With the current growth of inflation, most people are looking for a way to generate additional income that will enable them to live comfortably. Though there are several alternatives, getting a vacation rental can be a rewarding option. More people are choosing vacation rentals for their accommodations as they provide more efficient spaces to gather with loved ones and create more personalized experiences to remember.

As daily costs continue to rise, there is a lot of conversation that the country might be headed toward a recession. The Federal Reserve has dramatically raised interest rates to combat the rising inflation, and this affects many economic sectors but it hits the housing market the hardest as it’s the most interest-rate sensitive segment of the economy.

With a looming recession, you might wonder whether your best time to invest in a vacation rental is now. Below is some information to answer this question.

Market availability & property financing

With the uncertainty that comes with the looming recession along with high-interest rates, buyer demand has gone down since the pandemic boom.  Fewer buyers in the market mean less competition for homes, and less competition means sellers are more likely to reduce listing prices. However, the overall inventory in the housing market remains limited which has kept home prices up. Potential homebuyers stand to secure a home by focusing on smaller markets, being creative with their offers along with having a significant down payment.

For many people, mortgage rates near 7% simply mean that borrowing costs are too high. At the same time, home prices are still 7.5% higher than they were a year ago, according to data from real estate brokerage Redfin. With an increase in borrowing costs, there has been a decrease in buyer demand. Fewer buyers in the market mean less competition for homes, and less competition means sellers should be more likely to cut house list prices.

To reduce their risk, banks will often only lend mortgages to people with high credit scores, stable jobs, and high down payments. Pay attention to the interest rates if you need financing for your property purchase. These might be high at the start of a recession but drop as the Federal Reserve encourages borrowing and spending by adjusting its rate policy.

The timing of your borrowing significantly affects the cost of your mortgage during a recession. If you need a loan, it is prudent to borrow as the recession progresses. So if you’re in the market, now could be a great time to find your revenue-generating vacation rental home.

The possibilities for revenue-generating properties

Short-term rental properties that are revenue-generating are among the best options to weather a recession. You might be surprised at how many people are looking for vacation rentals despite being in a recession. Affordability will still be top of mind for travelers, but the quality of the experience and accommodations will be their main driver.  Plus, having a short-term lease in your vacation rental will allow you to quickly increase your rent to match market rates when the economy improves.

You might be drawing lessons on whether or not to buy a vacation rental in the looming recession from past recessions like the one in 2008. Nonetheless, the coming downturn seems different because it was caused by a pandemic rather than the financial sector. Hence, the economy is likely to start recovering when the pandemic is under control. Moreover, unlike in past recessions, the unemployment rate is low, and there is steady consumer consumption.

It takes more than securing an ideal vacation rental to set you up for success and you’ll need a property manager to guide your investment for the highest returns. This is where Gather Vacations steps in.  With local property managers, our team can provide a strong advantage in building relationships with area businesses, resources, and services. And this means we provide the best experience possible to our homeowners and their guests.

But Elite Pacific by Gather also has a national team that delivers best-in-class strategy and execution in sales, marketing, technology, pricing, and finance. National advantage gives us insights into rates and trends within the luxury travel industry that we can use to your advantage to ensure maximum return on your investment while providing the best care and attention to your vacation home.  Your property will receive the best care and outstanding revenue production, plus we’re creating happy memories for your guests. At Gather, happy homeowners and happy guests are our top goals.