Investing in rental property is a great way to diversify your asset portfolio and enjoy income while building equity in a property. That said, not all rental properties are created equal, and it’s important to evaluate what separates different rental investment opportunities.
Many investors are tempted to invest in vacation rental properties when they first begin investing. Vacation rentals are located in appealing places and give investors private vacation getaway options, but they might not be the best move if you want to see a big return on your investment.
Before you plunk down money on a vacation rental property, weigh the pros and cons of a vacation property investment against a single-family rental in a high-growth area. Generally speaking, SFRs have more upside for investors who desire strong yields.
The draw and risks of vacation rentals
It’s hard to deny the simple appeal of property in a popular vacation destination, but these houses may not offer monetary benefits in line with their emotional appeal. A vacation rental property gives the owner freedom, because they can use the property themselves and give access to friends, but it is unlikely to benefit from the consistent occupancy SFR properties in other areas enjoy.
The variability of vacation seasons makes it difficult to rent a vacation property consistently, and it’s hard to anticipate the annual interest in a particular vacation destination. With standard SFR properties, investors are tying their success to the housing market’s overall performance. When investors purchase vacation homes for rental, they have to contend with both the housing market and vacation trends.
An issue with either market can derail the investment and make it difficult to turn a profit. One of the great benefits of SFR investing is that rental income generally covers a property owner’s monthly mortgage payments. The inconsistent nature of vacation seasons and tastes makes it difficult for people who buy vacation properties to count on consistent occupancy, and as a result, they could spend many months paying the investment’s mortgage out of their own pocket.
The importance of picking the right single-family home
While single-family rentals are generally more consistent investments than vacation options, it’s important to find a home in a high-growth area with enough demand to ensure consistent occupancy. It can be difficult for investors to locate these areas nationwide, and it can be even harder to purchase and manage property that is located several hundred miles away. HomeUnion® simplifies this process and makes investing in single-family real estate as easy as buying stocks.
Registration on HomeUnion®’s website provides access to hundreds of pre-vetted rental properties in the best markets for rentals across the country. HomeUnion® uses deep data analytics to find areas that will give the best returns, and investors can easily purchase and manage homes thanks to HomeUnion®’s lending partners and network of skilled property managers.