How Much Money Can You Make Buying A Vacation Home?

With interest rates at record lows, many home buyers are considering the benefits of purchasing a vacation home to generate income from short term renters. These types of short term, usually weekly, rentals have gained in popularity in recent years and have begun to challenge the hotel market as a consumer favorite for vacation lodging. But despite the uptick in popularity, many potential buyers of new homes for sale in Winter Garden FL are still unsure of how much money can be made from this market. 

It Depends On How You Use It

One of the biggest determining factors in how much a vacation rental home will make is how exactly you plan to use it. If the plan is to rent it out year round as a strictly income generating property, you can expect greater returns than if you plan to live in it for six months of the year yourself. Every day that you spend using the home yourself is one less day that the home is earning rental fees and one less day of income for you.

Pricing Is Important

It may seem obvious, but the more you can get for rental fees, the more you will make per rental. This is one thing to consider along with the any questions you need to ask yourself when buying a vacation home. There is a fine line here however because charging too much for a week in the home could cause potential renters to pass on your home in favor of a cheaper option. Do your research and make sure your rent prices are in line with the area and similarly sized units to ensure maximum income. 

Location Is Key

We have all heard the phrase “Location, Location, Location” and the rule fits for vacation rental homes as well. Finding an area to purchase a vacation home that is near enough to the big tourist attractions, while also being convenient to more normal conveniences like grocery stores and shopping, will make your unit an ideal destination for vacationers. A great example are the new homes for sale in Winter Garden FL, which have local amenities right in town, but are only 20 minutes to the center of Orlando and all of the excitement the city has to offer. 

Keep It Booked

The key to making money from a vacation home is ensuring it stays rented consistently. Vacant days and weeks cost you not only the potential rental income, but those are days that you are paying your own mortgage, not someone else. If you are doing marketing for the home, be consistent and don't get complacent because you've had consistent renters recently. 

The Bottom Line

At the end of the day, owning a vacation property can be a fantastic investment, but one you won't likely lead to you “getting rich quick”. A general rule of thumb is for every $100,000 of investment in the purchase of the home, you should look to get $10-12k back in yearly rental income. While this may not sound like a lot of return on the investment, the important aspect to remember here is the appreciation of the property over time (the increase in market value of the property) and that someone else (your renters) will be paying for your mortgage on the home through their rental fees. 

Take the time to do your research and set realistic expectations before going all in on a vacation home. While this type of property may not be for everyone, it can be a fantastic way to dip your toes into real estate investing and generate some income and equity along the way. Short term rentals may have seemingly come out of nowhere, but all signs point to them being here to stay.