I've been a real estate investor for about a decade, but until very recently I focused exclusively on long-term rental properties. Among other reasons, I'm a fan of steady cash flow, which short-term rental properties aren't good at producing. Plus, vacation-rental management costs can be excessive, and the idea of different people in my house constantly generally didn't appeal to me.
However, I recently decided to take the plunge and invest in a vacation home for the first time, and here are five reasons I did.
Lots of potential for use
When I started toying with the idea of buying a vacation rental, my wife and I agreed that we were only interested in doing so if we were going to use the property ourselves for a significant amount of time. So, our search was narrowed down to the three places we love to vacation the most -- Asheville, North Carolina; Key West, Florida; and Orlando, Florida.
Ultimately, Orlando won. The Asheville market is simply too hot right now and the logistics of short-term rentals can be tricky, especially outside of the city (we wanted a mountain view). The Key West market is simply too expensive for what we need (at least three bedrooms) and isn't really a kid-friendly place. Plus, it isn't driveable for us. With children who are five and three years old, and a roughly six-hour drive to the Orlando area, we decided that owning a home near Disney World was the best option at this point in our lives.
A single-family home with very low maintenance
All things being equal, we wanted a single-family home. We value our privacy on vacation, want to be able to bring our dogs with us (difficult in a condo), and want to have the space to bring guests with us. Plus, I don't want to get into the weeds on condo financing, but let's just say that it can be considerably easier to finance a single-family home.
On the other hand, there are some big perks to condo living as well. And our single-family property has most of them. Exterior maintenance (including landscaping), daily trash service, and most utilities are included with our HOA dues. And our property manager handles virtually everything inside of the home for a reasonable monthly fee.
On-site management at a great price
The property we decided on is located at a new resort operated under a brand name that is known worldwide. The resort is beautiful, and the widely known brand name should help with rentability. Plus, it's very close to Disney World, has about a dozen restaurants within walking distance, and provides complimentary transportation to the theme parks.
In addition, the resort has two preferred property managers, both of which have on-site operations. And the part that really got my attention is that the manager we chose offers an 80/20 revenue split (80% to the owner, 20% for the manager). The industry standard in the area seems to be 60/40, and that's been one of my turnoffs in the past when considering vacation homes. Not only that, but our on-site manager lists our property for rent through some impressive channels, including Disney's own travel site.
Vacation-rental bottom line
Obviously, not all real estate investors are the same, and your wish list for a vacation rental property would likely differ from mine. For example, not all investors would care about being able to use their short-term rental for personal use and would rather keep it rented out as much as possible. And to be clear, some of the drawbacks of owning a vacation rental still frighten me.
The bottom line is that I decided to buy this particular vacation rental because the pros far outweigh the cons. But only time will tell if it will turn out to be a solid investment.