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Charlie and I are big proponents of passive income or side income streams. In other words – creating alternative revenue sources to your current full-time gig. Over the coming months – we hope to provide you with some more side income ideas that you can chew on or possibly implement into your financial picture should they match your goals or passions.
One such idea that I would love to put into action someday is vacation rental property. I’ve talked before about our owning a rental property (and the joys and pitfalls of being a landlord) – but I think there is a whole ‘nother untapped market that is growing in popularity with vacation rentals.
According to HomeAway – which is a big online connector of vacation rental property owners and vacationers – there are 6.1+ million vacation homes available to rent in the US and Europe, generating $85+ billion in annual rental revenue. Other interesting facts they cite include:
- Traveler demand for and awareness of vacation rentals listed on HomeAway’s sites have continually increased. In 2012 HomeAway websites attracted approximately 600 million website visits, according to internal metrics (an estimated increase of 22.1% year-over-year).
- According to a recent HomeAway survey, 73% of multigenerational travelers say they prefer the space of a vacation rental.
- In terms of personal preference, the same survey found that 80% of travelers agreed that staying in a vacation rental has helped reduce their stress on vacation.
Added to that – in some markets – traveler demand (property inquiries) outpaces inventory (vacation rentals) growth. Some of those properties (where demand outpaces supply) are:
- Honolulu – 258% inquiry growth versus 140% property growth (This is probably no surprise)
- Nashville – 80% inquiry growth, 15% property growth
- Newport Beach & Balboa Island area, California – 72% inquiry growth, 36% property growth
- Anaheim – 70% inquiry growth, 39% property growth
- Sanibel Island, Florida – 133% inquiry growth, 90% property growth
My experience with vacation rentals
Last year, my immediate family used VRBO (a popular HomeAway website) to find a vacation rental property we could use for a week. We were able to contact the owner of the property, view pictures of the rental and reserve it through the website. It was all very easy to use and the property turned out to be even better than we had envisioned it would be.
Two beautiful things about rental properties (from a vacationer’s point of view) is that you have all the amenities available to you at your disposal and you can reserve a property that fits your budget and vacation wants.
I would take a vacation rental over a hotel or motel stay any day – and they are often very comparable in price.
Pros and cons to owning vacation rental property
Obviously – you don’t want to go this route if you are still heavily in debt and living paycheck to paycheck. But, there can be some real advantages to owning vacation property. Among them:
- If you own in a high-demand area, you can often get top dollar for the rental
- Renters will help pay your mortgage (if you don’t own out-right)
- You can use the property for your own vacations
- If you live farther away from the property, you can hire trusted locals or a management company to care for the rental
- All of the booking and scheduling for the rental can be handled by websites like HomeAway.com and VRBO.com
With the pros – there are also some cons that you’ll want to be aware of:
- Unexpected fixes and repairs do happen with any property – you’ll want to be sure you have some savings that can cover these
- You will be taxed on the income you receive from renting
- Income can be unpredictable (especially during “off-peak” times)
- May require more time and attention than other side income streams
All in all – I think owning and operating a vacation rental property would be a fun side gig if you had the time and resources. I’m curious about your experience with vacation rentals – and if you own a property yourself? Any insight you can offer others who might like to own someday?