So you've decided that you're open to investing in a vacation rental as an investment property- but what now? Well, some of the first pieces of info that you'll need to gather is information on the real estate market in the vacation area that interests you, as well as what the estimated income and expenses will be for an average property.

So let's start out by looking at some data points to consider when analyzing the stability of different real estate markets (these tips go for any market, not just vacation areas.) First you'll need to speak with a Realtor in the area who can give you certain MLS data. What you are looking for is:

- The average days on the market for homes in that area over a six-month period
- The list price (what the home is listed for) to sale price (what it sold for)
- The number of homes currently on the MLS in that area

*All of this information you will want to see for a consecutive period of six months (give or take.)

The reason that you will want to see a six month or so period of time, is so that you can see if there are any trends in the market. You will also want to make sure that the same data points are being tracked, such as price range and area of homes. Data that is outside of these points can dramatically skew your results, so review them carefully. If even in doubt of what you are looking at, ask your Realtor.

So now you'll need to analyze this data. Are there more homes on the MLS now then there were 6 months ago? More homes on the MLS can mean that supply has flooded demand, which generally leads to more of a buyer's market. This is helpful information for you to know, as it may impact the offer that you make.

Have the average days on the market decreased or increased? If the average days on the market have increased it may be a sign that the real estate cycle in that area is turning into more of a buyer's market as properties are sitting longer. Are sellers getting close to their asking price for their home? This number generally appears in the form of a percentage such as 93.5%. What this means is that of the homes in the price range that you had your Realtor research, the sellers are getting 93.5% of their asking price. If this number starts dropping every month, then this is also another signal that it is a buyer's market.

As a general rule of thumb when considering if a rental property is a good investment or not, a property should ideally be able to cash flow (meaning that your rental income should cover your mortgage and all other expenses associated with the property) as well be in an area that is appreciating. If pressed to chose one or the other, choose a property that cash flows, as we all know that the real market fluctuates, and if it does, you want to make sure that the property can support itself.

If you are looking at all possibilities, then here are some basic facts you'll need to gather first:

- When is peak season?
- How long is peak season?
- What are the rental rates for comparable properties out there?
- How many days a month (and days a year) are comparable properties renting?
- What are the upkeep, taxes and utility costs of the property?

In a nutshell, your goal is to try to gather as much info on your projected income and as much info on your expected expenses in order to determine if the property will make a solid (money making) investment.