Every year, thousands of Americans will make the decision to purchase a vacation rental property. In addition to giving themselves an enjoyable place to retreat to every year (or multiple times a year), these properties can help many people earn an additional income. In fact, with the right vacation property management team by your side, you can earn significantly greater returns than you could in the stock market or with other speculative investments.
There is no denying that the vacation rental property market—especially in states that are warm year-round, like Arizona—can be quite lucrative. However, while countless property owners will end the year (even slow years) in the black, others may end up losing money on their initial investment.
Covering the cost of variables such as taxes, utilities, and homeowner dues will set the “breakeven point” your investment will need to yield with each passing year. But if you are like most rental property owners, you didn’t make your initial investment simply for the sake of breaking even. You made your investment because you want to actually increase your wealth over time.
In this article, we will discuss some of the most essential strategies for yielding strong returns on your rental property in 2020. Though these strategies are not all foolproof, they have produced incredibly lucrative outcomes for property owners in many different markets. By keeping just a few of these strategies in mind, 2020 may be your most lucrative year to date.
1. Choose a Market that’s Increasing in Demand
There is no denying that location is the most important factor driving the value of any given property. In order to make sure you are maximizing your investment as a vacation rental property owner, you will need to choose a location that people actually want to be. Investing in properties in growing markets—such as Phoenix, Scottsdale, and other cities in Arizona—will make it much easier to have your property booked throughout the entire year. Furthermore, Arizona cities are also attractive due to their constant sunshine and warm weather.
2. Hire a Property Management Team
While there are certainly many things you can do on your own, hiring a property management team will certainly make your life much easier. With the right team by your side, you’ll be able to effectively market, maintain, and improve the value of your property over time. Most of the best property management companies will allow you to purchase their services a la carte, meaning you won’t need to pay for more than you truly need. These companies offer a guest-oriented approach to management that will lead to positive reviews and consistent income streams.
3. Implement a Variable Pricing Strategy
No matter what market your vacation property might be located in, there will be certain times of the year (or week) where demand for rentals is recognizably higher. In order to maximize your profit potential, you should immediately install a variable pricing strategy. Most vacation homes can increase their rents by about 25 percent on weekends without seeing any major decline in stays. In states like Arizona, warm winters can cause an increase in visitors during the months of November, December, and January. Using local travel data can help you make more educated pricing decisions.
4. Build a Strong Social Media Presence
Social media is one of the most common places people look for travel suggestions and even vacation rental information. By developing a strong social media presence, you can help promote your properties and extend your potential reach. Even if these pages are designed solely for the purpose of directing guests to your main booking website, they will still help increase the perceived legitimacy of your vacation rental enterprise. Fortunately, your property management team will usually be willing to help run multiple social media pages at once.
5. Encourage Detailed Feedback
Feedback is one of the most important things for any vacation property owner hoping to secure more bookings. With plenty of detailed feedback on your property’s webpages (whether on Air BnB, an independent site, social media, or anywhere else), people will begin to trust that your property will be a great place to stay. Furthermore, gathering critical (but hopefully nicely worded) feedback can also be quite beneficial. By making an active effort to understand how your property can be improved, you will be much more likely to satisfy all future guests.
6. Offer Special Discounts
In the retail space, offering special discounts is one of the best ways to increase short-term sales and inflate your bottom line. The vacation rental property market is no different. There are many different discounts you can offer that will help ensure your place is consistently booked. For example, offering a discount for longer stays (7 days or more) may encourage some people to take longer vacations. You could also offer last-minute discounts, military or student discounts (be sure to ask for ID), returning guest discounts, and many others.
7. Invest in Upgrades
Though location is the primary driver of a given property’s value, its value will also be affected by the upgrades you install. Modern amenities such as free Wi-Fi and Netflix do not cost very much each month but can immediately make your place more appealing. Other more expensive options—a pool or hot tub, game room, full kitchen, etc.—can also give your place some additional appeals. Making these additional investments will be even more beneficial in highly competitive vacation markets. The more you can do to distinguish your place from the apparent alternatives, the more you will be able to command in rents.
Conclusion - How to Maximize the Value of Your Vacation Rental Property in 2020
2020 should be a great year for vacation rental property owners in the United States and elsewhere around the world. With millions of people looking for potential places to stay, you’ll have plenty of opportunities to begin reaping the benefits of your initial investment. Becoming a successful property owner will still require quite a bit of work. But with a qualified property management team and these helpful tips in mind, you should be positioned to have a profitable year.
