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Airbnb has revitalized the vacation rental industry, injecting life into urban areas that seldom saw vacation rental properties or their guests. This new pulse, when combined with the professionalization of the industry, casts aside the traditional rationale that resort areas are the best location to purchase an investment property. Take San Diego, for example, where neighborhoods with the highest concentration of Airbnb rentals – such as historically residential North Park – aren’t traditional resort destinations.

Now, there are countless communities to choose from if you want to invest in a vacation rental, such as downtown tourist hubs, beach towns, and sprawling suburbs, giving homeowners and investors options. These four helpful tips will guide you as you embark down the trail of opportunity and decide which location is best for you to buy investment property.

1. Decide What’s Important

With so many options comes the need for prioritization. Before you start your property search, decide what’s most important and what works best for you and your lifestyle. Do you desire a property that’ll generate max ROI? Or how about a home that’s close to your primary residence? Or somewhere you’ll also enjoy visiting? Would you prefer a downtown apartment, beachside villa, or cabin in the woods?

There’s a lot to consider and you’ll likely find several communities can provide you with the best of everything. San Francisco’s Mission District, for example, with its palm tree-lined boulevards and art deco architecture, is three miles from the city’s downtown financial district and six miles from sandy China Beach. The area boasts more Airbnb properties than any other San Francisco neighborhood and draws investors looking to make a tidy profit.

2. Who Will Take Care of Your Rental?

With step one complete, it’s time to think about how you’re going to manage your short term rental property. A vacation rental host needs to be able to support guests during their stay, turnover the rental between reservations, and maintain the property to a high standard – especially if they want repeat bookings and five-star reviews. Keep in mind, if you prefer to DIY, you’ll need to both live nearby and have the time to devote to it.

Property management firms take the stress out of rental maintenance for you, but these companies predominantly deal with long-term lets rather than short term vacation rentals. They also charge extortionate fees, which could cut into your profit.

A vacation rental management company, on the other hand, is a more cost-effective solution. Here at Pillow we market your home on vacation rental portals, handle guest reservations, and take care of the cleaning.

Ask yourself how involved you want to be when renting your vacation home. If you don’t want the pressure of collecting payments or dealing with fussy guests, a vacation rental management company is your best bet.

3. Check Local Regulations

If you’re planning to invest in a home as a vacation rental property, you’re probably hoping to use some of the rental revenue to help pay for the mortgage. And that’s great! However, before setting your heart on a specific location, be sure to check the local laws and regulations. Short term rentals are a frequently debated topic and communities often struggle to come up with agreeable regulations. Do some research and find out which areas are wary and which are welcoming of this revitalized trend.

4. How Much Rental Income Do You Need to Generate?

Speaking of paying for the mortgage… Just like each location can demand various home prices, each location will command a range of nightly rates and sustain unique average booking rates. Research, again, will pay off so you can be aware of what the nightly averages and booking rates are in the area you’d like to make your purchase. From there, do the math and see if the numbers add up to what you need them to be.

Buying an investment property in a city like Seattle or San Diego, for example, can provide you with lucrative money-making opportunities. Even when mortgage payments, property taxes, insurance costs, and HOA fees are taken into account, you could still make a massive return on your real estate investment.

Laying out your priorities, understanding the work involved, and knowing your potential community are all key steps in determining whether or not you’ll generate the rental income you’re hoping for. Just keep these four tips in mind and you’ll be sure to land on a neighborhood that suits you best!

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