Things you need to know about vacation rental market research

A market is a dynamic place. You can never fully predict what will happen. Most people work by experience and others by multiple means. But the best results have been derived from those who work with data-driven strategies. Calculative measures can give you a clear picture of what you are getting into. With the right tools, you can achieve high accuracy in predictions. 

MarketMinder is a great tool that assists hosts in choosing the right property and estimating returns as well. Here we discuss some points that will help you make an informed decision regarding your property and drive success with data-driven research. 

The importance of data-driven market analysis

The supply and demand numbers are constantly fluctuating in the industry. One may feel that they know the area and locality but you will never be able to guess the success based solely on intuition. 

Making decisions based on the available hard data sets seem more logical and often provides a clear path to success. Creating a calculated investment will help you derive short-term profits from the properties. Reducing uncertainty will help you build a healthy foundation.

Finding the ideal town to invest in

There are multiple approaches to picking a location to invest in. While there aren’t hardcore rules to selecting the place, there are some thoughts that go into the approaches used. 

1.When you have a place in mind 

Most people when thinking of investing, they refer to their personal options. For example, one might be thinking about a place close to their permanent residential area. Such biases can lead them to miss out on great opportunities. 

Using tools like MarketMinder can eliminate these errors and help you find a rational and profitable property. 

This tool can also help you dig deep into a location of your preference. You will be able to fetch details of all kinds of properties in the nearby area. Look for the ones that suit you the most. 

It also guides you on which type of property you should select. It will be there with you on every step to make sure you pick wisely and get the best returns. 

2. When you are open to all options 

If you do not have any preconceived ideas about the location, you can find some of the best opportunities listed in the article ‘Best Places to invest in’ by AirDNA. This report provides detailed insight into available properties in the United States that are segregated by their location. You can purchase reports for other countries as well. 

This report also includes an analysis of revenue potential, KPIs, revPAR, seasonality, supply, and much more. The segregation of this data results in an AirDNA score that can help one predict future demand. 

Once you are set on a town or city, MarketMinder will help you find the right type of property. This tool can also be helpful if you don’t want to buy the property and opt for rental arbitrage instead. 

Dive deeper into the specifics - neighborhood 

Once you are finalized on the town and type of the property, you need to find a suitable neighborhood. Using MarketMinder, you can look into the neighborhood you are aiming at and even calculate the approximate annual revenue. This will allow you to make informed decisions. 

If you are hunting in small towns, this is still a great option to check out. For example, Mauston is a small town but the lakeside property can fetch great deals. 

Learn about the regulations of the area 

Coming to the serious talks, you need to thoroughly understand the short-term rental regulations of the area that you are investing in. You can start by researching investment success factors. These factors will significantly differ from one place to another and hence, you want to be careful. Some places even outright ban short-term rentals. 

Qualitative competitor analysis 

Once you are done with the data-driven parts of the research, take time for the qualitative analysis of your competitors in the market. Look for any gaps in the market that your competitors aren’t addressing. These gaps can be your USPs and help you stand out and on top. 

When you study your competition, you will realize a lot of things that you should stay away from. Hence, pay attention and learn. 

Know your ideal guests

After finishing the formalities, you need to start thinking about your customers. Who do you want your guests to be? What can be an ideal definition of them? Defining this will help you reach the target audience through efficient and strategic planning. 

Do you want your guests a group of friends, a family, a couple, etc? Once you know this, you can draft your profile that caters to your audience. You can also choose to design a property that suits multiple categories of guests. But again, be sure that it caters to their needs and that you can target them effectively. It is better to know your ideal guests to make things easy for you.

Calculate the potential revenue of the property

Return on investment is the soul of all this mess. Before you make things official, take a dry run on calculating the potential revenue of the property. You can do this by using the rentalizer feature of the MarketMinder.

All you have to give the software is the address and significant characteristics of the property. From this, it will estimate the annual revenue that can be generated. You can also receive occupancy rates, average daily rates, seasonal variation in rates, and much more. 

Calculating the expenses 

Now comes the hard pills - the expenses that you will incur in the vacation rental investment. This will have you reading individual topics about local taxes, maintenance and cleaning costs, startup expenses, host’s association fees, etc.

Based on all this information, you can estimate your net operating income and cap rate with the rentalizer tool within the MarketMinder. 

Tip: 10% cap rate is considered ideal but it can vary based on the type and location of the property. 

The data-driven market research gives a major upper hand to the host and helps them make the best out of their investments in the rental business. Tools like MarkerMinder will always be there to aid them with numerical research and analysis. This can significantly up their profits.