15 Things to Look for When Adding a Vacation Rental to Your Portfolio

Buying a vacation rental is a great way to generate income and add some diversity to your real estate portfolio. If you're in the market for a vacation rental, here are some key things to look for.

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You don't want to buy a vacation rental in the middle of nowhere. Rather, aim to purchase a property that offers proximity to at least one well-known amenity, whether it's a beach or a theme park.

ALSO READ: 12 of the Best Vacation Rental Towns for Landlords

If you buy a beach house, you may get plenty of bookings over the summer. But your rental might sit empty for the rest of the year. Therefore, you may want to look for a vacation home that can serve a purpose in multiple seasons -- perhaps offering lake access during the summer, leaf-peeping access in the fall, and skiing access in the winter.

Many people rent vacation homes over hotel rooms for the added space. It pays to seek out a vacation property with larger common areas and enough room for families to spread out and dine comfortably.

ALSO READ: How Much House Do You Really Need? Here's How to Know

If you'll be hosting a steady stream of guests, you may need extra room for things like linens, towels, and toiletries. Make sure to seek out a vacation rental with plenty of closets and storage.

You may be mindful of how much you blast the air conditioning or heat in your own home. But guests may not remember to turn the thermostat up or down as easily when staying in your rental. It pays to look at a home with a newer air conditioning or heating system so that you can minimize your utility bills.

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A big part of enjoying a vacation is not having to worry about parking. Aim to find a vacation rental that offers guests the option to drive up and park onsite.

A vacation property that's historically seen a lot of bookings is one you may be more likely to have success with. Ask about a given home's rental history before contemplating making an offer.

ALSO READ: 5 Things to Think About Before Buying a Vacation Home

If you're buying a vacation property that's close to where you live, you might manage to oversee it yourself. Otherwise, you'll probably need to outsource that task. As part of your research, look into property management companies in the area to make sure you'll be covered.

Home values are up right now, so you'll need to be careful not to overpay for a vacation rental. Spending too much could limit your ability to make money. Plus, if you tie up too much cash in a single rental, you might struggle to add other properties to your portfolio.

ALSO READ: Home Prices Rose 19.5% in September, Reports Key Index

Property taxes are another cost you'll need to grapple with when owning a vacation rental. Aim to keep those taxes to a minimum, so they don't eat too heavily into your profits.

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If you'll be buying a vacation rental that's part of a homeowners association, you'll need to read through those HOA rules very carefully. Some HOAs prohibit rentals, or they allow them but impose certain requirements. The last thing you want is to get tripped up over regulations that limit your ability to generate income.

ALSO READ: Buying a Home in an HOA? Prepare for This Sneaky Expense

Some travelers like walking to different attractions, stores, and restaurants during their stay. It pays to seek out a vacation rental that's within walking distance to a town center or places of interest like a nearby park.

Buying a vacation rental in a high-traffic area may not work out so well for you. The last thing you want is a string of annoyed guests who travel a distance to get to your home, only to get stuck in traffic for 30 minutes in the last two miles of their journey.

ALSO READ: How to Get the Best Rate on Your Rental Property Mortgage

If you're buying a cabin or ski slope-adjacent vacation rental, be careful about purchasing a home that's on more of a makeshift road. Not everyone has a powerful enough vehicle to traverse snow-covered hills, and you don't want guests to have issues accessing your home -- or risk getting stranded because their cars can't make it to your driveway.

Many people choose vacation rentals over hotels so that they can cook and prepare their own meals. But if the nearest supermarket is 30 miles away, that could be a huge turnoff. Aim for a home that offers reasonable access to groceries and other household items your guests might need during their stay.

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The more thought you put into buying a vacation rental, the more profitable it might be. Keep these points in mind as you seek out the right home to add to your real estate portfolio.

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