The Best Ways to Fund your Real Estate Investment – Pros and Cons

Get Started Investing in Vacation Rental Properties

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One of the biggest emergent trends in the real estate industry following the market’s gradual rebound from the COVID-19 pandemic is investing in vacation rental properties. The growing popularity of digital platforms featuring these types of properties such as AirBnb and VRBO have fueled the wave of real estate investors looking to cash in on the increased demand for temporary getaways in highly desirable locations.


Following nearly two years of strict quarantines and restricted travel opportunities, the U.S. economy and aspiring travelers are looking to release pent-up energy and finally fulfill their wanderlust dreams. More than 86% of travelers around the world reported that they are willing to embark on domestic vacations after being vaccinated, with 34% of Americans claiming they have a minimum of three domestic trips planned in the upcoming year based on a poll conducted by TripAdvisor.


Regardless of what metrics you look at, one thing is clear: people are once again traveling for leisure—albeit with one small caveat. Due to ongoing social distancing protocol, private vacation accommodations are now the preferred destination as opposed to normal hotels. With the advent of telework options, workers now have the freedom to book a family getaway without having to miss out on work obligations, family time or security.


Distinct Investment Opportunity Investing in Vacation Rental Properties


The median monthly income for a property listed on AirBnb ranges anywhere from $1,249 to $5,780 across the top-performing U.S. markets, and the upper percentile of VRBO property owners netted over $110,000 annually. However, there are some important distinctions between these two leading property listing platforms.


VRBO allows property owners to rent their entire residence, whether it’s a single-family, condo, apartment, mobile home or studio. AirBnb landlords have the option of renting out single rooms or the entire space. They can also feature shared rooms, which allows them to tap into the college student customer base that are generally more budget conscious.


Benefits & Drawbacks of Investing in Vacation Rental Properties


There are a number of potential benefits of investing in a vacation rental property, which include:


  • Cash Flow: Vacation rentals enable property owners to generate substantial income, particularly during the months when vacation-goers frequent the area.
  • Profit Margin: Landlords are able to charge higher rents for short-term stays, which helps compensate for the potential vacancies when there is less demand.
  • Write-Offs: For those renting their residence, basement or room, you will incur tax obligations for the income generated; however, you are able to write off expenses for any costs associated with maintaining or improving those rental spaces—which include the fees charged by AirBnb and VRBO.
  • Flexibility: Landlords can adjust the types of tenants they rent to, switching to a monthly or semi-annual basis in the slower months for a reduced fee to keep the property full in the off-season.


Happy family looking at their new house

It is important to understand that while there are some great advantages of owning a rental property, it is not without its challenges. Here are some potential hurdles landlords may face:


  • Slow Season: If there is not sufficient demand during some periods of the year, your profit margin will suffer temporarily. You can counterbalance this by optimizing your rental fee during active months and being proactive when it comes to marketing your property.
  • Property Upkeep: Are you planning on handling all the responsibilities of property management yourself? If you don’t live in the same general area, it can be challenging to ensure that everything is running smoothly when you are far away. Hiring a management company is a convenient fix, but they can be costly and detract from the overall revenue the property generates.
  • Reputation: Building a positive reputation on online forums like AirBnb and VRBO is a gradual process, meaning it can take some time for your property to garner sufficient reviews to drive future tenants to your rental.


Get Started ASAP!


Are you ready to invest in a vacation rental property? Having a trusted hard money lender in your corner makes all the difference in building a sustainable and lucrative investment portfolio. Gauntlet Funding has a long track record of success in assisting real estate investors reach their financial goals. Contact us today to learn about how we can get you the capital you need to launch your investment business in a fraction of the time it takes conventional lenders.

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