Let’s talk about vacation rentals versus traditional buy and hold property.
Over my years in a real estate, I have been involved in various businesses and various transactions. I’ve tried my hand in a lot of things. Right now, my bread and butter business is my turnkey real estate company, where we sell a lot of properties to investors that buy and hold.
I also own three properties in the Bahamas, and I have a property in Japan and Croatia. So I’m pretty well versed in different economies, real estate markets, and asset classes from an investment standpoint and from running numerous companies. I’m not trying to toot my own horn; I’m just attempting to convey why I’m credible.
Why I Prefer Buy and Hold Over Vacation Rentals
Experience has led me to believe that vacation rentals are a little bit too much of a headache. I do know a lot of folks who do that as their full-time passive income stream—and they do it very successfully. But in my opinion, it’s an entirely different structure than a traditional buy and hold property.
Why is it different? You’re probably going to have to spend more money to acquire a property in a more desirable place—somewhere in the mountains or the Caribbean or Florida, where it’s warm and the weather is great. Usually, these properties do not come at a discount. In fact, you have to pay a premium.
It’s not just that either. If you are going to do a vacation or short-term rental, you’re probably going to have to furnish it. And you’re going to furnish it with a level of interior design, because you can’t just slap crap together and call it done.
Another thing is the turnover is going to be much higher, meaning you might have folks who want to rent it for one night, three nights, or two weeks. Of course, you’re going to have to make sure that you clean it and get it ready for the next guests. So there is a lot of hassle with that.
I also think it’s very seasonal. Even if you’re in the Bahamas, you’re not going to get people to rent during hurricane season. There are also periods when it’s really not that warm.
These are just a few of my thoughts when it comes to vacation rentals. I think we all invest in real estate to make it as passive as possible. You collect your monthly check, and you don’t really have to worry about it.
Although on paper vacation rentals may offer a higher cash flow return than a traditional buy and hold property, I do believe it comes with more hassles. I guess the perk there is you can use your property for vacationing whenever you want.
As I said, I own real estate in the Bahamas. But I’ve rented it out to long-term tenants, believe it or not. I prefer it that way—consistent and less hands-on involvement.
What do you think about vacation rentals versus buy and hold properties? Which way are you leaning?
Let me know in a comment below!