Why Should I Invest in Vacation Rentals?
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Have you ever stayed in an exciting Airbnb and wondered if you could ever own one yourself? Imagine your property to be an absolute gem for travelers who want to enjoy their favorite destination.
Vacation rentals offer an excellent opportunity to generate revenue from an investment property while enjoying short-term getaways or diversifying your retirement portfolio. The introduction of Airbnb in 2008 and Vrbo's rebranding in 2019 have opened up a wealth of possibilities in this field. More and more travelers opt for distinctive and personalized experiences, leaving traditional hotels and resorts behind.
According to a report, the revenue growth in the vacation rentals market in Asia is projected to reach US$27.23bn in 2023 which shows the potential of this particular investment market. The number of users is also expected to amount to 399.90m users by 2027, which shows that more and more individuals are opting for vacation rentals.
Investing in vacation homes, particularly those with Instagram-worthy appeal in sought-after and popular destinations such as Bali and Bangkok, can yield substantial returns. Nevertheless, entering the vacation rental market stands apart from long-term tenant leasing. While it can be an exciting and profitable venture, it demands greater dedication and maintenance. Here, we outline some pros and cons to consider when contemplating an investment in vacation rentals.
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Pros
Generate rental income
Online platforms like Airbnb, VRBO, and HomeAway have revolutionized the way people approach travel. Rather than opting for sterile hotel rooms, travelers are increasingly inclined to splurge on vacation properties that promise a unique experience. For individuals who own and invest in vacation rental properties, having a residence in the ideal location can result in significant profits, particularly during peak tourist seasons. The potential income from a vacation rental hinges on factors like its location, size, and the amenities it offers. It is estimated that the revenue of vacation rentals will have an annual growth rate (CAGR 2023-2027) of 6.89%, resulting in a projected market volume of US$35.55bn by 2027.
Dual-use
A vacation rental property serves a dual purpose, functioning both as an investment and a convenient holiday retreat. You can effortlessly reserve the property for your own use during specific days or weeks, transforming it into a second home for your quick getaways. This enables you to leverage your investment in the real estate market while simultaneously enjoying a dedicated vacation home.
Less risk during a recession
The key benefit of purchasing real estate, and why it proves to be a sound investment, is the perpetual necessity for people to have a place of residence. Similarly, even in economic downturns, people persist in taking vacations, albeit with shorter trips, cost-sharing arrangements, and holidays that are more localized. The chart below shows the projected revenue growth of vacation rentals in Asia, indicating that it is a strong and steady investment.
Property Appreciation
A vacation rental not only provides a source of short-term passive income through rental payments but also increases in value over time. In essence, should you decide to sell the property, its appreciation would ensure a substantial return on your investment, in addition to the ongoing monthly rental income it generates. In sought-after locations, the short-term rental market typically exhibits a quicker growth trajectory and offers higher long-term returns.
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Cons
Expenses
Given the demands of maintaining a vacation rental, which necessitates ensuring the home is furnished, has ample amenities, and conducting thorough checks after each guest's stay, the associated expenses can accumulate.
Upkeep and maintenance
Operating a short-term vacation property demands a greater degree of management, marketing efforts, and time allocation for bookings compared to a long-term rental. Daily responsibilities include supervising cleaning and maintenance, preparing the property for guests, replenishing essential supplies, marketing, handling booking logistics, addressing guest and renter inquiries, and coordinating check-in and check-out procedures.
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In summary, vacation rentals present a promising opportunity for real estate investment. With the strong demand and competitive pricing in select locations, you can anticipate owning a property that not only delivers consistent annual cash flow but also experiences substantial appreciation in value over time.
Eden Homes ensures that all our properties come fully furnished with all the essential amenities and utilities. We help to ensure that your property is ready for guests with our Eden Concierge service.
At Eden Homes, we want to give real estate investors opportunities to invest in homes and take advantage of property appreciation and rental income without the hassle of finding, maintaining, or managing a property. Our properties have all been vetted to ensure you get the best yield. Browse our properties today and get started.
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Eden aims to help individuals achieve financial freedom and wealth generation through vacation rental investments, emphasizing it as a path to sustainable income.
