Can Your Vacation Home Pay For Itself?

Are you looking at purchasing an investment property or already have one and would like to earn a return?  At Hometime, we've managed thousands of investment properties in Australia and New Zealand and worked with many property owners. Our experience has taught us a thing or two and we want to share that with you. Below, we list the main things you should keep in mind before purchasing an investment property and how you can go about earning a return on that investment.

Research the area before you buy

Whether you'd like to make a full return or just a portion return on your investment property, we recommend you research into the area you are buying. Many vacation areas have high and low seasons which comes with different daily rates.

A good place to start is looking at short-term rental data and analytics services, like Airdna. This will give you a good indication of how much you can charge for your investment property per night. Another alternative is going straight to the source and searching for similar size homes in the area you're looking to buy on Airbnb.

Whichever area you choose to buy, don't limit your earning potential. Look for an area that doesn't have too many short-term rentals and has a steady flow of tourists and visitors to the area.

Join the short-term rental market

It's no myth that the short-term rental market can help you earn more than leasing your investment property for months at a time. You'll also have the added benefit of staying in your own home when you're in the area.

The great thing about the short-term rental market is dynamic pricing. This means that you can charge more for your property during peak seasons, holidays and special occasions. No bookings for a weekend? No problem! With dynamic pricing, you can decrease the daily rate closer to weekends to get last-minute bookings. A booked weekend is better than an empty home.

Write off expenses

If you rent your property for more than a certain number of days, you can deduct property expenses from your tax. This does mean you'll have to pay taxes on the income you generate from your property. But it also lets you write off many expenses you incur. Find a full list of tax deductions in Australia, here.  

Some of the deductions include:

• Cleaning and maintenance costs
• Supplies
• Insurance premiums
• Utility costs

Get a property management plan together

If you live close to your investment property you can manage your short-term rental property yourself. If you live further away, it may be a good idea to get an Airbnb management company to take care of your property.

If you're going the management route, do your research wisely and hire property managers that have a few years of experience managing in your area. Property managers have different earning models — some may charge a retainer amount while others take a percentage of your earnings. It's up to you to do some research and determine which one works best for you, your schedule, and your home.

If you do your research and plan well, an investment property can pay for itself. Having a nest egg to retire at one day or simply enjoy another part of the country can be very rewarding. By doing your research and taking advantage of the short-term rental market, you'll have a good way to earn a consistent income throughout the year.