Vacation Rental Economic Market Update: Is Now the Time For an Investment Decision?

With the relaxation of lockdowns across the country, more and more people are ready to plan their first vacation in a very long time. This reality has led many prospective real estate investors to question: Is now the time to get into the vacation rental market?

Costs Are Still High

One factor hesitant investors point to is tough to ignore: housing of all kinds is expensive right now. Post-pandemic life decisions, rock-bottom interest rates, shortages of building materials, and a growing population of young families looking to upgrade their living space have led to a historic crunch in the housing market.

Properties suited for the vacation rental market are not immune.

Owners of vacation rental properties in need of some TLC are likely to pay higher premiums for labor as well as most building materials, whether natural (like lumber) or synthetic (such as PVC or composite decking materials). This has made maintaining adequate margins more difficult for both new construction and remodeling vacation rental projects alike.

However, Demand is Also High

On the other hand, demand for vacation rentals is also exploding.  Airfare, hotels, Airbnb, car rentals, you name it. We are getting back to normal, and the first thing on many people’s minds is where to travel next.

This means that, while construction and maintenance costs may have inflated in recent months, so too have potential long-term profits for savvy investors in the vacation rental market. Even with the surge in demand, the travel and tourism industry is still seeing only a fraction of the same activity as pre-pandemic levels. It’s a safe bet that these trends will continue as the population returns to our ordinary leisure activities.

Weigh Your Options

While the recent squeezes in the housing and construction supply markets may cause hesitancy in budget-conscious vacation rental investors, it’s also important to observe the signals in the travel and leisure industry. Purchasing or rehabbing a desirable vacation rental now may pay dividends well into the future.