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How Do You Finance a Vacation Rental Business

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Vacation rental firms are some of the most successful up and coming businesses today. However, the barriers to entry have several scales in this industry. We are going to look at the barriers to entering the vacation rental marketplace, and then how you can look at different options to finance such an enterprise. 

Barrier to Entry One – Financing Your Property (Medium to High)

One of the most difficult of those barriers to entry is finding the cash to finance the acquisition of property. Next, investing money into having the rental ready for rent. If you buy the property and it is not such a good state, and then rent it out without investing in refurbs, you could end up ruining your reputation before you have even got the business off its feet. 

Traveltips.usatoday.com has a guide on “How to Finance a Vacation Rental Home”. We also have some more tips below that should help you get an idea of how you too can purchase your own vacation rental property.

You could avoid bad reviews by investing cheaply with a lick of paint and keeping your prices low until you have built up enough cash to reinvest into continuous improvement. Some vacation rental owners have gone as far as installing complete smart home tech and solar power. Many of them started with an old run-down building and built it up by reinvesting to make these places into high-tech holiday homes. 

Furthermore, some have reinvested their earnings to use extra garden space and add decking, swimming pools, jacuzzis and so on. 

How do you get the financing in the first place?

  1. If you already own a property, then this helps. You can use your existing home as collateral. It is a big risk, and it would also mean you may have two mortgages. 

 

  1. If you have some capital already stashed away, then form a business plan and take this to the bank and get advice on what you need to do move forward with an interest-free mortgage.

 

  1. If you have some capital and friends or family with capital all looking for a business venture, then club together and formulate a business plan. You may still need a bank to get involved in the process, but with several parties involved, the bank would be more than willing to spread the risk of any capital it puts up.

 

  1. If you already own a successful business, create the vacation rental arm of the firm using the business’s success as collateral. 

One of the upsides to buying a property for the purpose of vacation rentals is that the holiday home becomes a valuable asset. In general property, prices go up in most places. Even if they come down, most of the time they increase again after a time; especially in places where there are many business visitors or tourists frequenting the area.

Barrier to Entry Two – Building Up A Reputation (Medium)

Once your vacation rental is ready for rent, the big problem is finding people to make bookings. Using vacation rental websites such as FlipKey listings mean your property will be exposed to searches online, but when you start out, you will need revies. Now cheating is not always the best way to get reviews so invite friends and family to book the place at a low price. Firstly, you get a low income, and secondly, you will get a good review. 

Let’s not forgot, anyone staying in your place will also be able to give you tips on how to make it more comfortable. Maybe you forgot to leave an iron and ironing board, or a kettle in the kitchen would have been useful. 

Another issue is that you will be going up against other properties that already have plenty of good reviews. This means you may have to run at a slight loss in the beginning with by offering lower prices for the same type of property. Make sure you explain why your price is so low or people will ask ‘what is the catch?’. You should begin to harness good reviews which enables you to increase your prices.

With the profits you can invest in marketing, designing your own branded website using website builders purposely made for vacation rentals. Lodgify.com offer a very good website builder platform with booking engines built in, financial options for payments, 24/7 support, and a channel manager that connects all your calendars on multiple websites to ensure they stay in sync. 

There are still plenty of new vacation rental entrepreneurs coming online and making a success of their business.  The market is by no means saturated at the moment, so this is the best time to invest.

Barrier to Entry Three – Investing in Marketing (Low)

Unlike many other businesses, the costs of marketing in the vacation rental business is low. You may be shocked at this revelation because after all, we are talking about the travel industry here.  

Travelaway.me has a list of 27 places where you can list your vacation rental property. Many of these websites suggested have thousands of online visitors every day. They do all the marketing themselves, while it takes you a little time and effort getting together some decent photos and hiring a good writer to create a description as well as persuasive intro for your property or properties. 

As long as your review are good, you offer great customer service by responding to inquiries and guest requests, then all you are committing is a small investment of time and money. 

To sum up, we suggest further reading by looking at some of the referral links we have provided leading you to more information. They are extremely relevant and will save you time doing more research yourself. Some of the resource guides we have linked to have more links to other informative websites, and they have pages on their on websites leading you to more information, so you can learn more about this lucrative market and become a successful vacation rental business owner.