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Choose a Location for your Vacation Rental in 4 Easy Steps

What an exciting time! Many families dream of a second home by the water, in the mountains, on a farm or a location that is simply away from it all. However, a second home is a major investment of both time and money. To make owning a second home more affordable, many homeowners, like me, buy or build a vacation home with rental income as a secondary priority. If you fall into that category, here are 4 easy steps to improve your income and secure your investment.

1 - Choose a shorter distance from your primary residence - As a first time second home owner, proximity to your primary residence is an important consideration. Some lenders will not finance a second home if it is beyond their distance requirements (which vary). In cases where homes are really far, the bank might require an investment vs. second home loan. Vacation homes that are more than 3 hours driving or flying distance likely experience lower utilization rates by owners. While this is common sense, set yourself up for success by owning nearby. Sure, a villa in Tuscany sounds amazing but how much time are you going to spend there and how are you going to oversee the property? Which leads me to #2....

2 - Select an established vacation rental market - I'm a big fan of options. You should be able to decide if you want to self manage or hire a property management firm to oversee booking, cleaning, and communicating with your guests. Fees typically range from 20%-30%. Property management firms that specialize in vacation rentals often serve larger vacation rental markets. If you choose to locate in a remote area, securing an individual who can assist vs a professional firm might be your best option. Some mortgage loans for second homes prevent owners from signing a property management agreement.

An established vacation rental market has a ton of advantages. Renters are seeking lodging in those areas. There is a tourist infrastructure that provides a wide variety of services and entertainment. There is likely a community of vacation rental owners who would be delighted to help a newbie break into the market. Several booking sites now offer free and paid services that help you identify the viability of different markets. To access reports including potential revenue, local demand and more, visit

3 - Get as close to four seasons as possible - No, not the hotel (although that might be a good strategy!) A resort area that offers four seasons of activity significantly boosts occupancy rates.

4 - Locate where you can afford the largest home - Larger homes (6 bedrooms and up) offer the greatest opportunity to maximize revenue. With 6 bedrooms, you can cater to large groups like weddings, retreats and parties. Larger homes consistently attract more bookings. Keep this in mind when looking at locations. If a larger home is out of your budget, consider waiting until you can afford it.

I used this criteria and more when selecting the location for my vacation home. I chose Wintergreen Resort in Nellysford, which is about 3 hours from my home in Washington, DC. This four season resort is slowest in spring but there are larger homes that consistently book year round with 90% occupancy. While still under construction, I'm developing the marketing plan to appeal to large groups up to 14 people. I'm excited about the journey and hope that these 4 easy steps help you in locating your vacation home in an area that maximizes rental income.

PHOTO - Architect - Studio Schicketanz Tehama

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