Vacation rentals have catapulted in popularity over the past decade. While they were already favored by many savvy families looking for more space and more savings, vacation homes blossomed even more when millennial travelers took notice. These adventure-seekers started choosing one-of-a-kind stays over been-there-done-that hotel rooms. Now, even more people are desiring short-term rentals for another reason—as alternative accommodations to social distance and stay away from others.
With this landscape, vacation rentals can be attractive investments. However, as with any endeavor, investing in vacation rental properties comes with hard work and some hurdles. It’s smart to weigh the vacation rental pros and cons before purchasing one of your own. Good news: we’ve done the research for you.
First up: The perks.
The obvious upside: The extra income you can earn by renting your vacation home to travelers. Homeowners renting on Airbnb make an average of $924 per month.* And that’s just one platform. If you list your home on the other most-visited vacation rental sites, such as Vrbo and Booking.com, you’ll have even more opportunities to fill your calendar and make your maximum revenue. The right vacation rental property, in the right place, with the right amenities can be a fantastic earner. Here are some factors that can tip the scales in your favor:
Consider popular vacation destinations that draw visitors year-round or for more than one season.
Consider what guests are willing to pay extra for. For example, our research shows that pet-friendly vacation homes can earn up to 10–20% more income.
What good is a vacation home if you can’t vacation in it? We recommend staying off-season so you can make the most during peak season from paying guests.
Learn more: How to make money on a vacation rental
A vacation rental can be a smart way to lock in a healthy financial future. Real estate properties tend to appreciate in value over time. A vacation home is no different. If the economy permits and if we see steadily climbing inflation, the value of your investment property could climb over time, too. Consider investing in upgrades and amenities that can draw in guests and boost your appreciation. For instance, our studies show that vacation homes with hot tubs make 15–20% more revenue. When the time comes, you can cash in on the profits from selling your home.
Escape with your partner for a weekend on the coast. Take the kids to the mountains for some sledding and snowshoeing. Plan for a family reunion one day. Whether it’s investing in a cabin in your favorite ski resort or purchasing a beach condo in your favorite seaside destination, you can look forward to more than just making extra money. You’ll make a ton of new memories as well. Precious time with your favorite people? That’s priceless.
Renting out your vacation home is a business, so you may be able to write off business-related expenses that you’ll incur maintaining and repairing the property. Here’s a list of possible deductions you can claim:
Federal tax law can be complex, plus every state has different tax laws, so we recommend consulting your CPA or a tax professional to discuss your tax obligations and how to maximize your deductions.
Learn more: Guide to vacation rental taxes
As in life, stuff happens. Things break, wear down, go missing. Same with your vacation home. After you carefully estimate projected expenses (mortgage, garden and lawn maintenance, insurance, utilities, etc.), have a plan for the unplanned. The smartest (and easiest) solution? We recommend setting aside funds to cover unforeseen costs. This will better allow you to manage your cash flow and protect your ROI from taking an unexpected hit. Having the right vacation rental management partner is also key. With Vacasa, you can rely on a local team to maintain your property on your behalf.
Learn more: Advice and tips from a vacation rental investor
Every destination has different rules, laws, and regulations surrounding short-term rentals. Some cities place stifling restrictions on homeowners’ ability to rent to travelers, while other destinations support their residents’ efforts to capitalize on tourism. This can easily complicate your home search. Your best bet? Refer to our latest list of top vacation rental markets. This list only features destinations that both allow short-term rentals and are big draws for travelers. Then, work with an experienced real estate expert who specializes in vacation rentals in your chosen market. Local real estate agents know their markets inside and out and can assist with regulations and permits.
When you rent out your vacation home for more than 14 days out of the year, you’ll owe federal taxes on your rental income. That is in addition to any local, state, and property taxes. If you’re considering a beach condo or house, you may be charged steeper insurance due to possible adverse weather conditions.
First, we recommend mapping out all these extra costs with your CPA beforehand. Once you’re ready to rent out your property, take advantage of dynamic pricing, which will automatically price your nightly rate based on travel demand, market conditions, events, and more. This makes sure you’re reaching your peak revenue potential—and not leaving money on the table.
Learn more: How dynamic pricing helps you earn more
Thinking of managing your vacation rental on your own? Brace yourself for an avalanche of work. As the owner, you might also fill in as the front desk agent, the housekeeper, the repair technician, and more. You’ll be responsible for things like regular maintenance, restocking linens and towels, repairing any broken items, and answering all of your guests’ requests. Partner with a full-service vacation rental management company like Vacasa to take those responsibilities off your shoulders. They’ll have a team watching and working on your property, making sure that your home is kept pristine and in top condition for every guest stay.
Guests have to find your vacation rental before they can book it. That requires marketing. Right out of the gate, that means taking eye-catching property photos, writing compelling listing descriptions that sell, and decorating with furniture and accents that both complement your destination and appeal to modern guests. Then comes listing your home on all the major booking sites like Vrbo, Airbnb, and Booking.com.
From that point on, you’ll have to continually optimize your vacation rental listing to appeal to the most customers, update your rates and calendars, and respond to questions and reviews. When you hire a full-service property manager, they’ll take care of all these marketing tasks. At Vacasa, we go even further by running digital marketing campaigns (like emails and ads) to keep our homes in front of travelers.
If you invest in a well-kept property, in an in-demand destination, with amenities that travelers are looking for—yes, buying a vacation home can be a good idea. The rewards of investing in a vacation rental are numerous. Your rental income can possibly offset your mortgage and other expenses. Your home may appreciate in value over time, leaving you with a sizable nest egg or a beloved home to relish your retirement. You could have plenty to write off come tax time. Plus, a vacation home can be a place where you create unforgettable memories with your closest family and friends (because we all could use more of that).
There are three options:
Managing a vacation rental on your own comes with endless responsibilities, like answering late-night guest requests and emergencies, fixing broken locks and air conditioners, thoroughly cleaning up after every guest, and preparing for the next one. The list goes on. That’s why thousands of vacation home owners lean on full-service vacation rental property managers like Vacasa. We don’t just take those responsibilities off your plate—we also help you maximize your rental income and investment ROI.
When investing in a vacation rental, don’t simply consider what you’d like. Think about what will draw in the most guests. The ideal vacation rental property checks these boxes:
All of these facets can boost your vacation rental bookings and bring in more rental income.
Want a vacation rental expert to help you buy the right property? Learn about our real estate services.
Once you’ve purchased your home, we can help you earn more R&R, too (reservations and rental income, that is).
Call 866-847-9186 to speak with a Homeowner Consultant, who can answer preliminary questions and see if we’d be a good fit for you.
If you'd like to move forward, we’ll put you in touch with our market expert in your neighborhood to explore the financial potential of your home, outline our management fee, and introduce your local team.
Vacasa offers property management and other real estate services directly through Vacasa LLC and through Vacasa LLC's licensed subsidiaries. Click here for more information about Vacasa's licensed real estate brokerage/property manager in your state. Vacasa’s licensed real estate brokerages/property managers include: Vacasa Alabama LLC; Vacasa Arizona LLC; Vacasa Delaware LLC, 302-541-8999; Vacasa Florida LLC; Vacasa Louisiana LLC, Dana MacCord, Principal Broker, ph 504.252.0155 (Licensed in LA); Vacasa Michigan LLC, 947-800-5979; Vacasa Missouri LLC, Susan Scanlon, Designated Broker; Vacasa Nevada LLC; Vacasa New Hampshire LLC, P.O. Box 283, Conway NH 03818, Dave Grant, Broker of Record; Vacasa New Mexico LLC, 503-345-9399; Vacasa New York LLC, 888-433-0068, Susan E. Scanlon, Real Estate Broker; Vacasa North Carolina LLC; Vacasa Pennsylvania LLC; Vacasa Real Estate Corporation, California DRE #02105811, Joseph Czapkowicz, California DRE #01380722; Vacation Palm Springs Real Estate, Inc., California DRE #01523013, Joseph Czapkowicz, California DRE #01380722; Vacasa Real Estate LLC (licensed in Colorado, Daned Kirkham); Vacasa Real Estate LLC (licensed in Idaho and Oregon); Vacasa Real Estate LLC (licensed in Tennessee, 615-671-9916); Vacasa Real Estate LLC (licensed in Texas, Debra Brock, Designated Broker); Vacasa Real Estate LLC (licensed in Washington, Robert Brush, Designated Broker); Vacasa South Carolina LLC; Vacasa Tennessee LLC; Vacasa Vacation Rentals of Hawaii LLC, 3350 Lower Honoapiilani Road, Suite 600, Lahaina, HI 96761; Vacasa Vacation Rentals of Montana LLC, Patrice Tompkins, Licensed Property Manager; Vacasa Virginia LLC; Vacasa Wisconsin LLC; Vacasa Wyoming LLC. In Canada, this advertisement is provided by Vacasa Canada ULC, CPBC lic. number 75826, 172 Asher Rd. V1X 3H6 Kelowna, BC.
* Earnest - How Much are People Making From Sharing Economy?
This document is for information and illustrative purposes only. It is not intended to provide “investment advice” or a “recommendation” regarding a course of action. The discussion is general in nature and has not taken into account your personal financial position or objectives. You should consult a licensed financial advisor or other professional to discuss your specific situation.
The ability to rent out a vacation rental property is subject to local market regulations and restrictions.