Once you decide to buy a vacation rental home, you will need to decide what kind of property to purchase. There are many options, from single-family homes to cottages, townhouses, and cabins. The type you select will depend largely on (1 the area in which you are buying (2 the preferences of the renters you are trying to attract and (3 your own personal preferences. Here is an overview of some of the most common types of vacation rental properties and the pros and cons each offer.
Single-Family Homes
A single-family home is typically a one-story or multi-story house that is not part of any community or homeowners’ association (HOA). They usually have multiple bedrooms as well as a full kitchen, living room, dining area, and more.
Because of the space they provide, large, single-family homes are ideal for larger groups of renters who need multiple bedrooms. They also offer a number of advantages for both you and your renters:
- Affordability: Single family homes tend to cost a little more to purchase, but may cost you less per month to own because they do not come with with any community (called HOA) fees. In addition, these houses often come with more financing options than other types of housing.
- Appreciation: Single family homes tend to appreciate (increase in value) more than do other types of housing (particularly condominiums and town houses).
- Fewer Restrictions on Renting: Finally, single family homes tend to have fewer restrictions on renting than do condos and townhouses. This means that you will enjoy more freedom when choosing renters, and your renters will have more freedom in the use of the property.
Before purchasing a single family home, however, make sure that it is located in a growing, popular area near the attractions that draw renters. In addition, be aware that you will be responsible for all of the outdoor maintenance on the property.
Bungalows and Cottages
Bungalows and cottages consist of a one (or occasionally two)-story building, often with a low roof and a long porch in front of the house. Bungalows and cottages are often smaller than single-family homes but still come with many amenities, such as a kitchen and a living area.
Bungalows and cottages are appealing to smaller families, single people, and retirees. As such, they might make a smart investment if you are looking to buy in an area where most visitors would fall into these categories. Here are a few of their other advantages:
- Location: Bungalows and cottages are often located close to area attractions, particularly beaches.
- Privacy: Bungalows and cottages are often built with privacy in mind, which might appeal to certain renters.
- Renting Freedom: Like single family homes, bungalows are often not part of an HOA and therefore give you more freedom in how you use and rent the property. Plus, the lack of HOA fees can make them both more affordable and more profitable to own.
The small size of bungalows and cottages may not be for everyone. They are also often located in communities where many residents are above retirement age. Taking your ideal renter into consideration can help you decide whether a bungalow would be a smart choice for a vacation rental home.
Condos and Townhouses
Condos and townhouses consist of buildings that you purchase and own, while ownership and maintenance of the outside belongs to the homeowner’s association. You typically pay a monthly fee (which can be a few dollars a month or several hundred dollars a month) to cover these services, as well as to gain access to community amenities such as a pool, playground, and/or clubhouse. In addition, the homeowner’s association typically establishes certain rules regarding the appearance and usage of the property.
Condos and townhouses are typically as large as a single family home, allowing you to rent to families. Here are few other advantages to owning a condo or townhouse as a vacation rental home:
- Community Amenities: Condos and townhouses provide access to the community’s playgrounds, pools, and clubs. This can add appeal and value to your home.
- Outside Maintenance: Because you do not have to perform outdoor maintenance, condos and townhouses tend to be less work to upkeep. This is especially an advantage if you are living at a distance from your vacation rental home.
- Less Expensive to Buy: Condos and townhouses also tend to cost less to buy upfront.
At the same time, condos and townhouses may restrict the amount of renting you can do. Plus, the monthly HOA fees can make this type of housing more expensive to own on a monthly basis. As such, you should make sure you understand the community’s rules and fees before you purchase one of these places as a vacation rental property.
Cabins
Cabins, particularly log cabins, have long had a reputation for romance, rustic living, and a cozy atmosphere. They can be ideal for many types of renters, depending upon their size and set up. Here are a few other advantages that cabins have:
- Privacy: This type of vacation rental property is most often located in wooded or secluded areas, providing a level of privacy that is hard to match. This can be an appealing option for many renters who are looking for a private vacation experience.
- Beauty: Cabins are also a beautiful choice of vacation rental home. They are often set in the woods or mountains, and are constructed in a beautiful and appealing style. This can make them very attractive to renters who are looking for a luxurious and beautiful feel to their rental space.
Cabins, however, also have the disadvantage of requiring a great deal of maintenance, some of which can be expensive. As a result, consider what type of maintenance will be required and decide whether you can handle those costs, before you purchase a cabin as your vacation rental home.
Beachfront Property
Beachfront property is often a smart choice for a vacation rental property because of its location. These homes can vary widely, from luxurious mansions to small homes perched on the water’s edge. They are often a good investment because they are in high demand, and because their property values are likely to climb over time. You can also often earn a healthy rental income from these properties because they are so popular.
At the same time, beachfront property tends to require more maintenance than other types of property. For instance, the water can wear away exposed pieces of the house (such as wood). As such, it is more difficult to make a profit off this type of property because of the increased maintenance costs that come with it.
The many types of vacation rental properties mean you must do property research before buying any property. Whether you purchase a single family home, a bungalow or cottage, a condo or townhouse, cabins, or beachfront property, the right property will allow you to make a profit while also giving you a beautiful second home in an appealing location.
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