Looking to invest in a vacation rental property? Thinking of turning your existing home into a short-term rental? A growing number of travelers are staying at vacation home rentals, like Airbnbs and VRBOs, and many investors and homeowners are now considering getting into the game. But how do you know if a property will make a good Airbnb or VRBO? In this article, I’ll explain how to identify the properties and features that vacationers are seeking out and paying more for.
Location, Location, Location
I know, it’s cliché, but it’s also true that location is the most important factor that determines the revenue potential of a vacation rental. The best short-term rental properties are located close to major attractions. What are the major attractions for vacationers in Duluth/Superior area? Let’s start with the lake, and I think you know which lake I am talking about. Lake Superior may be the biggest draw, but inland lakes are also huge attractions! Properties on the water tend to generate the highest revenue in our area. Even just having a lake view will boost revenue for a property. Throngs of people descend on Canal Park in the summer, and having a vacation rental near the Canal puts your guests near the action. But there is more than just Lake Superior in the Duluth/Superior area. Vacationers will find festivals, museums, galleries and historic sites in the area, as well as plenty of outdoor activities like hiking, biking, skiing, kayaking and fishing. And of course, everyone loves to eat, and there are plenty of food and drink options as well. Regardless of where you are in the Twin Ports, you will be a short drive to most of these attractions. Travelers also want to stay in nice neighborhoods with beautiful homes. The Congdon Park and Endion neighborhoods in come to mind. I will never tire of ogling the beautiful and historic homes in these neighborhoods.
But what about those secluded out-of-town locations? While there are plenty of vacationers that want a quiet spot away from any neighbors, most want to be where the action is, or at least a short drive to it. Properties away from cities and their amenities will certainly attract guests, but they generally don’t do as well, unless they are on a lake and near some other sought-after attractions.
Property Condition and Visual Appeal
Many vacationers have high standards. They expect the property to be in very good condition. If you want a property that can immediately generate income, you are looking for one that has been well-maintained and is aesthetically pleasing. That doesn’t mean that a fixer-upper won’t be a good investment though. In fact, fixer-uppers give you the opportunity to remodel with vacationers in mind. This often means choosing materials that are better quality and longer lasting. Thorough cleaning is done regularly in short term rentals so choosing materials that are easily and quickly cleaned is also advisable. A house rehab may give you the option to create themed rooms, game rooms, or a spectacular back yard that guests will love hang out in. If the remodel results in a property that is special and unique, with a few scroll-stopping pictures, it will be sure to drive bookings.
The Duluth/Superior area has roughly 500 vacation rentals. On Grandma’s Marathon weekend, nearly all properties are booked. But, on days with less than 30% occupancy what will make guests book your property instead of one of the other 500? You must stand out from the crowd, and having a unique property will help you do just that. There are a lot of homes in the area that still retain their historic charm. Many vacationers have rarely or never been in homes full of 120-year-old woodwork, intricate archways, stained glass windows and coffered ceilings. Some older vacationers have lived in homes like these, but that may have been decades ago, so the opportunity to stay in a home reminiscent of their early years is one that they can’t pass up. But historic charm isn’t the only way that a property can stand out. Homes with amazing architecture or balconies with million-dollar views are irresistible to many travelers. Unconventional amenities like saunas, hot tubs, and home theatres will draw vacationers in. With the increased concern about our environment, sustainability features like an EV charger or solar system will be a bit hit with some guests. And don’t forget about the kids. Most would love to stay somewhere with an amazing backyard treehouse!
If your property doesn’t currently have any really unique features, create some! Put a golf simulator in the garage. Make the basement a kids play area. Create themed rooms, especially if they are kids rooms. It’s really not possible to describe what the typical features are that make a home unique. They are, after all, unique! You may have to think outside the box to come up with ways to make your property unique, and then, when run of the mill properties aren’t getting booked, yours still will!
Amenities and Extras
We want to provide our guests a great house, but we want to provide them an even greater experience! The amenities of a property can greatly impact that experience. Remember, most of your guests are here on vacation, and vacationers often want amenities and features they don’t have in their own home. In other words, people want to be spoiled when they are on vacation. A property with a sauna, a pool, or a large backyard deck can give guests that unforgettable experience. When inclement weather cancels plans, your home theatre or game room can provide your guests an enjoyable plan B. Just make sure these amenities are a good fit for your property though. A large pool in the back yard of a small two bedroom property with very close neighbors is probably not going to provide the ROI or guest experience that you desire. And it may result in unhappy neighbors. The larger and more expensive amenities typically provide a greater ROI when they are paired with larger and more upscale properties.
This doesn’t mean that smaller properties should ignore amenities though. There are also many simple and inexpensive amenities that should be added to any vacation home, but because these can be added to almost any property, I’ll save that discussion for a future article.
Bedroom and Bathroom Counts
Let’s not forget about the basics! While unique features and amenities are great attractors to those looking for a place to book, having enough bedrooms and bathrooms is an absolute must for most guests. The majority of vacation properties are 1, 2 or 3 bedroom places. Many vacationers are traveling with friends or extended families, creating strong demand for properties with 4 or more bedrooms, especially during the peak months of June through October. Because supply of these large homes is limited, the ROI is often better than it is with the more numerous 2- and 3-bedroom houses.
Bathroom count matters too. Duluth and Superior are full of old homes and while these old homes may have a lot of charm, they often don’t have a lot of bathrooms. Remodeling to provide an extra bathroom or two may give your home much more appeal to would-be vacationers. At least one bathroom per 4 guests is preferred and you should have at least one shower for every 6 guests. Vacationers at upscale properties will expect more bathrooms still.
Know Your Current Regulations
Of course, none of this matters if regulations prohibit you from operating your property as a vacation rental. Duluth, Two Harbors and many of the townships around those cities significantly restrict vacation rentals. Regulations are less stringent in Hermantown and across the river in Superior. However, regulations can change at any time, so it is always a good idea to check with your local jurisdiction.