Investing in vacation home rentals is a great way to make money in real estate, but the most important question will always be, “What are the best places to buy a vacation home?”
As you have probably learned so far, location is the most important success factor of a real estate investment, especially when it comes to investing in vacation home rentals. In this blog, we will focus on this non-traditional investment strategy. Moreover, we will provide you with a list of the best places to buy vacation rental property in the U.S real estate market.
Vacation Home Rentals: Why Should You Invest in Them?
Investing in vacation home rentals is favored among both experienced and beginner real estate investors. Following this investment strategy, you will not only make extra money from rental income, but you will also have a second home in your favorite vacation spot. Imagine owning a real estate property by the beach where you can spend your holidays there.
Well, for sure other Americans and foreign tourists would like to do the same; who stays in hotels anymore? When you are not using your vacation home, you can easily rent it out as an Airbnb rental. How?
Easy! Visit the Airbnb website or download the app and list your vacation rental property within minutes. Airbnb is a great platform for listing short term rentals since you can easily choose which days your rental property is available. Just make sure to check the local Airbnb and short-term bookings regulations, as they differ from city to city.
For more information about Airbnb regulations, read this blog: Your Real Estate Investment Guide to Airbnb Rental Properties: Where Is Airbnb Legal?
Let’s be honest, we all get into the real estate business for the extra income (or if you are lucky enough it becomes your career). Therefore, a major risk of owning a rental property is having high vacancy rates or low occupancy rates.
But, since vacation home rentals serve as a second home as well, it is more comforting when you don’t manage to rent them out. Nonetheless, to reduce the risk of low occupancy rate, it is crucial to invest in vacation rentals in locations were demand for short-term rentals is high.
What to Look for When Buying Vacation Home Rentals
You probably know by now that location is the most important factor when investing in real estate in general and in vacation home rentals in particular as it determines rental demand, rental income, and occupancy rate of an investment property. Moreover, according to the location of a given investment property, you can decide whether to opt for a traditional vs Airbnb rental strategy.
Real estate market analysis measures the location of a property in numerical terms by comparing the market value of different real estate properties. Moreover, a real estate investment calculator will provide you with important real estate metrics like cap rate and cash on cash return.
As a vacation home rentals investor, your aim is to find the hottest real estate markets that offer high cash on cash return and cap rate for short term rentals. A good cash on cash return would be somewhere between 8-12%, but this also depends on many factors.
What is a good cash on cash return? Read this blog to decipher one of the most important metrics in real estate investing.
What Are the Best Places to Invest in Vacation Home Rentals Right Now?
The following is a list of the best cities to invest in vacation home rentals in the U.S. Out of 13 locations, 4 cities are located in the State of Florida, which is a top vacation destination in the U.S.
These best places to buy a vacation rental property are chosen based on Mashvisor’s investment property calculator that measures Airbnb rental income, Airbnb cash on cash return, Airbnb cap rate and most importantly, occupancy rate.
1. Panama City Beach, Florida
- Median Property Price: $258,448
- Airbnb Rental Income: $2,354
- Airbnb Cash on Cash Return: 5.85%
- Airbnb Occupancy Rate: 61%
2. Chicago, Illinois
- Median Property Price: $447,549
- Airbnb Rental Income: $2,726
- Airbnb Cash on Cash Return: 1.11%
- Airbnb Occupancy Rate: 54%
3. Napa, California
- Median Property Price: $1,092,489
- Airbnb Rental Income: $6,627
- Airbnb Cash on Cash Return: 5.10%
- Airbnb Occupancy Rate: 51%
4. Memphis, Tennessee
- Median Property Price: $243,531
- Airbnb Rental Income: $2,498
- Airbnb Cash on Cash Return: 3.34%
- Airbnb Occupancy Rate: 47%
5. Destin, Florida
- Median Property Price $636,221
- Airbnb Rental Income: $3,928
- Airbnb Cash on Cash Return: 4.10%
- Airbnb Occupancy Rate: 57%
6. Kissimmee, Florida
- Median Property Price: $220,000
- Airbnb Rental Income: $2,110
- Airbnb Cash on Cash Return: 6.8%
- Airbnb Occupancy Rate: 65%
7. Fort Walton Beach, Florida
- Median Property Price: $325,000
- Airbnb Rental Income: $3,850
- Airbnb Cash on Cash Return: 13.4%
- Airbnb Occupancy Rate: 60%
8. Ocean City, Maryland
- Median Property Price: $407,216
- Airbnb Rental Income: $2,079
- Airbnb Cash on Cash Return: 11.1%
- Airbnb Occupancy Rate: 43%
Related: The 7 Best Places to Buy a Vacation Home in Florida
9. Myrtle Beach, South Carolina
- Median Property Price: $190,000
- Airbnb Rental Income: $2,250
- Airbnb Cash on Cash Return: 8.5%
- Airbnb Occupancy Rate: 48%
10. Gatlinburg, Tennessee
- Median Property Price: $295,382
- Airbnb Rental Income: $2,984
- Airbnb Cash on Cash Return: 6.49%
- Airbnb Occupancy Rate: 73%
11. Virginia Beach, Virginia
- Median Property Price: $374,270
- Airbnb Rental Income: $3,568
- Airbnb Cash on Cash Return: 4.43%
- Airbnb Occupancy Rate: 53%
12. Orange Beach, Alabama
- Median Property Price: $469,000
- Airbnb Rental Income: $3,190
- Airbnb Cash on Cash Return: 4.7%
- Airbnb Occupancy Rate: 50%
13. San Diego, California
- Median Property Price: $824,006
- Airbnb Rental Income: $3,609
- Airbnb Cash on Cash Return: 1.76%
- Airbnb Occupancy Rate: 62%
The Bottom Line
Investing in vacation home rentals is a great way to start making money in real estate. Once you decide which of these best locations for vacation rentals is best for your investment goals, head immediately to Mashvisor where you can use our investment property finder and investment property calculator to find the best real estate investment opportunities for both traditional and Airbnb rentals!
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.