Is a Cottage a Good Investment?
The answer to “is a cottage a good investment” is, it depends! Vacation rentals can be very lucrative, but they can also be expensive and work intensive to set up and maintain, so it is important to do your research before committing. Making a cottage a financially viable and worthwhile investment is about maximizing profits and minimizing costs while maintaining a quality product. This article will outline some considerations when determining if buying a cottage is a good investment for you.
Time and Money
The answer to “is a cottage a good investment” is influenced by how much time and money you have to buy and set up your space. While vacation rentals can be arranged to have minimal hands-on requirements, and essentially just make passive profit, it takes a lot of work, time, money, and know-how to get there. Every step towards that goal outlined in the following paragraphs takes significant amounts of research, effort, planning and execution. The more time you can carve out for this endeavour, the quicker you will have a smoothly running system and wonderful vacation home. It can be an arduous process, but extremely worth it.
Location
As the old saying goes: Location, location, location! The location will have a huge influence on whether buying a cottage is a good investment. It is easy to understand that people generally like to vacation in pleasant and/or interesting places. Beautiful landscapes, good weather, and lots of different activities nearby will attract interest in your rental.
Besides selecting a place for its beauty and abundance of activities, the local economy should also be considered. When choosing the right location to buy a vacation rental, a strong local economy, good job market, and a tourism industry are pillars of success.
Safety and security should also be considered. Select a neighbourhood where guests will feel at ease, and won’t have to worry about theft or violence.
Looking at reviews and feedback from other vacation rental owners in the area will provide valuable insight into the market and any challenges you might face. Calling up some potential future neighbours to ask them some questions is a good idea, as they can get into details not mentioned in reviews.
Seasonality
Does the location attract visitors year-round, or is it primarily a seasonal destination? Seasonal destinations may have higher peak rental rates but more downtime during the off-season. Factors that affect seasonality include weather and the availability of activities, such as fishing, hiking, sightseeing, sports and athletic activities, relaxing in the sun, or even storm chasing, to name a few.
High season is when the majority of the tourists come. In a ski town, the high season is in the winter, whereas a beach destination is likely to attract visitors when the weather is most pleasant. Adjusting your prices according to demand is essential to maximizing your returns on your investment. Remember, though, that price has to reflect quality, as a single bad review can be bad news for the success of the unit. Make sure that you maintain high standards of comfort, cleanliness, and experience.
Are you going to use the rental when it’s not rented out? This is an important consideration that must be reconciled with the wants and needs of you and anyone involved with you in this project, like your family or business partners. Seasonal locations will have lots of vacancies in the off season, allowing you to use the rental yourself without losing potential income. The caveat is that that would be in the off-season, when it might not be as enjoyable a visit.
Research The Competition
Another wise adage that applies here: an ounce of prevention beats a pound of cure. Make sure to do your research! A thorough market analysis to assess the competition will pay great dividends in the long term, and will prevent you from making poor choices. By evaluating the amount of vacation rentals in the area, their prices, and their occupancy rates, you can determine how viable your endeavour is. It’s important to make sure you understand your competition, and that you will be able to gross enough income for it to be profitable.
Local Laws And Regulations
While gauging the local economy is a very important consideration for determining if a cottage is a good investment, the local laws regarding rentals will have a huge impact on its success as well. Different places have different property regulations, zoning laws, and homeowners association rules that will affect the ability to rent out your domicile. Some areas have restrictions on short-term rentals. Knowing the rules will prevent you from having to redo anything, and save money from fines and fees.
Future Development
What the city has planned for the future could affect your investment. Construction tends to cause delays and inconveniences, so research any planned developments or infrastructure projects in the area is prudent. Spending some time talking to the municipal government about any future expansion is prudent planning.
Accessibility
The more accessible your rental property, the higher the likelihood you will have consistent bookings. Therefore, considering how easy it is for guests to reach the property is essential. A guest choosing between two similar rentals with the main difference being ease of access will usually choose the more convenient option. Proximity to airports, highways, and public transportation can be a selling point. However, there are lots of people who enjoy remote locations and the solitude that comes with it. Know your target market and choose accordingly.
Amenities and Features
Another reason to know your target customer is to include amenities and features they will enjoy, and what will make your vacation rental stand out. People often choose their accommodation not just on price, location, and comfort, but because there are special, unique, or luxurious amenities, services, and experiences offered. Many AirBnBs get attention due to their unique features, and are marketed as an experience and an attraction unto themselves.
This could include a pool, hot tub, fully equipped kitchen, or pet-friendly policies, to name a few. To get ideas, research rental units in the region, as well as other ones in different places that have a similar atmosphere. By finding popular rentals in far away places that have a comparable feeling to your location of interest, you can introduce new experiences and attractions to the place you decide to purchase. This will differentiate your place from the others with tried and true amenities that are new to the area.
Whether a cottage is a good investment will depend on various factors. While it has tremendous upside in terms of lucrative profitability, as well as having a beautiful place to enjoy, it requires careful consideration and research, and lots of work to create and maintain. Although the learning curve can be steep, once the space is set up it can be well worth it. To try out a cottage vacation rental for yourself, browse our wide selection of rentals available.
