So You Want To Buy A Vacation Rental?

Savvy real estate investors know it’s all about Location, Location, Location!


Years ago, while on a sailing charter in the British Virgin Islands (our honeymoon, which is also where we got married) I had a brilliant thought “Wouldn’t it be cool to own a Caribbean vacation rental home, which would produce cash flow, and we could stay there when it wasn’t rented?” That was 15 years ago and the thought has since turned into reality.  Now we have a very good problem: our vacation rental has been booked so solidly that we’ve hardly been able to stay there!  Now we are planning to add a third story apartment so we can actually stay there and enjoy it!

How do you find the right location?


An argument could be made (sorry, I’m a lawyer!) that with proper marketing, any location could become a vacation destination.  I’m still am not interested in going to Fargo, ND for vacation, no matter have much marketing is done.  It is far easier to find a destination that is already popular with tourists, and also profitable for investors.  Established vacation destinations receive a steady flow of tourists each and every year. The more established tourism is, the greater the demand for lodging.  It is simple economics: if the demand is already established, you look at supply. A potential pitfall to investing in a popular vacation destination area is the possibility of more competition.  If an area does have lots of vacation rental properties, more and better marketing will be required to make the property stand out and thereby get more bookings.
In our case, we had been coming to Isla Mujeres for over 25 years.  For about the last 15 years, each time we visited we educated ourselves by speaking with real estate professionals, developers, business owner friends and expats.  We visited various construction projects, stayed in new properties.  In other words, we performed our due diligence and did NOT buy on a whim or because we “fell in love” with the island the first time we visited.  It was not an emotional buying decision.  We were very strategic, and educated ourselves to learn exactly what was in demand and what was in short supply.  The property we purchased wasn’t perfect, but we saw its upside potential – in fact huge potential!
Once you identify the optimal location, and find an excellent vacation rental property, how will you maximize your investment and achieve long term rental success?
The bottom line is: your vacation rental will only as profitable as your marketing strategy behind it is.  Unless you are a real estate property marketing wiz yourself, it may be much wiser to hire a property manager.  It may cost more to pay a property manager to handle everything, but piece of mind and a high return on investment may make the cost pale in comparison.  Are you able to take on all the work required to run the vacation rental yourself? It is best to consider these issues when purchasing your first rental property.

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