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Mistakes to Avoid When Buying a Vacation Rental

Mistakes to Avoid When Buying a Vacation Rental

Investing in a second home to rent out for short-term stays on Airbnb is a very popular way to make money these days, and it's an excellent long-term investment.

Even though it is an excellent way to earn money, many people make mistakes that result in them losing money. Airbnb hosts frequently wonder why their listings are not being featured. These issues can range from trivial and easily resolved to catastrophic, which generally necessitates selling or starting over. You can easily avoid these mistakes by taking the necessary steps and educating yourself before investing.

“Mistakes are costly and somebody must pay. The time to correct a mistake is before it is made. The causes of mistakes are, first, I didn’t know; second, I didn’t think; third, I didn’t care.” - Henry H. Buckley

To ensure that your short-term rental business succeeds, pay close attention to the below points in our blog, so you can make the best possible investment.

1. Inadequate Research into the Local Rental Market

Inadequate Research into the Local Rental Market

The most common mistake when purchasing a vacation home is not doing your research and not understanding all the different aspects of buying a property. Prior to investing in a vacation rental property, it is important to research the local market to determine the level of demand for vacation rentals in the area, the level of competition in the area, and the average rental rates.

Some vacation rental markets are seasonal, with peak demand during certain times of the year and slower periods during off-season. Making informed decisions about rental pricing and availability requires understanding the rental market's seasonality.

Researching the local rental market beforehand will help you make informed decisions about the purchase of a vacation rental property, set realistic expectations for rental income, and ensure the property's long-term success.

2. Overlooking Hidden Costs

Overlooking  Hidden Costs

When buying a vacation rental property, it is important to consider all types of costs involved, including property taxes, insurance, maintenance, and repairs, and this is in addition to the cost of purchasing the property.

Whilst buying a vacation rental is a great investment before going ahead with the purchase it's important to take into account all of the costs associated with ownership to ensure that it's profitable in the long term.

Here are some hidden costs that should not be overlooked when buying a vacation rental,


Depending on the condition of the property, you may need to furnish the property. This could vary from purchasing or replacing furniture, linens, appliances, and other items to making the property appealing to guests.

Maintenance and Repairs

Regular maintenance and unexpected repairs can add up quickly, especially for a property that is being used frequently by guests.

Property Administration and Management

If you're not planning to manage the property yourself, you'll need to factor in the cost of hiring a property manager to handle tasks such as cleaning and maintenance.


Vacation rentals typically have higher utility costs than a typical residential property because they're being used more frequently.


Vacation rental properties typically require a specialized insurance policy that covers risks associated with short-term rentals, such as liability and damage from guests.

Marketing and Advertising

To ensure that the property occupancy rate is higher you may need to invest in marketing and advertising to reach potential guests.

3. Lack of Attention to Location Details

Paying too little attention to the location

Location is key when it comes to vacation rentals. Before investing in one, you need to consider factors such as proximity to popular tourist attractions, local amenities, and public transportation when choosing the right location.

In short-term rental properties, location is plays a crucial factor because it impacts profitability and success greatly. Here are some reasons why location matters in this type of investment.

  1. Assess the Demand - Properties located in popular tourist destinations or areas with high demand for short-term rentals are likely to generate more revenue.
  2. Check out the Competition - Making sure the property stands out in a competitive market requires researching the local market and assessing the competition.
  3. Property Amenities - Properties located near tourist attractions, shopping, dining, and other amenities are often more appealing to traveling guests.
  4. Accessibility - Properties located near public transportation and highways are more accessible to guests and can make it easier for them to get around.
  5. Zoning laws - Research local zoning laws in order to ensure the property is compliant and there are no restrictions on short-term rentals in the area.

4. Ignoring Zoning Laws and Regulations

Laws and Regulations

Make sure you understand the local zoning laws and regulations for vacation rentals in the area and any restrictions that may impact your ability to operate a vacation rental property.

Ignoring zoning laws and regulations can have serious consequences when it comes to short-term rental properties. These laws should not be ignored for the following reasons,

  • Operating a short-term rental property in an area where it's not allowed or violating local zoning laws can result in Legal consequences such as hefty fines, legal action, and even closure of the property.

  • If a short-term rental property violates zoning laws, it may be shut down, resulting in the loss of potential rental income.

  • Reputational risk is higher when operating a property that violates zoning laws. This can damage the reputation of the property, the owner, and the short-term rental industry as a whole.

  • Investment risk is posed when you purchase a property in an area with restrictive zoning laws for short-term rentals and this can negatively impact the property's value and return on investment.

  • The disregard of zoning laws can also create opposition from local residents and community groups who object to increased traffic and noise levels.

5. Estimation of Rental Income

Estimation of Rental Income

Before making a purchase, it's important to have a realistic estimate of what you can expect to earn in rental income. This is an important step in the purchasing process. Here are some reasons why,

  • Estimating the rental income will help you determine if the property will be financially viable and if it fits within your budget.
  • By estimating the rental income, you can calculate the potential return on investment (ROI) and determine if the property is a good investment.
  • Estimating the rental income will help you determine a fair rental rate for the property, taking into account market demand, competition, and other factors.
  • Lenders may require a minimum rental income when considering a loan for a vacation rental property, so it's important to have a realistic estimate of the rental income.
  • Having an estimate of the rental income will help you plan for the future, including budgeting for maintenance, repairs, and other costs associated with owning a vacation rental property.

6. The Absence of a Contingency Plan

Contingency Plan

A contingency plan is a backup plan or alternative solution in case something unexpected happens. Having a well-thought-out contingency plan in place is an important part of risk management and can help you protect your investment and ensure the long-term success of your vacation rental property.

The following reasons make it important to have a contingency plan when purchasing a vacation rental property,

The Unexpected Can Happen

Unexpected events such as natural disasters, economic downturns, or changes in regulations can impact the rental market and your ability to generate income from the property. A contingency plan will help you prepare for and respond to these types of events.

Slow Season / Off-Peak Season

Some vacation rental markets have slow periods during the off-season, and having a contingency plan in place can help you manage the financial impact during these times.

Maintenance and Repairs

Unexpected maintenance and repair costs can arise, and having a contingency plan in place can help you budget for and manage these costs.

During Non-occupancy

If the property is not being rented, it's important to have a contingency plan in place to manage the costs associated with unoccupied property, such as utility bills and property insurance.

7. Not considering the Type of Property

Type of Property

If you plan to make short-term rentals successful, consider factors such as the property's size, number of bedrooms, and bathrooms, and whether it's suitable for families, couples, business travelers, or digital nomads.

Vacation rental type is important for several reasons when buying one, here are some,

Rental Demand

Different properties have different levels of demand in the rental market. For instance, beachfront properties may have higher demand in coastal communities, while ski properties may be in high demand in mountain resorts.

Target Audience

Guests may be attracted to different types of properties. Consider the type of property that will appeal to your target audience. For example, families might prefer homes with multiple bedrooms and bathrooms, while couples might prefer smaller, more intimate properties.

Maintenance Demands

Different types of properties require different levels of maintenance and upkeep. For example, a single-family home may require more maintenance than a condominium, which may have shared amenities and services. Consider the level of maintenance and upkeep you are comfortable with and capable of handling.

Before you purchase a vacation rental consider the type of property so you can make an educated decision that aligns with your goals, budget, and the demands of your rental market.

7. Underestimating the Importance of an Online Presence

Online Presence

It is critical to have a good web presence in order to attract people to your short-term rental. Having a well-designed website, listing your home on reputable vacation rental sites, such as Airbnb, VRBO, Booking.com, Hopper, Google Vacations, etc, and adopting successful marketing and promotion tactics are all part of the process.

8. Don't Skimp on Amenities


It's important to make sure that the vacation home you are considering is equipped with all of the amenities that you want and need. Many hosts design a beautiful vacation rental space but neglect to add the amenities that will make a guest's stay truly memorable.

Think about what your ideal guest needs, and invest in amenities that can meet those needs. Pools, hot tubs, fine linens, comfortable mattresses, toiletries, and a well-equipped kitchen are things that should not be overlooked. These features will make your vacation home more enjoyable.

Skimping on amenities when buying a vacation rental property can have negative consequences and impact the property's overall profitability.

Investing in amenities is a good idea for the following reasons,

Guest Experience

Amenities are an important factor in a guest's decision-making process when choosing a vacation rental. Providing quality amenities can enhance the guest experience and make your property stand out from the competition.

Higher Rental Income

Properties with quality amenities tend to be more rentable and attract a higher rental rate. Skimping on amenities can result in less desirable property and lower rental income.

Higher ROI

Investing in quality amenities can increase the property's value and overall return on investment (ROI).

Increased demand

Properties with quality amenities tend to have higher demand, resulting in more rental income and a stronger bottom line.

Repeat Guests

Providing quality amenities can help build a strong reputation and encourage repeat business. Repeat guests can provide a steady stream of income and help offset the cost of upgrades and maintenance.

Ensure that every detail is taken care of and don't be afraid to get creative with your amenities! Reviews will reflect your guests' appreciation for your thoughtfulness and ingenuity.

9. Not Investing in Property Management Software

Property Management Software

It is important to invest in professional property management services or have a plan in place for managing the property effectively. Trying to manually handle everything can result in costly human errors like missed cleaning schedules, double bookings, inaccurate pricing, and worst of all - unhappy guests!

The tools in property management software help to reduce your manual workload in numerous areas. You can automate most tedious tasks such as check-in and check-out, so you don’t have to be present every time a guest arrives at one of your properties, and automate cleaner management to take the stress out of turnovers.

How can Hostaway Help?

When you invest in Property management software such as Hostaway you can be rest assured your troubles are put to rest. Hostaway is the most scalable, comprehensive, and robust property management system built for property managers and aspiring hosts alike.

With Hostaway you get property management software with an inbuilt channel manager. The automation features simplify time-consuming tasks and grunt work. You can manage inquiries, streamline channel distribution, guest communication, reviews, and staff task management all in one platform. You can be better organized, as a PMS can help property managers keep track of important information such as lease agreements, tenant information, and property maintenance records. By doing so, you can ensure that information is easily accessible and nothing falls through the cracks.

Property management software like Hostaway can be a valuable investment for property owners and managers because it streamlines and helps you scale your business in the long term. Learn how Hostaway can fit your property management business and unlock growth potentials for you by scheduling a demo call with one of our product experts.

Ready to find out how Hostaway can transform your business?

Hostaway is proud to support thousands of Property Managers and Airbnb Hosts Around the world. We take pride in being Top Ranked in Vacation Rental Software Review Sites: Capterra, G2, Software Advice, Trust Pilot, to name just a few! Check out our reviews and read the Hostaway Case Studies from real successful and growing Short-Term Rental Managers!