When it comes to profitability, market exposure, and cost-effectiveness, where is the best place to buy a vacation rental? The vacation rental property market can differ quite wildly from area to area, and finding the right spot is crucial for growing your portfolio. Even within individual cities, the differences from zip code to zip code and neighborhood to neighborhood can be surprising.
When it comes to finding the best place to buy a vacation rental, we would argue that Western North Carolina might just be one of the places you should look first. Best places to buy a vacation rental in Western North Carolina include:
- Sapphire Valley
- Lake Glenville
- Lake Toxaway
Whether you’re buying a vacation home and hoping it can pay for itself or you’re looking for a rental income to improve your cash flow, Western North Carolina might be the place for you.
Why Western North Carolina?
When you choose to buy a vacation rental, which one makes the best choice for you depends on your priorities. Are you going to prioritize buying a place that suits your own tastes? Or are you going to buy a property that will really help make you a profit? Western North Carolina might be able to help you achieve both.
Here, we’ll take a closer look at three of the benefits that stand out in particular. Two of them define exactly what makes Western North Carolina so attractive to visitors, while the third covers a reason for investors to stick around and make some money in the state.
The Joy of All Four Seasons
One of the big advantages of North Carolina as a vacation spot is that it’s a perfectly suitable place no matter what season it is. The climate is mild throughout all four seasons, and usually not too extreme. The western mountains act as a shield against the bitterest of winters, keeping them short and mild. Meanwhile, summers are still nice and sunny without getting overly hot, making for perfect weather for outdoor adventures.
While it lacks some of the more extreme sorts of weather seen elsewhere in the sun belt or in the cold northern states, Western North Carolina can still experience some diverse weather. In the spring, the mountainsides turn green, beginning in April or even early May. The weather remains mild even as it gets into summer. The mountains and valleys keep things at a pleasant temperature range. Even when the occasional heatwave does hit, the forests and fresh springs give you plenty of places to cool off.
Fall starts to cool things down even further, but it’s not quite enough to call it “cold.” Furthermore, the forests in the region become a spectacular sight under the changing colors, perfect for hiking, biking, and a host of other outdoor activities that are popular. Winters are brief, sunnier and feel crisper than in other states. You can enjoy views of snow-dusted mountains without being buried in snow yourself since temperatures may reach the high forties and low fifties.
Hidden, but not Excluded
A Western North Carolina property can offer the best of both worlds and help you reach two major markets of tenants and vacationers with different tastes. Most of the area is nestled in the pristine beauty of the mountains, offering gorgeous vistas and the seclusion that many want from a getaway. However, you are also close to at least one of the cities, whether it’s Asheville, Franklin, Sylva, Dillsboro, or elsewhere. As such, your property can appeal to the crowd looking for a remote retreat and those looking for easy access to places that offer additional options including activities, restaurants, shopping, and entertainment.
The range of activities and attractions available to those staying in a Western North Carolina vacation rental property is diverse. Not only does that make it an excellent place to visit for yourself whenever you like, it’s also great for marketing purposes. Make sure you get the scoop on what’s nearby and choose your property with the help of a Landmark agent, as they know the area well.
The rugged nature of the land, with as many forests, mountains and valleys as it has, means there’s a lot to do in it. There are historic estates and gardens to visit, coves to explore, ski and snowboard parks, national parks, and state parks to enjoy.. For an example of what can be found in the nearby cities, Asheville has a lot to offer, such as the North Carolina Arboretum’s 434 acres of nature and garden trails, many local bookstores, art galleries, the Biltmore, and more.
Flat Tax Benefit
Western North Carolina is an area that makes a lot of sense financially if you’re a state resident. One of the reasons is that the state has a flat-rate income tax system. All state resident taxpayers pay the same rate no matter what they earn, which is beneficial for high-earners who keep more of what they might otherwise have to pay. That means more income you can put back into your investments. North Carolina is one of nine states that have a flat income tax rate, so it’s something to consider.
The effective tax rate does still mean that higher earners have to pay more than lower-income earners. However, the flat-rate income tax has other benefits for a property investor. It completely eliminates the confusion of having to file within a progressive tax system and cuts down on both the effort and money spent on tax preparation costs. It’s worth noting that the flat tax rate doesn’t always apply to unearned income, however, or the capital gains tax from sales of property and other assets, as well as interest from other investments.
The Move Away From Major Metropolitan Areas
You’re not the only one looking at Western North Carolina as the best place to buy a vacation rental. Trends show that a growing number of tenants and short-term vacation renters are interested in more secluded, relaxing locations in rural or countryside environments. Many vacationers still prefer having a city nearby, but more prefer to visit them rather than stay in them.
This change to how we like to vacation could partly be because we are moving to cities more and more to find places to live and work. Approximately 68% of the world’s population is expected to live in urban areas by 2050, and that percentage is expected to climb.
Away from major metropolitan areas, however, rural environments, such as those found in the mountains and woods of Western North Carolina, offer a real retreat. The peace and quiet of a tranquil secluded environment, the ability to see and explore nature, and the chance to simply slow down is something that more and more vacationers are seeking. Of course, great rental property in Western North Carolina keeps them just close enough to the city for all the conveniences offered there, too.
When it comes to finding that nature retreat, there’s plenty that Western North Carolina offers that you simply may not be able to find in other areas of the country. Hiking, biking, and fishing are only a few examples.
Tax Implications for Buying a Vacation Rental
A vacation home in North Carolina could offer more tax benefits than you might think. If you’re liable to be taxed on your rental income, like the vast majority of people are, then you may be able to claim a range of tax deductions. Some of these are obvious, designed to help cover the costs of running, maintaining, and investing in your rental property. However, they can also cover some personal expenses, building wear and tear, and so on. In some cases, these deductions may even be able to cancel out your rental income tax.
One of the biggest tax benefits of buying a vacation rental is that you can deduct depreciation. All property loses value over time, with annual depreciation happening for 27.5 years for residential rentals. With a vacation rental, you’re allowed to accept an amount of rent up to the expected annual depreciation without being taxed. Not many property investments offer you anything to help you cope with the burden of depreciation, so it’s an opportunity worth considering. Other expenses that could be deducted include fees paid to rental managers, insurance premiums, mortgage interest, utilities, and property taxes. Be sure to consult with an accountant to learn more.
It’s also important to understand that there are three types of vacation rental property taxes, each of which should be considered alongside the other expenses that come with managing a rental. Here, we’ll take a closer look at them:
Property taxes: The property tax can vary to a significant degree, even within Western North Carolina. Macon,Transylvania, and Jackson have some of the lowest property tax rates in the state. Overall, North Carolina has an average effective property tax rate of 0.85%, making it around 30th when ranked against other states. Since property taxes are deductible, it’s always wise to have an accountant on your side who can help you find ways to manage the tax you owe.
Rental income taxes: For the days that you rent out your property, you must pay rental income taxes. This only applies for a property that is rented out for 15 or more days. If there is a year in which you choose not to rent your property, whether it’s to renovate it, use it yourself, or for any other reason, you don’t have to pay any rental income tax. Otherwise, North Carolina’s regular flat income tax (currently at 5.499%) applies.
Occupancy taxes: Also known as a hotel tax or sales tax. Most vacation rental homeowners must collect and file this tax on short-term rentals. They can be filed monthly or quarterly, at the current sales tax rate of 4.75%. Other city and county taxes also may apply. Some guests may be exempt from paying sales tax, including full-time students and active military personnel who are in the community under orders. Guests must provide documentation proving their exemption prior to check-in. Since the rules for occupancy tax can be complicated, it’s recommended that you get in touch with the North Carolina Department of Revenue for details specific to your case.
Best Time to Buy a House for Tax Purposes
When it comes to taking advantage of property investment opportunities, the when matters as much as the where. Finding the best vacation destinations to buy a slice of is important, so is timing your purchase for tax purposes in order to help your cash flow.
The best way to time your house purchase is to do it when you’re able to maximize your deductions. Here are a few ways you can figure which time of the year is the best option for you:
- Take a look at your tax liabilities for the current tax year with your accountant or preparer. They can help you gauge whether it’s best to take additional deductions this tax year or next year.
- Know which items are tax-deductible and which are added to the value of the property. If you’re aiming to increase deductions for next year, then closing in January may be best.
- Prepaid and prorated interest are deductible in the year paid and charged from the date of the closing until the end of the period covered by your initial mortgage payment. Fitting this period into a single tax year as best possible can help you maximize your deductions.
Taxes aren’t the only reason to consider timing your buy. If you’re hoping to take advantage of the peak season, you want to buy before that comes around, while giving yourself enough time to prepare the property for tenants. Of course, in Western North Carolina, a vacation home could be a year-round money-maker, but it still pays to know when you can expect a healthy market.
You might find more properties available on the market in April, but May and June are also popular months if you’re looking for the biggest selection. That does mean you may be dealing with higher prices. For lower prices, you may want to look throughout fall and try to buy in late fall or early winter.
Selecting the Right Vacation Rental
You may be inclined to think that choosing the right vacation property is much the same as buying a house to use as a residence. However, that’s not the case at all. When buying your own home, personal preference is likely to overrule all other factors. For vacation rentals, it’s all about identifying homes that will be a good investment. Here are a few tips for doing just that:
1. Some of the best vacation rentals will be a little out of the way. When choosing one, look at how accessible it is from major roadways and how close it is to the nearest town. Being able to point to some nearby attractions can help when advertising the home.
2. Look at the real estate metrics for any area that catches your eye. Online, you can find profit calculators, heat maps showing the popularity of certain areas, and more that can help you find signs of growth in nearby cities or towns. If there is recent economic growth, population growth, or construction, this is a good sign for both traditional and vacation rental profitability. The value of the property is also likely to climb over time.
3. Keep in mind any costs associated with the property. Are there are homeowner association fees, greater insurance costs, and will you have to consider expenses for marketing or rental management?
4. Get some local help when choosing a vacation rental property. The internet might help you learn about nearby attractions, amenities, and market data, but having someone with experience living in the area you’re looking at can be helpful. Local real estate agents can highlight factors that are easy to miss.
5. Remember to take a closer look at the kitchen and bathrooms. These are the most relevant rooms in any vacation home. Updated, well-equipped kitchen and bathrooms may save you the effort and expenseof renovating.
6. Buy only what you can afford. If you have to finance your vacation rental, there are plenty of mortgage calculators that could help you get a better idea of what you’re likely to pay in homeowner costs alone. Again, keep in mind the other associated costs mentioned above.
7. Have a good idea of the weather is like during all four seasons. As mentioned, the climate in Western North Carolina is pretty mild throughout the year, but it can vary. You need to know how each season affects the property, the community, and the activities available. In most cases, a Western North Carolina property is perfect for renting year-round, but it never hurts to learn as much as you can about the area.
Some may consider creating the perfect vacation home by purchasing land and building on it. As appealing as the idea can be, it can also be challenging and time-consuming. There are local building restrictions to consider and you have to work with contractors, homeowner associations, and more. Furthermore, building a house rarely comes in under budget. To control costs, manage an easier transition to being a vacation homeowner, and to start making money sooner rather than later, buying is usually more efficient. Just be sure you do it with the help of a local, reliable agency that can find a property that matches everything you want from your vacation home.
Maximizing ROI For Your Vacation Rental
When you dip into the world of the vacation rental, you better have a plan at the ready. There is a lot of revenue to get excited about, but you’re not likely to see as much as you hope unless you take active steps to maximize your return on investment. Unless you’re savvy or lucky enough to find a property in an emerging area before anyone else, you could be jumping into a competitive market. Here are a few ways to make sure you stand out and make the profits that come with doing so:
- Make sure your online listings and advertising are straightforward, accurate, and up to date. Let the guests know what they can expect, how many rooms, bathrooms, kitchen details, and about the outdoors.
- If you’re listing on multiple websites, be sure you fully understand the formatting styles of those websites. You may have to rearrange or rewrite your descriptions to fit the formats.
- Invest in high-quality photography and have photos of each room. The photos must be well lit and should capture as much of the room as possible, showing where the door is and where the light comes from. Add a detailed floor plan of the home as well.
- Keep your booking calendar updated and make it accessible online. Your guests should have an easy, welcoming experience long before they set foot in your front door, and that starts with making bookings easy and transparent.
- Invest in a good outdoor living space. Adding livable spaces such as patios and decks gives your guests the opportunity to enjoy their surroundings. Don’t forget to clean and maintain the outdoor area, including landscaping and outdoor furniture. Other great outdoor additions to consider include hot tubs and fire pits. Position them to make the most of the surrounding mountain views and you’ll get plenty of visitors.
- Focus on marketing the value of the property and ensure that your guests understand that value outweighs price. Highlight the quality and comfort of the interior design, the convenience of services, the available attractions and activities, and the fantastic guest experience they can expect.
- As marketing plays a big role in helping you achieve the kind of return on investment you want, you should make an effort to advertise everywhere you can. Smaller sites, bigger sites, older sites, Facebook, Twitter, anywhere you can advertise that adds a potential point of contact for guests.
- You should also consider looking at influencers, such as bloggers and travel writers who can give your property some press attention. Just beware of smaller would-be influencers who will try to persuade you to give them a free stay even if they don’t have the readership numbers to justify it.
- Be available. Potential guests are going to be researching your property and may have questions. Provide an email address or a customer form they can fill out, or hire a rental management team to handle inquiries. Having a toll-free phone number they can call or leave a message with can increase your overall bookings by up to 18%.
- Accept bookings online. More are doing it these days, either directly through their own website or through listing sites, such as Airbnb. Business is increasingly going digital and going online, and vacation rentals are no different. The convenience and accessibility the internet offers appeals to a generation that would rather do things with a click than a phone call. Of course, you should provide access with both.
- Provide a professional, reliable payment procedure. Rather than asking your guests to cut a check or pay in cash, having a PayPal account on your website or a card reader is much more convenient to most consumers. Or you can send online invoices.
- If your guests have a great time, encourage them to send you their review. Plenty of vacation rentals still have the traditional, sentimental guest book left in the front hall. Take it online and you can use all those positive comments as a marketing tool.
- Finally, as a vacation rental owner, you must be aware of the laws that govern this business. Learn about the North Carolina Vacation Rental Act.
Ready to Find the Perfect Vacation Rental?
When it comes to finding the best place to buy a vacation rental, Landmark Realty Group is more than happy to help you find the North Carolina property that could be an excellent investment and a personal retreat. We bring real-life experience in the area, plenty of expertise in real estate, and a history of helping investors find properties that can earn income.
We have detailed, thorough listings for a wide range of areas throughout North Carolina available on our website. Get in touch with us at 888.743.0510 and we’ll be glad to answer your questions and help you start finding the perfect vacation rental.