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Things You Need to Know Before Investing in a Vacation Rental

Vacation rentals have become increasingly popular in recent years as travelers seek out more unique and personalized experiences. The vacation rental market is anticipated to grow in the coming years, with revenue projected to reach $17.31 billion by 2022. Further, this market is predicted to grow at a CAGR of 4.14% every year until 2026, reaching a total market volume of $20.36 billion by the end of the forecast period.

With this, there are a lot of opportunities for those looking to invest in a vacation rental. However, before making such an investment, it’s essential to understand what goes into owning and operating a successful rental property.

Here are some things you should know before investing in a vacation rental:

Financing Options

If you’re looking to invest in a vacation rental, you’ll be glad to know that it can qualify as a second home for your mortgage. This means that you may get a lower interest rate on your home loan, which could save you money in the long run. Your trusted mortgage lender can discuss your options and help you find the best option for your needs. You might go through the financing details with your mortgage specialist later, but it’s essential to be aware of the basics before you start shopping for a vacation rental.

When you’re applying for a mortgage on a vacation rental, you’ll need to show that you have the income to support payments by providing proof of income, such as tax returns or pay stubs. You’ll also need a good credit score, as this will impact the interest rate you’re offered. Additionally, you’ll need to have a down payment saved up to qualify for the application. The amount you’ll need to save will depend on the mortgage product you choose, but it’s generally between 10 and 20 percent of the purchase price.


Depending on your location, the time of year can significantly affect how much money you make. In some cases, renting out your property during peak season can double or triple your income. But in other cases, renting during the off-season may be more profitable. It’s important to do your research and determine the peak season for vacation rentals in your area. Once you know this, you can start planning your rates and marketing strategy accordingly.

Location and Neighborhood

Suppose the vacation rental is located near a beach,  in a city center, or in any desirable area. In that case, it will be easier to find renters. When choosing a vacation rental, it is also essential to consider the surrounding neighborhood. If the area is safe and family-friendly, it will appeal more to potential renters. On the other hand, it may be more difficult to find renters if there aren’t any nearby tourist spots.

Group of friends take a photo using a selfie stick with the cityscape behind them

Regulations and Restrictions

Before investing in a vacation rental, it’s essential to be aware of the various local regulations and restrictions. Each municipality has its own rules governing short-term rentals, so it’s essential to do your research ahead of time. Sometimes, you may need to obtain a permit or license from the city to operate a vacation rental, so be sure to check with your local authorities.

Insurance and Liability

What happens if someone gets injured while on your property? What if they sue you? There are a few different types of insurance that you should consider: general liability, property damage, and workers’ compensation.

To go through their differences: first, general liability insurance protects you if someone gets injured while on your property. Second, property damage insurance protects your property if something happens to it while someone is renting it. Lastly, the workers’ compensation insurance protects the workers helping you run your vacation rental if they get injured while working.

Vacation Rental Management

Your workers will need to prepare the property before renters arrive. They can work ahead by doing things such as making beds, stocking bathrooms with toiletries, and ensuring there are enough dishes and silverware. They should also be available to answer questions and deal with any problems during a renter’s stay. After guests check out, your team will need to clean the property and prepare it for the next round of renters. This can be a lot of work, so you’ll need to ensure you have a good staff to handle it.

When considering whether or not to invest in a vacation rental, it is essential to weigh all the pros and cons. By doing your research and taking the time to make a well-informed decision, you can be sure that you are making the best choice for your needs.


The Author

Amelia Brown

Amelia Brown is an enthusiastic writer and a devoted parent who believes in the transformative power of shared knowledge. With a strong background in education and a flair for storytelling, Amelia brings a unique perspective to Family Badge. As a hands-on mother of three, she knows the joys and challenges of parenting inside out. When she's not crafting engaging articles for the blog, Amelia enjoys exploring the great outdoors with her family, trying out new DIY projects, or cheering on her favorite sports teams. Her friendly and approachable style makes her an invaluable member of the Family Badge team, offering practical guidance and heartfelt insights to fellow parents on their journey of creating loving and thriving families.

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