in many cases only for a few months of the year — your per-night or per-week rental rates will need to be high to keep your investment cash-flow positive for the year.
Another thing you should consider when deciding whether or not a vacation rental is a smart investment for you are the expenses of owning such properties — and these are often higher than they would be for comparable properties not in vacation hotspots. The cost of advertising your rental unit, for example, will almost certainly be high because it could take slick, elaborate ads to entice prospective vacationers.
Additionally, because your vacation property can be turning over much more frequently than would a standard residential rental, you could also need to spend more money per year on cleaning, replacing broken or missing items, insurance, etc.
Owning a vacation rental property in Zanzibar
Is Owning A Vacation Rental A Good Investment?
When investors follow the appropriate steps to buying a vacation rental property, they are more than likely to reap the many benefits this investment offers. The biggest payoff vacation rentals have is increased cash flow. Vacation rental platforms (like Airbnb) are a great way to generate income from a short term lease, and if your property is in high demand, you will see even greater profits.
Not only can you generate income by leasing out your rental property, but also you have the benefit of vacationing there yourself. If you ever decide to take a getaway, your vacation rental can be made available for your own personal use. You can even hold on to your vacation home to use as a future retirement home.
Pros Of Vacation Rental Investments
It’s obvious that there are several advantages to owning a vacation rental property. In recent years, Airbnb continue to grow as more and more properties are being listed on the apps. The convenience of these apps have made finding and marketing vacation rentals as convenient as ever. In turn, those interested in vacation rental investments have skyrocketed. Here are a few of the benefits of vacation rental investments:
More Income: The first and most attractive benefits of vacation rental investments is more income. An Airbnb host can earn an average of $900 a month. If you have vacation rental investments in the most populated areas of the world, that income can multiply exponentially.
Having Your Own Getaway: Investing in vacation rental properties allows you to have your own ideal getaway whenever you would like. Use the property for any special events you may have such as birthdays, parties, or family get-togethers. Try investing in an area you want to visit again and again. The convenience speaks for itself.
Ensure Finances & Retirement Home: Investing in vacation rentals is great for ensuring you have future expenses for healthcare, future travel plans, emergencies, etc. Or if everything goes to plan, you can keep it as a retirement home. Either way, investing in vacation rentals can be a reliable asset for the future.
Cons Of Vacation Rental Investments
As with any type of investment, there are several disadvantages including costs, obstacles, and drawbacks when it comes to vacation rental properties. All of which deserve as much consideration as the benefits. Here are some of the drawbacks of vacation rental investments:
Property Management: While having your own vacation property is luxurious and convenient, it also comes with the task of managing the property if you hope to rent it out. Vacation rental properties can be the most involved investments you’ll have. For every new guest, it is your responsibility to clean, stock, and maintain the property almost year-round if your property grows in popularity. At the cost of 10% to 15% of your income, you could hire a property management company to do all this work for you.
Finding Guests: It goes without saying that marketing is a key part of profiting from your vacation investment. Finding renters can be a difficult and daunting task especially for new investors. Firstly, you must make your property attractive to renters. You will have to provide comfortable and attractive furnishings while also appealing to your targeted audience. Once done, you will have to consult top platforms, such as Airbnb, to list your property. Finally, you will need to come up with a desirable price that will also make you money in the end. Doing special promotions and discounts can help your property take off in slower seasons.
Monthly Payments & Expenses: Without careful management, vacation rental investments may cause problems in your income as well. For one, you will have an extra mortgage payment. Then you have extra expenses that come with owning a home including maintenance, repairs, and utilities. Be sure you have your finances in order to avoid any extra stresses managing another home may have.
Summary
Vacation rental investments are a great way to break into the passive income community. However, it’s not enough to simply jump in head first without a plan. Instead, mind due diligence and know what you are getting into before you take the leap. With the right preparation, you might find that your investment is well worth it. Those that are prepared could find that their decision to get into vacation rental properties is one that could pay off for years to come.
