Looking for profitable side hustle ideas? I wanted to share with you a very doable, legit side hustle that creates passive income. I think you will love this technique.
If you find the right location, you can easily start renting out vacation rentals that will cover your mortgage and operational costs. Check out this TikTok duet.
##duet with @melefante6 Passive income alert. Buying vacation rentals. Check this out!♬ original sound – Michael Elefante
How to Buy a Vacation Property
The first step in buying a vacation property is to research the “high demand” vacation rentals while thinking about value so you can start profiting from the start, even in down times. There are certain areas that are priced too high for this strategy to work.
You can start searching VRBO and Evolve Vacation rentals to view high demand areas. Areas with high tourism rent faster & easier than other areas. Or if you want to view ALL the data and sort by active properties & rental demand, then click here to view Air DNA's data.
Features of a Vacation Property
- Beach or Mountain Views
- Outdoor Spaces with Grills
- Outdoor Firepits
- Waterfront Property
- Next to Lakes or Rivers
Calculate Income and Expenses
One of the challenging parts to this is accurately calculating expenses while predicting the rental rates. Here are some expenses to calculate on a yearly basis:
- 10% Renovation & Repair Costs
- Cleaning & Management Fees
- Lawn & Landscaping
- Mortgage & Mortgage Requirements (i.e. flood insurance)
- Insurance (i.e. rental, house, fire, flood)
- HOA Fees
- Management Fees
- Advertising Platform Fees
- Unexpected Costs (i.e. tenant destroying items)
If the property's operational expenses are $200 and the mortage, taxes and insurance are $1,800. Then, the nightly rental rate of $200 but thinking the occupancy rate is only 70%. That gives you the data to plug into this vacation rental calculation:
Add your expenses first:
$1,800 + $200 = $2,000
Add your income potential second:
$200 x 70% = $140 x 30 days = $4,200
Subtract Income $4,200 – $2,000 = $1,800
That gives you $1,800 per month. Then, make sure you add in additional fees like:
Platform Fees, Management Fees, Cleaning Fees and any HOA and extra costs.
Advertising Vacation Rentals on Platforms
Once you make it this far with running the numbers, you'll want to create beautiful listings that you'll put on AirBNB, HomeAway and VRBO. Both are great for online vacation rental platforms. If you're in a high-traffic, high-tourist area then consider destination magazines to get in front of your target audience.
I've talked to 10+ couples who are using this strategy to generate passive income, and they all say the same thing. They prefer Air BNB because of the low fees, easy to use and high traffic website. However, they are worried that they are too dependent on just one website. I recommend branching out to all three.
List Your Vacation Rental on Air BNB
This is a very easy to use platform and most of their clients are looking for quick overnights or weekend stays. If you have a high-touristy area next to a stadium or amusement park or events, then look for Air BNB to bring in the bulk of your customers.
If you run into any problems with Air BNB, it will likely be customer service and strict communication rules with potential renters.
List Your Vacation Rental on VRBO
This is a very easy to use platform and most of their clients are looking for longer stays, but their fees are much higher. However, most of their audience are looking for vacation rentals. Since you have a vacation rental, you'll get most of your traffic from here.
Pro Tip: You can sync your availability calendar with most of these platforms. If you run into any problems with VRBO, it will likely be high fees and slow technology. People have reported having a hard time syncing their availability calendar with VRBO.
List Your Vacation Rental on Home Away
Depending on your location, Air BNB might be lacking in traffic. Where they lack in traffic, Home Away makes up for it. They allow you to easily block out reservations if you rent out on VRBO or AirBNB. Also, you're able to communicate directly with renters.
Other Places to List Your Vacation Rental
- Facebook Marketplace
- Trip Advisor
- Turnkey Vacation Rentals
How Much Money Can You Make from a Vacation Rental
What can you expect from renting out your vacation home? For every $100,000 you spend on the house, expect to bring back 10% in rentals. So if you buy a $500,000 vacation home, it should command $50,000 per year. If you want to increase this amount, then find a high-tourist OR high-demand area with a view.
How to Find Areas with High Rental Demand
Now, how do you know what areas are high demand for vacation rentals. Take a look at this chart by AirDNA. They collect data for vacation rentals and if you look at the title of the chart, you'll see RENTAL DEMAND. Click that until you see the highest demand.
Right now, as of December 2020, the areas that are high demand are:
- Lutsen, Minnesota
- West Glacier, Montana
- Shenandoah, Virginia
- Slade, Kentucky
- Castroville, California
- Denison, Texas
- Two Harbors, Minnesota
- Cherry Log, Georgia
- Manchester, California
- Apollo Beach, Florida
Setting the Price of Your Vacation Rental
There's a lot of thought that goes into pricing the vacation rental. I would love to have a family of four stay the entire week at a $400 per night rental OVER a group of college kids who combined their money to get the entire place, especially if they are drinking & partying.
If you live in a “large event” area, proceed with caution on who can and cannot stay at your vacation house. Let's say you're trying to get $400 per night, but you're thinking about bumping up the price.
Let's say you want to bump it up to $600 per night. Would the average family be able to afford that new increase or would six college buddies be able to throw in $100 each to grab the entire place.
What to look out for:
If you keep the price at $400 and it rents out an extra day every week at that price, then you bring an additional $1600 per month or an extra $19,200 every year. If you raise the rent to $600 and you see the demand decrease, then run the numbers to see if you losing money.
Make sure you bookmark this post as I'll be updating it as I get detailed numbers of expenses. If you know anyone looking for a side hustle or an extra way to make money, share this post with them. We rely on word of mouth marketing to advertise our site. Thank you!