An HGTV star shares 7 tips to keep in mind when buying a vacation home for rental income

Use a financial equation to figure out whether your new place is worth it. If you want to know whether a vacation home is worth its price, there's one equation you should follow. Look at the total monthly costs of the property — including the price of rent, utilities, renovations, mortgage, and taxes — and see if you can make what you'd spend on a month by renting the property for a week. If you're able to make enough to cover the month's costs by renting for a single week, you're in a good place. There are typically 12 weeks in the high renting season, so you want to ensure that you're making enough in the high periods to make up for the low ones. Keep distance in mind. Where a vacation home is located will also affect how much you can charge for rent. McGillivray recommends purchasing your first vacation home in a location that is between two and two-and-a-half hours away from where you live, so you can be close enough to access it regularly. You also want to ensure that the property is at least a few hours from an urban center so that those renting the property can have easy access to various amenities. Consider destinations that have year-round appeal. According to McGillivray, some destinations tend to stay popular for longer periods of time, usually because they have warm weather, lower prices, and close proximity to water. For these reasons, McGillivray finds that destinations like Florida and Arizona are often the most popular. Finally, the direction a home faces — whether it is turned towards or away from the sun — can also affect its pricing, depending on the renters' preferences. Spend the money on renovations. Renovations are one area you should definitely be spending on when it comes to your vacation home. The caliber of the space will equal the caliber of the rent, McGillivray said. When considering renovations, McGillivray recommends creating plenty of open spaces, to make it simpler to accommodate more people in the home. Fellow HGTV star Marnie Oursler told Business Insider where to spend your renovation budget for the most impact (and the biggest renovation mistake people make).Get everything in writing. When it's time to rent your home, McGillivray's first point of advice is to always have a contract drawn up. Thankfully, short-term rentals have fewer rules and often allow the tenant to request the full rent upfront, according to McGillivray. If you're drawing up a longer term rental, stay away from cases where the renter writes a check for more than the rent amount and requests a money wire back, as that can often be indicative of a scam.Take advantage of deposits. A common issue that arises with renting vacation homes is the damage that careless renters cause. To avoid this, McGillivray suggests working in both a cleaning and damage deposit into the cost of the weekly rent, so that you can make sure to avoid paying for damages later on. McGillivray also recommends that you always ask for a reference before allowing someone to rent the property. Go for the magic number. You don't have to stop at one vacation home. In fact, when it comes to maximizing profits and having vacation homes assist in financial success down the line, McGillivray finds that three is a good number. With three properties, the rental process is not too time-consuming, but you can still make enough to reap the financial rewards.