Remember that the number one rule of real estate also applies to purchasing vacation rental properties and that is – location, location, location. If you have any hope of renting out your new home to vacationers, the property has to be located where people go to vacation. That's obvious, but what's not so obvious is the need to research the existing supply of vacation properties before investing in one of your own. Does the destination really need one more vacation rental or is there already an excess supply during the height of the season?
Also important to remember is that the property is a rental unit. You as the owner are responsible for covering the mortgage, the homeowner's insurance, the property taxes, and the utilities, PLUS you've got to furnish the place. Besides beds, sofas and televisions, your vacation rental needs pots, pans, dishes, glassware, appliances, blankets, sheets, silverware, and more. The property will need regular maintenance, too and don't forget about the emergency repairs!
And who's going to ensure your vacation rental stays occupied? You can enlist the assistance of a vacation rental agency, but this convenience won't be cheap. Typically, property management companies charge between 30-40%. Even if you're the "do-it-yourself" type, marketing your rental unit isn't always easy, especially if you live far away. Vacation rentals sites like Rentals2Remember.com and eVaca.com certainly help, but be prepared to do things like keep your calendar on these sites up to date, sending keys and alerting the maid service. Is paying a property management company $300-400 on a $1,000/week rental worthwhile – well, that is for you to decide.
Don't lose hope though! There is a lot of money to be made in vacation rentals as long as you approach this venture as you would any other business venture. You might not become rich, but if you do these things you should make some money and have a nice place to stay while you're on vacation.