Whether you're hoping to subsidize the mortgage on a vacation home or just looking for long-term investment strategies, buying a property to rent out for short-term use is becoming an incredibly popular investment strategy.
In some cases, managing an Airbnb, VRBO, or HomeAway property could generate a great profit. Here in Myrtle Beach, demand is so high for vacation rentals that many Condominiums even have their own on-site rental companies and owning vacation rentals can be quite lucrative. However, these types of investments are not without their potential pitfalls. Experienced investors know the key to success is due diligence. Here are some things to look out for.
1. Does your condo board (or city) allow it?
In the past, property owners could rent out their properties without much fanfare. Thanks to the popularity of websites like VRBO, HomeAway, and Airbnb, many homeowner/condo associations now have clearly defined rules regarding short-term property use. If you're looking to purchase a condo for the purpose of short-term rentals, make sure to check the HOA's rules before investing.
If you're not beholden to a homeowners association, you still need to do your due diligence. Some cities require specific business licenses and registration to operate as a short-term rental property. You also definitely need to check with your homeowner's insurance agency about liability issues.
2. Are you buying in a popular area?
Location, location, location. As with all property investments, location is important...oceanfront will likely always be more in demand than other properties...but it can also mean a higher purchase price, more competition for rentals, and higher HOA fees. You will need to analyze comparative listings, rental rates, occupancy rates, management fees, amenities, and more.
3. Take into account your overhead and understand your ROI
There are many factors potential buyers have to consider before investing in a short-term rental property. Condo fees, professional cleaning, furnishings, decor, property damage, repairs, and vacancy rates will all need to be factored into your calculations. Additionally, unless you are going to manage the day-to-day operations of the property, you will need to hire a management/rental company which will also eat into your potential profit. And last but not least, you need to consider property taxes, income taxes, and homeowners/liability insurance.
4. Use the right REALTOR®
When all the variables are taken into consideration, knowledgeable REALTOR® is invaluable. Find a local REALTOR®with experience in helping buyers with investment properties and you could be on your way to buying that vacation property you've been dreaming of and earning a comfortable monthly income in the process.