There are lots of advantages to buying a vacation home. The world is still reeling from the effects of the COVID-19 pandemic, and Airbnb is not excluded. Like almost everything in the economy, Airbnb saw a decline in the heat of the pandemic, but this has since become a thing of the past.
Find out the top 10 locations for investing in vacation rentals in our video below:
According to Airbnb’s Q3 2021 financials results, the said three-month period brought about the company’s highest quarterly revenue ever, which was 36% higher than Q3 2019. In the third quarter of 2021, it also realized a net income of $834 million, which was its most profitable quarter ever.
Looking closely at the company’s financials, Airbnb demand is on a steady upward trend. As real estate investors, making money in real estate from buying an Airbnb income property that doubles as a vacation home is one of the best real estate investment strategies there is.
Before buying a vacation home, there are things you must consider, laws you must take note of, and your return on investment on the property you intend to invest in.
When looking at buying a vacation home, you need to ensure you’re looking at the best vacation investment property locations. It is important because before committing to any vacation property, you must ensure its Airbnb return on investment is positive.
When buying a vacation home, the first thing to remember is to ensure you buy from the best locations. It’s not enough to buy a vacation home from your favorite travel destination; this simply won’t cut it. You need to be prudent in searching for the best vacation rental markets.
This article will go in-depth into everything associated with buying a vacation home. Without further ado:
The Benefits of Buying a Vacation Home
Before looking at the best places to buy vacation rental property, let’s discuss some of the reasons why you should be interested in investing in a vacation home.
Dual Purpose Property
One of the most important reasons for buying a vacation home is the dual purpose. While a vacation home is a real estate investment opportunity, it also serves, as the name implies, a vacation home.
With the advent of the coronavirus and increasing remote working opportunities, it’s an incredible idea to have a home away from your primary residence. And on days when you’re not using your vacation home, it supplements your real estate investment income.
If you buy a vacation home in a prime location, the Airbnb return on investment will be enough to offset your vacation home loan and handle all other expenses associated with buying a second real estate investment vehicle.
Tax Write-Offs
There are significant advantages attached to real estate investing, and tax benefits rank high on that list. As a real estate investor, you must be aware of all the benefits. More importantly, you must benefit from them.
Vacation homes provide many tax benefits that depend on various factors such as: How long is the property rented out? How long do you live in it? And so on.
Having your real estate property rented out for more than two weeks is considered a business. This is extremely important for tax benefit purposes. While it is paramount that you pay taxes on the income your real estate investment brings in, you also get to write off the expenses used for improving, maintaining, and fixing the property.
The tax write-offs you can have on your vacation home include but are not limited to insurance premiums, mortgage interests, management fees, cleaning, etc. You can even go as far as writing off the hosting fees charged by Airbnb and other rental companies.
That said, it is crucial that you carefully look at the tax implications before buying a vacation home.
Low-Risk Investment Strategy
Since a vacation home serves dual purposes, it is considered one of the least risky real estate investments. This means even if you do not rent out the vacation home as much as you’d like to and the property retains a low Airbnb occupancy rate, it still serves its other purpose of being a second home where you can go to spend time with your family and perform other activities.
While you may not be making money in the short term, you also stand the chance of benefitting from the property in the long term through real estate appreciation. To ensure that you make money from short-term Airbnb rentals, before buying a vacation home, make sure to use the Mashvisor Airbnb calculator to help you choose a property with a high Airbnb return on investment.
Also, if short-term rental services do not seem to cut it, you can switch to traditionally listing the property on a more long-term basis.
High Return on Investment
According to Airbnb’s Q3 financials, we can accurately deduce that it would be a good year for short-term rental properties. The pandemic put a halt to things, and with the constant increase in remote culture, people are traveling more than they used to.
Also, many travelers prefer the safety and comfort associated with rental homes over the activities related to hotels.
In addition, buying a vacation home ensures two things: ensures finance and retirement home. Buying a vacation home is a great way to plan for future expenses and a retirement home. Putting it simply, investing in a vacation home guarantees a dependable asset for the future.
Everything You Need to Know Before Buying a Vacation Home
After discussing the benefits associated with buying a vacation home, let us delve deeper into what you need to know about investing in a vacation home.
As said earlier in this article, having a favorite travel location is not enough to invest in a vacation home there. You must base your analysis on other factors to determine your vacation home guarantees a return on investment.
Below, we will discuss all the factors you should bear in mind when conducting your research for buying a vacation home.
Location of Vacation Home
You must know that the single determining factor presiding over whether or not your investment is a success or a failure depends on the housing market you invested in.
Location is the single factor that can make or break your real estate investing objective as an investor.
The role location plays in real estate investing cannot be understated. Location is a highly significant part of your real estate investment strategy as it determines the sale price of the property, the kind of vacation home mortgage you can get, rental type property, occupancy rate, the Airbnb return on investment, the cash flow, the recurring rental expenses, the return on investment, etc.
When investing in short-term rentals like a vacation home, location plays an even more significant role as it dictates the Airbnb laws and rules you must abide by.
Many US cities were prime locations for Airbnb investments some years ago and are now essentially illegal for investing in rental properties for the purpose of rentals. These locations include Airbnb Boston, Airbnb Chicago, Airbnb New York, and Airbnb Los Angeles.
If you’re a new investor and you’re unsure of how to start your search for the best vacation investment property locations, stick around and make your decision from the sites listed below.
Neighborhood of Your Vacation Home
If the location is the yin of real estate, the neighborhood is the yang. While the location is essential in real estate investing, the neighborhood is equally important. This is important because different areas in the same town can have astronomically different returns on investment.
So, while you’re conducting location analysis, be sure to include neighborhood analysis due diligence as well. This means location and neighborhood analysis go hand in hand in real estate investing.
Financing
Financing a vacation home should be carefully looked at when it comes to funding real estate investment properties. It is because buying a vacation home is not the same as buying a home, nor is it a pure investment property.
However, it doesn’t mean you cannot get a mortgage loan to finance your vacation home; actually, it’s possible. The only difference is that it follows different rules compared to conventional mortgages.
Airbnb Daily Rate and Airbnb Occupancy Rate
As a real estate investor looking to make money by buying a vacation home, you must ensure you calculate the Airbnb return on investment in the area you’re looking at investing in.
Finding accurate and reliable Airbnb data is an arduous task. This is why Mashvisor brings you industry-leading data, analytics, and insight directly from Airbnb based on the actual performance of all Airbnb listings in your area of interest. This analysis is unlike anything else in the real estate industry. For every property within the US that you’d like analysis on, we will provide you with the insight you need to make your investment decision.
There are many factors to bear in mind to determine an Airbnb return on investment. Two of these factors rank high above the others: Airbnb occupancy rate and the Airbnb daily rate. These two factors help you analyze the Airbnb return on investment to aid your decision.
If you’re looking to make a substantial income, some locations have high Airbnb daily rates and occupancy rates.
Short-Term Rental Laws and Regulations
Lastly, another major factor to consider when choosing the location to buy your vacation home is the short-term rental laws and regulations that govern the Airbnb industry.
Before committing to a property, make sure to conduct extensive legislative research on the state, county, and city you’re looking to invest in. Doing so ensures that it is legal to own a non-owner-occupied short-term property.
As said earlier, in some states, this is illegal. This is why it’s essential to look for a vacation property that you can rent out as long as you want without being physically present.
The absence of these strict laws and regulations makes Florida one of the best places to buy a vacation home.
Make sure to research state and local laws and regulations before committing to buying a short term rental property.
The Best Places for Buying a Vacation Home
The real estate data listed below are based on the analysis of the performance of actual Airbnb listings and properties for sale conducted by Mashvisor.
As an investor, one of the most critical thoughts crossing your mind when hunting for a vacation home is the Airbnb return on investment. We took that in mind when we collated this list.
Without further ado, here are the best places to buy a vacation home.
1. Huntingdon Valley, PA
- Airbnb Cash on Cash Return: 9.61%
- Airbnb Daily Rate: $299
- Airbnb Occupancy Rate: 65%
- Airbnb Rental Income: $9,740
- Median Property Price: $428,580
- Average Price per Square Foot: $223
- Average Days on Market: 67
2. Owings, MD
- Airbnb Cash on Cash Return: 8.97%
- Airbnb Daily Rate: $761
- Airbnb Occupancy Rate: 66%
- Airbnb Rental Income: $6,895
- Median Property Price: $674,590
- Average Price per Square Foot: $300
- Average Days on Market: 53
3. Sparks, MD
- Airbnb Cash on Cash Return: 8.73%
- Airbnb Daily Rate: $374
- Airbnb Occupancy Rate: 70%
- Airbnb Rental Income:$7,018
- Median Property Price: $357,500
- Average Price per Square Foot: $201
- Average Days on Market: 90
4. Bryans Road, MD
- Airbnb Cash on Cash Return: 8.72%
- Airbnb Daily Rate: $176
- Airbnb Occupancy Rate: 75%
- Airbnb Rental Income: $6,613
- Median Property Price: $428,400
- Average Price per Square Foot: $169
- Average Days on Market: 55
5. Collingswood, NJ
- Airbnb Cash on Cash Return: 8.72%
- Airbnb Daily Rate: $137
- Airbnb Occupancy Rate: 76%
- Airbnb Rental Income: $8,624
- Median Property Price: $443,713
- Average Price per Square Foot: $236
- Average Days on Market: 48
6. Cottage Grove, MN
- Airbnb Cash on Cash Return: 8.69%
- Airbnb Daily Rate: $359
- Airbnb Occupancy Rate:72%
- Airbnb Rental Income: $6476
- Median Property Price: $518,997
- Average Price per Square Foot: $208
- Average Days on Market: 245
7. Farmingdale, NY
- Airbnb Cash on Cash Return: 7.96%
- Airbnb Daily Rate: $342
- Airbnb Occupancy Rate: 38%
- Airbnb Rental Income: $8,268
- Median Property Price: $557,817
- Average Price per Square Foot: $387
- Average Days on Market: 61
8. Columbus, MN
- Airbnb Cash on Cash Return: 7.84%
- Airbnb Daily Rate: $361
- Airbnb Occupancy Rate: 67%
- Airbnb Rental Income: $6,572
- Median Property Price: $562,689
- Average Price per Square Foot: $294
- Average Days on Market: 139
9. Fair Oaks Ranch, TX
- Airbnb Cash on Cash Return: 7.25%
- Airbnb Daily Rate: $178
- Airbnb Occupancy Rate: 56%
- Airbnb Rental Income: $9,878
- Median Property Price: $929,410
- Average Price per Square Foot: $244
- Average Days on Market: 70
10. Mound, MN
- Airbnb Cash on Cash Return: 7.15%
- Airbnb Daily Rate: $465
- Airbnb Occupancy Rate: 68%
- Airbnb Rental Income: $8,828
- Median Property Price: $704,298
- Average Price per Square Foot: $302
- Average Days on Market: 91
Conclusion
So, if you’re interested in buying a vacation home, you know the best places to search from. It is also important to remember that while short-term rentals are legal in these locations, every market has its own rules.
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