Are Vacation Rental Properties a Good Investment?

When it comes to investment properties, there are quite a few options for buyers. However, recent trends suggest investing in vacation rental property is a top choice for buyers looking to earn more income. Over the past year, the majority of people who chose to travel favored vacation rentals over any other type of accommodation.

With the popularity of vacation rentals, it’s believed to be the new preference for travelers, as well as buyers. With that said, getting into the market has become a bit of a challenge. The demand for vacation rental property is so high that inventory is quickly diminishing, and the competition among investors is rising.

All is not lost, though. If you’re considering getting into the market, now’s the time. To further prove our point, here are five major benefits to consider when investing in vacation rentals.

Unmatched Income Potential

The vacation rental industry has shown unprecedented income opportunity over the last year, but it’s always been considered a high-reward investment. This is due to the excellent cap rate of vacation properties. Most investors examine the ratio between a property’s net income and its market value as this indicates return on investment. Simply put, the ceiling for profitability is significantly higher for vacation rental investments compared to other property options.

Vast Market Opportunity

Vacation rentals, specifically short-term rentals, have major profit potential in virtually any market. The array of travel locations allows for investment opportunity across the board, with wider price ranges and bigger profit margins. So, whether you’re interested in beachfront property, a ski rental, the city, or a cozy cabin, your market choices span from coast to coast.

Vacation Rental Property Can Offset Homeowner Costs

Having a sizable revenue stream and growing an income property portfolio are the major investment goals many homeowners look for in vacation rentals. From mortgage payments and utilities, to insurance and maintenance costs, rental income can cover monthly expenses and help your home pay for itself in a shorter time frame. Additionally, vacation rental property owners are eligible for certain tax deductions, which can help close the gap between income and expenses.

Dual Use

Unlike long-term rental properties, a vacation rental can be used as an escape for renters, as well as the owner. It gives you the luxury of having a place to go with friends and family, or just to switch up the scenery. If you’re looking to earn rental income but still get use out of the property for yourself, look in a location where you know you’ll enjoy going to time after time.

Property Value Appreciates

Like all good real estate investments, you can expect your vacation rental’s market value to appreciate over time. Whether or not you plan on selling it one day, you’ll most likely earn more than when you originally purchased the property. You can improve your home’s appreciation further if you decide to invest in upgrades or renovations as well.

Final Thoughts

All in all, if you can afford to invest in a vacation rental property, you’re more than likely to reap the benefits listed above. The vacation rental market has soared during the pandemic, and travelers proved to be more drawn to the privacy and home-like feel rather than amenities from a hotel. Furthermore, the desire for travel and stay-cations isn’t going away anytime soon, and it’s likely going to be very popular moving into the new year. While investing in property can be a big leap, it doesn’t have to be complicated.

Find Vacation Rental Financing with RCN Capital

Here at RCN Capital, we’re ready to help you find financing options for your vacation rental property dreams. If you’re looking to invest in property to generate rental revenue, RCN has you covered. Reach out today to learn more about our loan programs.