Back in the spring I got the bug to buy another vacation home. The current one, Osprey Cottage, has fulfilled its potential as far as occupancy is concerned and there is not much more we can do to create more income from renting it out. We seem to be doing just about everything right so the time seemed perfect to repeat the process. I documented the steps of buying the new place which will be the topic of a new eBook coming out early next year but here are some of the topics addressed:
Set the purchase criteria
I’m often asked what makes for a great vacation rental property, and my response is invariably the same. Do the research and see what is working for others, then apply the same to the purchase criteria. Osprey Cottage has been a stellar property; our guests love it and many have stayed there on multiple occasions, so there seemed little reason to divert from the model. My criteria for the new place was identical:
– Good clear water for swimming
– Minimum 3 bedrooms and 2 bathrooms
– Less than 2.5 hours from source of primary demographic
– Necessary renovation must fit budget
– Accessible year round (we are in an area where many properties close up for winter
– Good to excellent privacy
Assign a budget and stick to it
This is very important as it’s easy to over-reach and over-spend. We’ve bought seven rental properties and know better than to underestimate the overall spend that includes the purchase price, closing costs set-up expenses, together with an emergency fund. Have a cash flow forecast for at least the first year and be realistic with rental projections. It will take some time to build a following.
Don’t do anything that doesn’t sell more chickens
Many years ago we were fortunate to have an investor help out with our first vacation rental purchase. His greatest piece of advice that has never left me was ‘If it doesn’t sell more chickens, don’t put it in the hen house’. It didn’t take me long to appreciate the value of that advice and we now evaluate every potential purchase, from the smallest to the largest, on this basis. It’s saved us a lot of money.
Your past guests can be your new market
The primary reason we bought Kingfisher Cottage was because Osprey Cottage was always full. And….we were turning people away who had read the wonderful reviews and wanted to stay there. One of the first marketing activities we did was to create a standard paragraph to attach to the end of every email response that told our past guests we’d bought a new place and they would love it just as much as Osprey Cottage. It worked as four out of our first five guest groups had already stayed at Osprey.
We know we have another success story on our hands and it’s in part because we did the homework, ruled out any potential properties that didn’t meet the criteria, and stuck to the budget.
Do you have a vacation property or more than one? What have you learned?