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Globally, the vacation rental market reached a value of $ 74.64 billion in 2021 , according to Grand View Research. And while the pandemic hit the travel industry hard, over a quarter of Americans plan to travel through the end of the year, per Destination Analysts. This makes a vacation rental a smart investment. However, there’s a lot to consider before jumping into the vacation rental business. To help, Norris Lake Living outlines a few essential steps it takes when getting into the real estate investment game.

Choose Your Location

Vacation rentals rely heavily on location. Buying in the right area increases your income potential. Look for target neighborhoods close to attractions or public transportation with low crime rates. You can consider buying and renting out a vacation home in Lake Norris, for example. In addition to the allure of the area’s natural beauty, Knoxville is a short drive away and Nashville is an easy day trip. Choose an area that makes those spots easily accessible.

Understand the Purchase Process

If you're financing the rental property, expect to have a larger down payment than when buying a house as your primary residence. Investment property financing often requires at least a 15% down payment. However, it may be 20% or more, depending on your credit score and the type of property. If you don't have that much money on hand, a second mortgage or home equity loan on your primary residence may help with the funding.

Make Improvements

Consider your ideal renters when remodeling or updating the property. If you're targeting families, a large, updated kitchen and multiple bathrooms are ideal. If you're targeting young, single vacationers, you might focus on fun entertainment spaces. If you want ideas on how to make a rental stand out, check out comparable homes in the area to see what sort of updates are popular. Handle necessary repairs to make the property safe, then make cosmetic updates so it photographs well for rental listings.

Decide on Your Management Style

Determine if you want to manage the rental yourself or hire a property management company, which can cost between 10% and 50% of your monthly rental income, according to iGMS. Hiring a management company can reduce your time commitment, but you can lose a large part of the rental income to the fees.

Hire Professional Help

Consider hiring help to learn from professionals as you venture into rental property investing. Some professionals to consider hiring include:

• Real estate agent. Find an agent with experience in rental properties.

• Contractors. Choose licensed contractors to help with specialty work, such as electrical or plumbing.

• Lawyer. Legal advice can help you form your investment company properly.

• Accountant or financial advisor. Financial professionals can guide you on how much you should invest and how to manage the property after buying it.

Consider Unexpected Costs

Investing in a rental property doesn't stop at the cost of the home. Research and budget for unexpected expenses, such as:

• Repairs if something breaks

• High utility bills from guests who crank the air or leave lights on all the time

• Marketing costs to keep the rental booked

•Landlord insurance , a must for protecting yourself

• Furnishings

• Landscaping

Form an LLC

Treating your investment as a business is easier when you create an LLC. This business structure minimizes personal liability and gives you tax advantages. To form an LLC in Tennessee, you can file your articles of organization online. If you don't feel comfortable completing the paperwork, hire a lawyer or use a formation service to save on costs.

Master Real Estate Investing

Doing research and having a detailed plan can help you enter vacation real estate investing successfully. When you choose the ideal location, plan carefully for what you can afford and what sort of updates are worth making and set up shop as a legitimate business, you pave the way for a better start.

Thinking of buying a lake house or lake property on Norris Lake? Team up with the real estate pros at Norris Lake Living today by calling (800) 485-1290!

Are you in the market for lake homes or lake property real estate on Norris Lake? Norris Lake Living has been around since 2005, helping home buyers in search of their dream vacation homes, lake condos and lake lots for sale on Norris Lake!