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Mentor
Lots of people have done this before. There is an entire industry around this, and apps like Airbnb / VRBO are centered around vacation home rentals.
That being said, the returns aren’t what they used to be 3 to 5 years ago (or longer). A lot of traditional vacation markets are heavily saturated, and others are heavily regulated. Running a vacation home rental business is a job, not a passive investment. That being said, if you buy the right property, decorate / furnish it well, and approach the business like a business, you can still do well.
Do you have any specific markets in mind? Do you have money saved up for the down payment / furnishing?
Mentor
How much have you looked into insurance costs for Florida? Many insurance companies have pulled out completely, and the few who have remained have doubled or tripled rates over the last few years. I’d be highly worried about that, as I expect it will only get worse. That alone could kill your returns.
How much work it takes depends on some of the details. Hosting guests means expecting to respond 24/7 (or at least within a few hours). You can hire a property manager and/or a virtual assistant to help with some of the work, but there’s still work involved. If you’re in a condo, where the shared amenities are someone else’s problem, then there’s less work to do. If you have a beach home, or a house with a pool, there’s a lot more work to be done.
I’d suggest reading the book “short term rental, long term wealth”. There’s a lot of good knowledge in there. There’s also tons of Facebook groups / online communities / YouTube tutorials / podcasts to help you evaluate the business of running a vacation rental. Again, the answer to “how much work will it be?” Is always “it depends”.
I've got a vacation property in Florida. My family spends a few weeks a year there, the rest of the time it's rented. My advice is to do thorough due diligence and to work with a property manager. I found a great one that handles everything for me and keeps the place occupied almost year-round. It's well worth the cost of not having to hassle with any of the details myself.
Mentor
When did you buy it?
How much has your insurance premium changed over the last 2 to 4 years?
I’d say just run the numbers to see if it makes sense and consider the opportunity cost. Consider longer term rentals if you don’t want to spend a lot of time on managing - I have a rental in a good area with an annual lease, and while not passive, it’s a few times a year when issues come up that need to be immediately addressed and might take a lot of hours within a short window of time. The income is very stable, our realtor did the work of small repairs, taking photos, listing and finding tenants for us (half the cost of a month’s rent). Insurance has been going up about 15% a year though but I’ve also increased rent quite a bit in line with market - and this is not a “vacation area” although pretty close (southern CA).
Mentor
A longer term rental won’t pencil out in 80% of the country with the current market values, interest rates, and rent prices. If you bought said property before 2023, it was a completely different market than what is happening now.
I’m not saying your rental doesn’t work great for you, but it would likely be nearly impossible to reproduce at current market rates.
Subject Expert
How much time will you spend in this vacation house yourself?
What is your main motive for doing it?