Real Estate Marketing & Beyond
The vacation rental landscape continues to evolve with millions of vacation properties available to book through online sites like AirBnb and VRBO. Statistics from Hotel Tech Report say the U.S. vacation rental market has grown 10% since 2021, and that roughly one in eight travelers have been vacation rental guests. By 2025 that number is expected to increase to one in five.
No wonder more real estate investors are considering the upsides of investing in vacation rental properties or short-term rentals (STRs) in recent years. The potential ROI is attractive, and vacation rentals can often offer both cash flow and long-term growth since most vacation rentals are located in desirable markets.
That doesn’t mean investing in a seasonal vacation rental doesn’t have its risks. There are significant differences between investing in a vacation rental property and a more traditional buy-and-hold investment property, including market nuances and the nature of being a landlord versus a property host.
Some pros and cons of investing in seasonal real estate properties are discussed below.
Depending on the market, peak season may last approximately 12 weeks in many parts of the U.S. However, many short-term rental owners are able to charge higher nightly rates during their vacation market’s peak season and adjust accordingly in response to demand, lowering their rates slightly for shoulder seasons.
That kind of flexibility, compared to the fixed monthly income of a long-term lease, tends to produce higher levels of income for the short-term rental owner. When shopping for a short-term rental investment, ask your realtor for insight on nightly rates for the area during peak and low seasons.
While turnover in a seasonal rental may be high during peak and shoulder seasons, especially on weekends and during major holidays, in many instances the property may be vacant for several months of the year, resulting in less wear and tear over time. Problems can be noted and addressed quickly due to frequent cleaning and high turnover.
High turnover equates to frequent cleaning, where wear and tear can be noticed and addressed in a timely manner. Similarly, guests are more likely to bring potential maintenance issues to the attention of their host or property manager immediately, allowing those issues to be fixed promptly in-between guest departures and arrivals.
Many investors use the vacation property personally, at least some of the time, which is easy to do when you reserve days or weeks for yourself in advance, something you can’t do with tenants who have a year-to-year lease.
Some investors view a vacation home as a retirement preview or a way to discern if you’d like to make a favorite vacation spot a permanent residence when you’re ready to retire. If you do decide your vacation home is situated in the ideal location and community for retirement, you could retire with your property already paid for, if retirement is still some years away.
You should consult with a tax professional to understand the nuances of how owning a revenue-generating property may affect your tax burden in your state. But generally speaking, you may be eligible for tax benefits for expenses related to renting your seasonal property.
Some of those expenses include certain percentages of mortgage interest, real estate taxes, HOA dues, insurance, property management fees, maintenance costs, cleaning supplies, and marketing and advertising costs.
Historically, most real estate investments appreciate in value over time. Statistically, it’s likely that a vacation property will as well, particularly if the property is located in a high-demand vacation spot.
If and when it comes time to sell, a knowledgeable realtor who knows the market can help identify buyers interested in a vacation property in your area.
It stands to reason that the best markets for seasonal real estate rentals tend to be the most popular vacation spots, which means you may be competing with other short-term rental owners for bookings. Vacationers may have a wide range of options available to them depending on the time of year and the popularity of your market.
Working with a realtor who knows the market can help you identify ways to highlight the unique qualities of your property and what it has to offer.
Investing in seasonal real estate is different from investing in a traditional rental property in that, with a short-term rental, you’re running a high-turnover business in which you host temporary guests rather than have a lease with tenants.
Even if you choose to use a property manager or management company to handle the day-to-day, you’ll want to find seasoned experts who understand the market, customer needs, and how to maximize profits. Property reviews and ratings are everything in the short-term rental business, so choose the best property manager you can find who will ensure the business runs smoothly from one guest to the next.
Many temperate areas have almost year-round appeal, with generous peak and shoulder seasons. Other popular spots have a definitive ideal season that may only last 12-16 weeks of the year. Based on the location of your property, be prepared to experience a potential 4 to 6 months off-season in which your rental is vacant.
Likewise, can your finances and investing plan absorb the costs if your resort town is the victim of a natural disaster like a hurricane, flooding, earthquake, or wildfire? Expect rentals to drop during a recession, as vacations are often one of the first items cut from family budgets when finances are tight.
A seasonal rental investment might not make sense for you if your budget is not able to weather the financial tides.
Maximizing the income potential from your seasonal property means having a fully booked calendar during peak season at optimal rates. In other words, you and yours may need to resist booking yourselves into your vacation home during the high season and save your personal use for the off-season.
Do your homework regarding state, local and community HOA restrictions before purchasing any seasonal real estate you intend to rent, even part of the time.
Some cities that rely heavily on tourism have implemented restrictions around short-term rentals in recent years including New York City, Orlando, Honolulu and New Orleans, to name a few. While it’s impossible to know what laws a municipality might pass, check to see if your market has any pending legislation that could affect your ability to rent your seasonal property in the future.
Likewise, carefully review the HOA bylaws of any resort community you might be considering, to ensure that short-term rentals are not prohibited altogether.
Real estate investors looking to expand into seasonal rentals, whether they hope to personally use the vacation property or not, need to understand that short-term rentals need to be actively managed like a day-to-day business rather than a hands-off investment in order to be successful and profitable.
