Is making more money on your New Year’s Resolutions List? If so, then it’s time to start planning your investment strategy now in order to be on your way to becoming rich before the end of 2019. In case you are looking for the best investment strategy to make extra money, consider real estate investing.
However, investing in real estate is a very broad and vague concept. To be more specific, how about buying a vacation home in 2019? By investing in a second home, you not only get a place where to spend your holidays but also a rental property to make money in real estate the rest of the year.
In this article, we will discuss the benefits of buying a vacation home to rent out which make it the best real estate investment strategy for both beginner and experienced investors. Then, we will show you how to find the best places to buy a vacation rental home.
Last but not least, we will list for you the 10 top locations for buying a vacation home in the US real estate market for maximum return on investment.
Ready to start making money in real estate? Let’s go.
What Are the Advantages of Investing in a Vacation Home?
Buying a second home to rent out on short-term basis comes with many benefits for real estate investors. Here are the most important ones:
- Buying a vacation home serves a dual purpose. First, you can spend holidays with your family and friends in a homey environment in your favorite place in the US, away from the expensive, noisy, and often unattractive hotels. After all, the suboptimal experience which hotels frequently provide at ridiculously high prices has driven the recent growth in the short-term rentals industry through platforms such as Airbnb and others. Second, you can rent out your vacation home and make money as a real estate investor for the rest of the year, when you live in your primary home or when you travel abroad with the rental income you will be making from your vacation rental. That’s a sweet deal, right?
- Buying a vacation rental home constitutes a low-risk investment strategy. All investors – whether real estate or others – look for low-risk opportunities, and investing in a second home to rent out on Airbnb is exactly this. In order to make a profitable investment, you have to conduct rental real estate market analysis as well as investment property analysis in order to assure high rental income, high occupancy rate, and ultimately high return on investment. However, even if for some unexpected reason you end up with a low occupancy rate (which you should be able to avoid if you use the best real estate investment tools), this is your second home in any case. You can always switch your rental strategy and try operating it as a traditional rental, also known as a long-term rental. If this doesn’t work out, you can keep the property for your own purposes to spend time there with your beloved ones. Meanwhile, real estate appreciation will work its magic on your property until you decide the time has come to sell it, for a high long-term return on investment. Or worse goes to worse, you sell it right away and use the money for a down payment on a new investment property. See how buying a vacation home is a safe real estate investment?
- Buying and owning a vacation home to rent out comes with tax benefits. As a real estate investor, you should use every available opportunity to increase your cash flow and make more money. Tax deductions are one way to do that, which makes them a major advantage of investing in a vacation home rental. Depending on how many days a year you spend in your second home and how many days a year you rent it out for, you can claim different tax deductions. Before you decide to buy your first vacation home though, you should study the relevant legislation well to make sure you take full advantage of the possibilities, without breaking any tax laws, of course. Moreover, consider consulting with a real estate attorney as the regulations might be somewhat complicated.
The combination of dual purpose, low-risk, and tax benefits sounds quite appealing for anyone thinking about investing in a second home, no? Since you are already convinced of why you should invest in a vacation rental in 2019, let’s have a look at what makes for the best places for buying a vacation home and how to find them.
How Can You Identify the Best Places for Buying a Vacation Home?
Investing in a vacation home to rent out is a form of real estate investing, after all, so it’s governed by the same principles as any other rental property investment. More specifically, in this case you will be renting out your investment property on a short-term basis, so you should apply the rules which direct decisions related to Airbnb rental properties (rather than traditional rental properties).
So, here are the most important factors you should look at in a location to identify it as a best place for buying a vacation home:
- High rental demand for Airbnb rentals: Whether a place is a top tourist destination or a busy business hub, it has to draw short-term rental demand in order to be a good choice for buying a vacation home. This is the only way to secure a high Airbnb occupancy rate, a determining factor for the success of your vacation rental home business.
- High Airbnb rental income: If you choose a hot Airbnb destination to invest in, you will get not only a high occupancy rate but also a high nightly rate. This will translate into a high Airbnb rental income – the goal of any real estate investor.
- Affordable property prices: Even though investing in rental properties comes with a wide range of financing options, it is always better to go for a market with reasonable and affordable property prices. The property sale price is one of the main factors that will determine your return on investment, in terms of both cap rate and cash on cash return.
To learn more about cap rate and cash on cash return, read What’s a Good Cap Rate for Investment Properties? and What Is Cash on Cash Return?
- High return on investment: All real estate investors, whether beginner or not, seek the same thing – high return on investment. That’s the only way to make money in real estate. The return on investment for short-term rentals is the result of the Airbnb occupancy rate, the rental income, and the property price. No matter if you go for cash on cash return or cap rate, you have to aim for a location that yields high returns. That’s what makes for the best places for buying a vacation home.
To start searching for rental properties with high return on investment, sign up for Mashvisor now.
- Airbnb rental regulations: Since we are talking about short-term rental properties, there is one last factor which we need to consider when defining the top locations for this kind of real estate investments – namely, the local Airbnb laws and regulations. Pushed by the hotel lobby, many towns and cities have started implementing strict and sometimes even prohibitive short-term rentals laws. So before deciding on where to invest in an Airbnb rental, you have to make sure that it’s legal there.
For first-time real estate investors, having to gather and analyze all this information might sound daunting or even discouraging. No worries. We have put together a list of the 10 best places for buying a vacation home in the US in 2019. This list takes into consideration all the above-mentioned factors.
Regarding the real estate market analysis and the investment property analysis to come up with the places with the highest return on investment for Airbnb rentals, it’s provided by Mashvisor’s rental property calculator. This must-have real estate investment tool saves investors a ton of time, efforts, and money by providing ready to use data and analysis of investment opportunities in most US real estate markets.
What Are the Top Locations for Investing in a Vacation Rental Home?
Following is a list of the best places for buying a vacation home to make money from real estate in the US housing market in 2019. These are the locations which offer the highest Airbnb cash on cash return and the highest Airbnb cap rate for short-term rentals right now, according to Mashvisor’s investment property calculator.
Note: The cap rate and cash on cash return below are the same number because the default Mashvisor’s rental property calculator assumes all-cash property payments. However, if you plan to take a mortgage loan to buy a rental property, as most real estate investors do, you can plug in the details, and the investment property calculator will adjust the return on investment figures immediately.
To learn how Mashvisor’s Airbnb profitability calculator helps you make smart investment decisions, check out The Airbnb Profitability Calculator: The Best Friends of the Short-Term Rentals Investor.
In the infographic below you can have a quick preview of the 10 best places for buying a vacation home in the US.
- Median Property Price: $138,600
- Airbnb Rental Income: $3,050
- Airbnb Cash on Cash Return: 10.2%
- Airbnb Cap Rate: 10.2%
- Airbnb Occupancy Rate: 45.8%
- Traditional Rental Income: $1,100
- Traditional Cash on Cash Return: 3.1%
- Traditional Cap Rate: 3.1%
To start looking for profitable Dubuque vacation homes, click here.
2. Portsmouth, VA
- Median Property Price: $189,600
- Airbnb Rental Income: $2,750
- Airbnb Cash on Cash Return: 9.6%
- Airbnb Cap Rate: 9.6%
- Airbnb Occupancy Rate: 63.0%
- Traditional Rental Income: $1,190
- Traditional Cash on Cash Return: 2.4%
- Traditional Cap Rate: 2.4%
To start searching for high return on investment Portsmouth vacation homes, click here.
3. Bainbridge Island, WA
- Median Property Price: $387,000
- Airbnb Rental Income: $5,020
- Airbnb Cash on Cash Return: 9.3%
- Airbnb Cap Rate: 9.3%
- Airbnb Occupancy Rate: 53.9%
- Traditional Rental Income: $1,960
- Traditional Cash on Cash Return: 2.3%
- Traditional Cap Rate: 2.3%
To find money-making Bainbridge Island vacation homes, click here.
4. Tuscaloosa, AL
- Median Property Price: $250,400
- Airbnb Rental Income: $2,770
- Airbnb Cash on Cash Return: 9.3%
- Airbnb Cap Rate: 9.3%
- Airbnb Occupancy Rate: 41.9%
- Traditional Rental Income: $870
- Traditional Cash on Cash Return: 0.6%
- Traditional Cap Rate: 0.6%
To find lucrative Tuscaloosa vacation homes, click here.
5. Abilene, TX
- Median Property Price: $240,200
- Airbnb Rental Income: $3,460
- Airbnb Cash on Cash Return: 8.9%
- Airbnb Cap Rate: 8.9%
- Airbnb Occupancy Rate: 50.3%
- Traditional Rental Income: $1,190
- Traditional Cash on Cash Return: 0.9%
- Traditional Cap Rate: 0.9%
To start searching for profitable Abilene vacation homes, click here.
6. Columbus, GA
- Median Property Price: $157,000
- Airbnb Rental Income: $2,290
- Airbnb Cash on Cash Return: 8.9%
- Airbnb Cap Rate: 8.9%
- Airbnb Occupancy Rate: 57.4%
- Traditional Rental Income: $960
- Traditional Cash on Cash Return: 2.2%
- Traditional Cap Rate: 2.2%
To look for high return on investment Columbus vacation homes, click here.
7. Springfield, MA
- Median Property Price: $195,100
- Airbnb Rental Income: $2,140
- Airbnb Cash on Cash Return: 8.6%
- Airbnb Cap Rate: 8.6%
- Airbnb Occupancy Rate: 42.6%
- Traditional Rental Income: $1,280
- Traditional Cash on Cash Return: 2.2%
- Traditional Cap Rate: 2.2%
To find the best performing Springfield vacation homes, click here.
8. Akron, OH
- Median Property Price: $114,500
- Airbnb Rental Income: $1,960
- Airbnb Cash on Cash Return: 8.4%
- Airbnb Cap Rate: 8.4%
- Airbnb Occupancy Rate: 53.7%
- Traditional Rental Income: $850
- Traditional Cash on Cash Return: 2.4%
- Traditional Cap Rate: 2.4%
To find the best investment opportunities among Akron vacation homes, click here.
9. Shawnee, KS
- Median Property Price: $339,100
- Airbnb Rental Income: $2,500
- Airbnb Cash on Cash Return: 8.4%
- Airbnb Cap Rate: 8.4%
- Airbnb Occupancy Rate: 52.8%
- Traditional Rental Income: $1,570
- Traditional Cash on Cash Return: 1.2%
- Traditional Cap Rate: 1.2%
To start searching for the most profitable Shawnee vacation homes, click here.
10. Spartanburg, SC
- Median Property Price: $184,500
- Airbnb Rental Income: $1,860
- Airbnb Cash on Cash Return: 8.3%
- Airbnb Cap Rate: 8.3%
- Airbnb Occupancy Rate: 45.7%
- fTraditional Rental Income: $920
- Traditional Cash on Cash Return: 1.4%
- Traditional Cap Rate: 1.4%
To find the most lucrative Spartanburg vacation homes, click here.
Based on data and analysis from Mashvisor’s rental property calculator, these are the 10 best places for buying a vacation home to rent out on Airbnb in the US housing market in 2019. As you see, they are distributed all over the country and come in various sizes and in different climates.
What unites all these towns and cities is that they are top locations for starting out a short-term rental business this year. Although Airbnb rentals are generally legal in all these areas, make sure you check the specific rules and regulations in terms of zoning and timing. The last thing you want to do as a real estate investor is to break the law.
Have you made your choice of where to be buying a vacation home in 2019? You can start searching for the best real estate investment properties for sale in these places (as well as thousands of others) on Mashvisor today.
All you need to do is to sign up to get instant access to Mashvisor’s heatmap analysis, Airbnb calculator, and property finder. These must-have real estate investment tools will help you find money-making positive cash flow properties with high cash on cash return as well as good cap rate in any US market, in line with your rental strategy.
Related: Airbnb Rentals: Finding Income Properties Using a Heatmap
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