With the normally stable stock market experiencing an incredibly volatile—and unpredictable—run in 2020, many individuals have begun considering diversifying their investments. In the United States, one of the fastest-growing investment markets has been the market for vacation rental properties. When strategically selected and managed, vacation rental properties can offer continuous streams of income for many years to come.
Vacation rental properties in Arizona, for example, are an attractive investment option because while they generate income through rentals, they also provide wealth through appreciation. In this sense, investing in a vacation rental property wherever you may choose is comparable to investing in a high-growth stock that also yields strong dividends every quarter.
Of course, owning a vacation rental property still carries with it some degree of risk. Depending on where your property is located, there might be many competing properties available for potential guests to choose from. Taking an active management role or hiring a vacation rental property management team can help put your property in a position where it can achieve its full income potential.
If you are hoping to diversify your current wealth portfolio, an investment in vacation rental properties might be the perfect place for you to begin. In this article, we will discuss what prospective investors can expect from the vacation rental property market in 2021. By taking the time to recognize the direction the market is currently moving in, you can decide if owning a vacation rental property is the right investment for you.
Vacation Rental Property Statistics
Naturally, before making an investment in a vacation rental property before taking a close look at the overall marketplace. A recent vacation rental property report revealed some surprising statistics which, generally speaking, tend to paint the broader market in a positive light.
Some of the most relevant stats for aspiring vacation rental property owners include:
- Global revenues for vacation rental properties are expected to grow from $29 billion in 2019 to about $88 billion in 2023. This represents a more than 300 percent increase in just four years, indicating tremendous investment potential.
- Airbnb currently offers more than 7 million listings worldwide and on a given night, approximately 2 million Airbnb units will be rented.
- Despite having around 5 percent of the world’s population, the United States accounts for more than 20 percent of vacation rental properties.
- In 2012, vacation rental properties in cities accounted for 13 percent of all rentals, but by 2016, the share of urban properties would increase to 34 percent.
- 90 percent of all vacation rental property management companies manage less than 100 units.
- Currently, there are about 23,000 vacation rental companies in the United States, representing a significant increase over the past five years.
Combined, these statistics show that the market for vacation rental properties has been consistently growing. While 2020 interrupted some property management plans, this steady growth has seen an influx of investment, often at the expense of area hotels and other more traditional alternatives.
Real Estate Forecast in 2021
Despite the economic turmoil that was seen throughout the course of 2020, the real estate market—particularly in the United States—has been thriving. Much of this growth was due to record-low interest rates, which dropped below 3 percent by the end of the year and, in some cases, were trending as low as 2 percent.
Going into the new year, real estate markets are still faring generally well. The average number of days an American home experience on the market is down compared to last year, especially in the nation’s fastest-growing regions.
America’s Shifting Population: South and West
46 states enjoyed population growth between 2010 and 2020, but two regions experienced exceptional growth rates: the American South and the American West. With the national population shifting and growing in both regions, states that are located in the Southwest, such as Arizona and Texas, have made some exceptional gains. In fact, during this time period, Arizona enjoyed an impressive 13.9 percent growth rate, making it the seventh-fastest growing state in the nation. Cities such as Scottsdale, Phoenix, Mesa, and Glendale have enjoyed increased property values and tourists from new locations.
Increased Demand for Travel
With many workers having vacation days that can be rolled into the next year, many companies are anticipating increased demand for travel in 2021. In fact, according to one benefits company, 24 percent of companies have changed their rollover policies in order to allow vacation days to be carried into the coming year. This is great news for vacation rental property owners who will be able to increase their profit margins and institute more competitive, dynamic pricing policies.
Investing in a Vacation Rental Property
Of course, while it is clear that the market for vacation rental properties is still quite competitive and looks to be productive in the upcoming year, there is still a lot that needs to be done in order to succeed as a property owner. Successfully running your property means finding ways to market the property, consistently communicate with guests, manage various platforms, and clean between each stay.
While it is certainly possible to manage all of these tasks on your own, you’ll likely be much better off hiring a vacation rental property management company. These companies will handle all of the tasks mentioned above (and more), empowering you to continue capitalizing on your initial investment without any added stress. Most companies offer flexible packages and dynamic pricing plans, making it easy for property owners of all kinds to make the experience truly “all about the guests.”
By taking the time to find a desirable location, investing in features that will make your guests happy, and finding a vacation rental property company that’s compatible with you, the property ownership experience can be incredibly satisfying. While there is no telling what 2021 might have in store, it is clear that property owners that are able to position themselves for success can expect a lucrative and consistent income.