Why Home Rentals Mean Big Money in Certain Travel Destinations: Could You Profit?January 10th, 2019 by Holly Godbey | Comments Off on Why Home Rentals Mean Big Money in Certain Travel Destinations: Could You Profit?
The travel industry has been evolving at a rapid pace, with a new generation of travelers fueling new travel options that have spawned a plethora of successful businesses, from Uber to Airbnb. However, these massive global providers aren’t the only ones pocketing the profits; they also allow for savvy scrappers to profit, whether that’s by hauling travelers to the airport in the family car or renting out the extra bedroom in their loft.
For those of us with a bit more business acumen and a slightly more entrepreneurial bent, opportunities exist beyond these (mostly) unreliable gigs. Home rentals can mean big money in certain travel destinations, both domestically and abroad, so much so that even newbies to the real estate market are noticing they have a shot at making a nice profit.
HomeAway is an Airbnb competitor that some would argue caters to a more mature audience. It recently released a survey created in partnership with real estate adviser Savills. The two brands found that the international market for additional homes has changed significantly. Buyers are now purchasing vacation homes not for their own use, but for the potential rental income.
In the 1970s, 90 percent of home owners with multiple homes kept their properties in high-demand locations exclusively to themselves. Even in 2000, this number had only declined by 10 percent. Now the industry has flipped on its head, with two thirds of owners using their other properties for additional income.
“In a low-interest-rate environment, investors are seeking out income-generating assets” said Paul Tostevin, associate director of Savills world research. “Today’s second home buyers want properties to work for them financially, and they are increasingly looking not just to cover costs but to turn a profit.”
“Global tourism continues to grow, with international tourist arrivals up by 7 percent last year to a record 1.3 billion,” he added. “At the same time, the rapid expansion of online vacation home platforms, such as HomeAway, opens the market to new target groups and makes it much easier for owners to make their properties income-producing.”
The HomeAway and Savills survey found that, on average, a buyer will pay $291,000 for a vacation rental property (nearly 40 percent less than in 2008). Most buyers are purchasing condos and two thirds either break even or turn a profit on the property, with an average gross yield of 6.4 percent.
The most popular destinations for these profitable vacation home rentals were Florida, California and North Carolina, most likely for the attractive Outer Banks area, which sees flocks of travelers from the Northeast each summer. Canada and Mexico are also attractive markets for American vacation home rental purchases.
Abroad, the Brits are also buying up home rental properties across the world, not only in the United Kingdom, but in Spain and France.
However, it’s not just vacation destinations savvy businesspeople should be targeting. Others have found quite the lucrative market in an unexpected place: college towns.
It’s no secret that large college towns bring in a huge amount of travelers, whether it’s for fall football games, alumni reunions or student-centric dates such as move-in weeks and graduation.
Take, for example, State College, Pennsylvania, home to The Pennsylvania State University. Last year, one of the school’s most popular football games fell in September, against Pittsburgh. Airbnb released a report that stated the small town experienced a 271-percent increase in guest arrivals over that weekend alone. Airbnb expected a record 1,150 guests, paying more than $250,000 to property owners in the region. Additionally, between Aug. 1, 2016, and Aug. 1, 2017, Airbnb found that 350 State College rental property owners, welcoming 10,000 or more guests, earned approximately $1.6 million, with accommodations going for an average price of $345 per night.
Airbnb, however, does have strict rental policies that can make it difficult for more opportunistic businesspeople to turn a profit on vacation rental properties. This is why alternatives have popped up on the national scale (like HomeAway and VRBO) and on the local scale. You’ll find that college towns like State College have locally owned and operated platforms similar to Airbnb, but with a more personalized user experience, both for owners and guests.
So, are home rentals a viable business opportunity for you and your family?
Jason Hartman, globetrotter and serial entrepreneur, as well as the founder of Platinum Properties Investor Network, has said: “I’ve spent years researching real estate trends around the globe in order to help investors make smart decisions. The vacation home rental trend is certainly one that I would recommend they jump on, and quick. With the millennial travel market increasing in profitability by the year and their predecessors, Generation Z, following suit, more are looking for accommodation alternatives in a variety of travel destinations.”
Hartman continued: “A second, third or even fourth home in one of these locales can spell big profits when the right businessperson is at the reigns. Whether you’re renting to a business traveler for just a few nights or an expat who needs a place to stay for a few months, there are plenty of opportunities to turn your love of the global travel market into a profitable business.”