Dilemma Short Term Vacation Rental Property or Long Term Rental

[Atanas Petrov]

Hello everyone,

I've been deliberating whether to purchase a vacation home, with the intention to run it as a short term rental preferably within 2-5 hours from Los Angeles where I live.  I can not identify a vacation rental market where the word "saturation" is not mentioned which make me insecure whether or not the property will positively cashflow, considering it's a decent house with nice touches, furniture etc.   In other words my biggest fear is to put a 20% downpayment may be less, decorate and furnish the place nicely which is easily 20k if it's a 3 bedroom 2 bath,  push it on AIR BNB and VRBO, and then not cashflow positively a few months later.  I know it will take around 2 months to set up the place and get the permits for short term rental which I can certainly cover financially, and pay the mortgage for up to 4-6 months if necessary. 

Would any of you vacation rental investors say just go for it, and would you recommend markets that are relatively consistent and would cashflow, and it's not only 1 season market like some of the national parks.

I do have 2 single family long term rentals in Los Angeles, a condo, and currently building a 1200 sq ft ADU on one of the properties which will cashflow very very well after it's complete. So I have some experience with long term rentals, tenants, and all the small and big issues that comes with that.

I could repeat the process of buying another single family home in LA, rent it out right a way and I will be able cashflow 200-300$ may be more with 20% downpayment with no or minor improvements, talking on about a 1 million price tag of a home.  Because of my experience with long term rentals, I would encourage anyone to get into real estate, weather it's house hacking which I have done for the past 6 years, or buying a house and renting it out, perhaps duplexes,  of course multifamily I would say just do it, start anywhere you can.  Yet when I have to overcome my fear of buying a vacation rental I'm very hesitant and indecisive. 

What do you think?  Are vacation rentals a good strategy to expand outside of long term rentals for better cashflow and appreciate with extra work, or a safer equity long term rental approach.

Thank you in advance for any opinions