If you are thinking about investing in vacation rentals, is it worthwhile looking outside of major urban centres? This question is one that many budding investors need to ask at some point. Choosing the best area for vacation rental investment is no small feat, after all.
From a profit point of view, it makes sense to focus on areas that have a high tourism rate. Areas that receive regular travel numbers over the course of the year also often have rentals with higher rates potential. Areas a bit further off the beaten path do not always receive a large number of visitors, but also have the disadvantage of reduced rates potential. From a lifestyle point of view however, the decision is not always cut and dried. If you plan to invest purely to bring in a small amount of extra income, then it might be worthwhile consider a country destination for your investment property.
To help you make an informed decision, we’re taking a closer look at the ups and downs of investing in vacation rentals in remote areas.
Investing in Vacation Rentals Outside of Urban Hubs
There are many, many options to consider for areas, whether you are investing in vacation rentals in the very heart of a city such as Cape Town, or you are considering an area outside of town. Some important things to keep in mind include the following:
- Property purchase prices are often higher in urban centres. That does not mean you will not be able to find reasonable options however. It simply means that you will need to budget accordingly. You could find a smaller apartment within the R1 to R2 million range in the Inner City. For that price, you could find a veritable mansion out in a small town. When taking the purchase price into account, remember to think about long term growth potential. For that million or two, what sort of return could you realistically expect? This leads us onto the next point…
- Rental income is generally far higher in urban centres. You may need to put down more for your initial investment, but the good thing about investing in vacation rentals within popular main centres is that the returns are almost always worthwhile. Generally speaking, rates are lower within small towns and lesser known travel areas. Do your homework to look at average accommodation rates within major areas in Cape Town, such as Camps Bay, Clifton, the Bo Kaap, CBD and Waterfront. Then compare those with average rates for a smaller town such as George, Hermanus, Cederberg or Oudsthoorn. Even the outlying suburbs of Cape Town are considered more affordable compared to high-tourism areas.
- Keeping your property booked can get more challenging outside of urban areas. Some areas are busy during specific seasons, such as Hermanus during Whale Season, for example. The busy summer months may be booked up, but once winter begins, will your bookings remain steady? In Cape Town, winter tourism is showing a slow but steady increase. While not as busy as the summer months, there is enough for visitors to do all year around that off-season travel opportunities abound in urban areas. This also allows you to fine-tune your marketing efforts to reach larger travel markets – family, honeymoon, business and general leisure markets all have different needs and travel at different times of the year.
If you do decide to invest in a quieter area, it is important to be aware of the challenges that you may face. If on the other hand, you are serious about investing in vacation rentals, major tourist hubs will always be a good choice.
The best way to ensure that you get solid returns on your investment is to consider professional vacation rental management from an experienced manager that knows how to position your rental for maximum growth. To find out more about the Totalstay approach, contact us today!