⚠️ Disclaimer: This article is for informational purposes only and is not financial or investment advice. Real estate investing carries risks. Always do your own research and consult professionals before buying a property.
Vacation rentals are usually located in stunning locations. They can be unique properties that make money every month. They allow you, as an investor or owner, to travel there, visit there, and live there yourself if you ever want to.
The first step is to buy a vacation rental property in Florida or another state. Research needs to be done before even thinking about buying one.
Step 1: Conducting Essential Research
What Research Is Needed Before Buying a Vacation Rental Property in Florida?
Finding the Best Areas
Search on Google for the best places to buy a vacation rental property in Florida.
Look at multiple publications and see which properties or areas appear in the top 10. Some areas within the United States have started to become more popular than others.
Using AIRDNA for Market Data
Once areas are identified, compare them to the data found on AIRDNA — a site that compiles data for short-term vacation rental properties in one place.
AIRDNA provides three main metrics to look.
- Occupancy rate
- Average nightly rate
- Average monthly income
Another important factor is RevPAR (Revenue Per Available Rental).
It’s calculated by dividing the total revenue earned by the number of available listings and is commonly used in the hotel and hospitality industries.
Understanding Regulations
Regulations are a critical factor.
Many cities and counties are discussing limits on how many people can stay in a vacation rental relative to bedroom count. This is often tied to septic and sewer capacity.
For example, they may allow three people per bedroom.
Demand, Seasonality, and Supply
When researching demand, consider:
- Proximity to attractions
- Number of foreign and domestic tourists each year
For instance, about 11–12 million people visit the Smoky Mountains National Park every year, which ensures a steady flow of potential guests.
Also, consider seasonality. You can’t assume that every month will perform like the best month — factor in the off-peak seasons too.
Finally, evaluate market saturation. Too much supply in an area can make it challenging to maintain high occupancy.
Property Size and Age
Research what property size (bedrooms and bathrooms) typically rents best in your target market.
Also, consider the age of the property:
- Older homes often require more yearly maintenance.
- Newer properties may have fewer maintenance costs initially.
Lastly, define your guest profile — know who you want to attract and cater to.
Financial Analysis
Here’s a general rule of thumb for vacation rentals and short-term rental income.
The 10% Rule for Income
The annual income should be at least 10% of the purchase price.
Example:
- If buying a house for $500,000, it should generate at least $50,000 per year in income.
Other benchmarks:
- 15% of the purchase price → A pretty good deal
- 20% of the purchase price → An excellent (and rare) opportunity
Also, consider appreciation — properties in high-demand areas tend to gain value faster.
In-Depth Financial Analysis
The 10% rule is a quick check.
For a full analysis, use a short-term rental calculator or vacation rental calculator.
Plug in:
- Insurance
- Taxes
- Expenses
- Utilities
- Maintenance
- Capital costs
The calculator will help determine whether it’s a profitable deal.
Financing Your Vacation Rental
Traditional Loans
If the property is an investment property, traditional banks usually require a 20–30% down payment.
However, if you present it as a second home, you may only need 10% down.
Traditional financing involves more paperwork and proof of financial stability.
DSCR Loans
DSCR stands for Debt Service Coverage Ratio.
These loans are designed for investment or short-term rental properties.
Instead of looking at your personal income, lenders evaluate:
- The cash flow of the property
- The property’s ability to cover the debt service
Key points:
- Typically require 15% down
- Need at least 12 months of rental history
- No personal income verification required
Alternative Financing Strategies
If you don’t have the money to buy a vacation rental outright, consider these options:
1. Partnering with Investors
Find a partner willing to invest if the property offers a strong cash-on-cash return (20% or more).
2. Airbnb Arbitrage
This method lets you start a short-term rental business without actually buying a property. It’s a go-to strategy for investors who want to build cash flow while keeping startup costs low.
Learn the specific steps for this model in Florida by reading our guide, “How to Start an Airbnb Business in Florida.“
Here’s the basic process:
- Find a long-term rental property (like a standard apartment) where the owner is open to you subletting it as a short-term rental.
- Get clear, written permission from the property owner or management company to list the unit on platforms like Airbnb.
- Furnish and market the unit to attract nightly bookings.
- Collect the revenue. Ideally, the income you earn from bookings will be more than your monthly lease and expenses, giving you a positive cash flow.
Important things to check first:
- Your Lease Agreement: Does it explicitly prohibit subletting? Many do.
- Local Ordinances: Check your city’s laws. Many restrict short-term rentals in properties where the owner doesn’t live.
- HOA or Condo Rules: These associations often have their own rules that can ban short-term rentals entirely.
By doing your research and following these steps, this “rental arbitrage” strategy can be a scalable, legal, and profitable business, especially if you partner with a co-host or get professional guidance.
Conclusion
Buying a vacation rental property in Florida isn’t something you jump into without a plan.
You must:
- Research the market
- Run the numbers
- Understand local rules and guest demand
There are multiple ways to enter the vacation rental market — from purchasing your own property to leveraging creative financing or Airbnb arbitrage.
With the right research and financial strategy, vacation rentals can be both a profitable investment and a personal getaway.
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