Real Estate Investing

Best Places to Buy a Vacation Rental Property

How do you find the best places to buy a vacation rental property?

Stephanie

September 23, 2022

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https://www.getaway.co/articles/best-places-to-buy-vacation-rental-property

The worldwide vacation rental market is expected to reach nearly $100 billion in revenue by 2028. Investors, from small non-accredited individual investors all the way up to institutions are actively trying to get a piece of this $100 billion pie through the acquisition and ongoing management of vacation rental properties. But it’s a big country, and through fractional real estate ownership, it’s relatively straightforward to invest outside of your immediate geographic location. But how do you find the best places to buy a vacation rental property?

When it comes to accomplishing this feat, there are a few key factors you need to keep in mind. The first is to find a location that is in high demand. This could be a beach town, a city with lots of historical sites, or even a ski resort area. Another important factor is to find a property that is in good condition and is priced reasonably. 

You don’t want to overspend on a fixer-upper that will take a lot of time and money to get into shape. It’s also important to find a place that has good rental potential. This means it should be close to amenities like restaurants and shopping and have easy access to public transportation. These are the fundamentals- we’ve barely scratched the surface. We’ll break down some of the determiners you should use when choosing a market, as well as our rigorously-researched list of the best places to buy a vacation rental property.

Why Location is Important for a Vacation Rental Investment

Ever heard the phrase, "location, location, location?" When it comes to real estate, including vacation rental properties, that truism is, well, true. When considering investing in a vacation rental property, one of the most important factors to consider is the property's location. 

There are a few reasons why location is so mission-critical for a successful, low-vacancy, cash-flowing, appreciating vacation rental investment. 

1. Location affects the vacation properties' occupancy rate

The location of the property plays a huge role in how often it is rented out. If the property is in a popular vacation destination, it is more likely to be rented out often. On the other hand, if the property is located in a less popular area, it may not be rented out as often. Lower vacancy rates mean less downtime and more money in your pocket- so you want to pick the right location for your vacation property.

2. Prime locations command higher rental rates

The property's location will also affect how much rent you can charge. Properties located in popular vacation destinations can command much higher rental rates than properties located in less popular areas. There's a reason it costs a few thousand bucks a night to rent a place on Ko Olina Bay outside of Honolulu, while you can rent a five-bedroom home in Wichita, Kansas for a few hundred bucks a night. 

3. Location will affect resale value and potential property appreciation

When you eventually decide to sell the property, the location will again play a role in how much the property is worth- and how much you'll be able to sell it for down the line. Properties located in popular vacation destinations tend to appreciate more than properties located in less desirable areas. 

4. Maintenance requirements will differ based on location

If the property is located in a high-traffic area, it may require more frequent cleaning and maintenance than a property located in a more secluded area. For example, if you're renting out condo units in a spring break spot on the Florida Panhandle, you'll probably incur more maintenance and repair costs compared to a quiet cabin getaway outside of Aspen. 

Weather also plays a role- properties in dry desert climates will age and deteriorate differently than ocean-side bungalows. Before investing, you'll want to get a firm grasp of your ongoing maintenance and repair costs.

5. Insurance rates are heavily dependent on local variables

The location of your vacation property can also affect your insurance rates. Properties located in areas with higher crime rates or natural disaster risks will typically have higher insurance rates than properties located in safer areas. 

Market Conditions for Vacation Rental Investments

After a tough couple of years caused by COVID-19, vacation rentals are set to continue surging in 2022. The world is beginning to open up, so it shouldn't be surprising that demand is coming back at the same time. While high gas prices and higher interest rates are having a cooling effect on price growth in many regions, summer travel demand is still strong, and despite overall negative consumer sentiment- people are still spending money- including on vacations. 

This follows a larger trend of growth in non-hotel vacation rentals. The vacation rental market has been on the rise in recent years, as more and more people are choosing to rent vacation homes instead of staying in hotels. The increase in vacation rental popularity is due to several factors, including the increased flexibility and privacy that vacation rentals offer and the ability to save money by cooking meals and entertaining in the rental home. 

If you're considering an investment in a vacation property, there's no better time than the present. Market conditions are favorable, and there's a high demand for vacation rentals. To help determine if an investment in a vacation property is right for you, check out our comprehensive guide to vacation rental investments, Is Buying a Vacation Rental Property a Good Investment?

10 Popular Places to Buy Vacation Rentals

You probably get it by now- location is important. However, this only applies to the location of the property or properties in question. With the rise of fractional and tokenized real estate ownership and professional management, you don't need to be anywhere near your vacation rental property. You can find, research, perform due diligence, and execute on a vacation rental opportunity from the comfort of your home or office. 

To give you a better idea of where to start, we're going to look at 10 Sought after American cities for vacation rentals.

*Data below sourced from AirDna.co and Zillow.com and accessed 7/8/2022

Miami, Florida

best places to buy a vacation rental

Miami has long been a popular vacation destination, which has helped to increase the demand for vacation homes and condos in the city. As a gateway to Latin America, it benefits from tourism from Americans fleeing cold winters and Latin American and Caribbean residents seeking the nightlife, culinary scene, and shopping destination typified by Miami Beach. 

Average Daily Rate:$233

Occupancy Rate: 71%

Typical Home Value: $517,987

Scottsdale, Arizona

Visitors that love the sun and the heat will consider Scottsdale the perfect vacation destination. The city is located in the middle of the desert and boasts plenty of days with clear blue skies and bright sunshine. When the temperatures do start to cool down in the evening, there are still plenty of options for entertainment and nightlife. Among the best things about Scottsdale is that there is something for everyone. 

Vacationers that love to shop will find plenty of high-end stores and boutiques. If they're looking for a more relaxed vacation, there are plenty of spas and golf courses. Additionally, there are numerous family-friendly attractions, including the Scottsdale Museum of Contemporary Art and the Scottsdale Zoo.

Average Daily Rate: $318

Occupancy Rate: 67%

Typical Home Value: $862,348

Palm Springs, California

Palm Springs has California-cool and the climate to match. Investors in Palm Springs vacation real estate will benefit from warm weather and a diverse array of activities and attractions. The crowds keep coming to this desert city for its many golf courses, tennis courts, swimming pools, and luxe resorts. Additionally, the city has a thriving nightlife and cultural scene, making it an incredibly well-rounded vacation destination.

Average Daily Rate: $506

Occupancy Rate: 68%

Typical Home Value: $717,012

Park City, Utah

This winter-sport paradise is a breathtaking vacation destination that offers up a wide array of outdoor activities. It is situated in the Wasatch Mountains and is home to world-renowned ski resorts, including Deer Valley and Park City Mountain Resort, the latter of which hosted the 2002 Winter Olympics. In addition to snowboarding and skiing, visitors can enjoy cross-country skiing, snowmobiling, snowshoeing, and ice skating. 

But Park City isn’t just a winter wonderland – it’s a great summer destination, too. The mountains offer hiking and biking trails for all levels, and the town is home to several golf courses. Park City also hosts the Sundance Film Festival every January, bringing celebrities and film fans from all over the world. 

Average Daily Rate: $443

Occupancy Rate: 55%

Typical Home Value: $1,720,995

Maui, Hawaii

The island of Maui has beautiful beaches, great weather, and a variety of activities to keep visitors entertained. Maui has a strong tourism industry, and there is always a demand for vacation rentals. The island has something for everyone, from beaches and golf courses to hiking trails and waterfalls. And, with an average of 3 million visitors each year, there is always a demand for rental properties. Maui is also a great place to live, with an excellent climate and plenty of activities to keep you busy. 

Average Daily Rate: $257

Occupancy Rate: 87%

Typical Home Value: $890,240

Joshua Tree, California

The small, off-the-beaten-path, California desert town of Joshua Tree has a lot to offer investors, including low prices and growing tourism industry. It is a relatively affordable place to buy vacation rental property. This fact is especially true when compared to other popular tourist destinations in California.

Each year the region becomes increasingly more popular with tourists and vacationers, largely thanks to its reputation as a great place to enjoy the desert landscape and truly get away from it all. Joshua Tree offers up a sense of isolation that's just impossible to find in major California metros like the SF Bay Area and Los Angeles.

Average Daily Rate: $265

Occupancy Rate: 67%

Typical Home Value: $469,777

Breckenridge, Colorado

Breckenridge, Colorado, is an outdoor lover’s paradise. In the wintertime, the town is bustling with skiers and snowboarders taking advantage of the slopes at Breckenridge Ski Resort. In the summer, hikers and mountain bikers flock to the area to explore the many trails in the White River National Forest.   But Breckenridge is more than just a playground for outdoor enthusiasts. It’s also a great place to invest in a vacation rental property.

The town is a year-round destination. With so many people visiting Breckenridge year-round, there is a high demand for vacation rentals. This demand means that you can charge premium rates for your rental property. And, with a well-managed property, you can expect to see a healthy return on your investment.

Average Daily Rate: $384

Occupancy Rate: 63%

Typical Home Value: $1,292,802

Big Bear Lake, California

Big Bear is perfect for any vacation – whether a winter getaway or a summer retreat, it has it all. In the wintertime, you can hit the ski and snowboard slopes at one of the many nearby ski resorts and later go for a scenic hike through the snow-covered woods. And in the summer, you can enjoy swimming, boating, and fishing on Big Bear Lake or take a peaceful stroll through the meadows and forests. 

The nightly rates are very reasonable – especially when you compare them to other popular nearby vacation destinations. You can find a vacation rental property in Big Bear for a fraction of the price you would pay in places like Aspen or Tahoe. Additionally, the rental market is strong and vacation rental properties in Big Bear are in high demand, so you have a good shot at generating a solid income from your investment.

Average Daily Rate: $362

Occupancy Rate: 40%

Typical Home Value: $639,292

Nashville, Tennessee

Nashville is a fantastic place to buy a vacation investment property. The city has a lot to offer tourists, and there are many opportunities to make money via vacation rentals. The city is known for its world-class country, rock n roll, and hip hop music scene, and there are countless cultural, musical, retail, and restaurant attractions and events that draw visitors to the area. 

“The Music City,” is a working town- which means you'll benefit from business travelers in addition to your typical tourists. It's also much bigger than many other cities on our list, opening up more investment opportunities and traffic to grow your vacation rental portfolio. 

Average Daily Rate: $305

Occupancy Rate: 65%

Typical Home Value: $446,258

Fort Lauderdale

Fort Lauderdale, with its sandy beaches, canals, and year-round sunshine, is a top destination for vacationers. A vacation investment property in Fort Lauderdale can be a great way to earn rental income and benefit from getting "in on the ground" of a vacation locale before it goes sky high like Miami or Myrtle Beach.

The city was recently ranked as the second most popular destination for vacation rental properties in the United States. Fort Lauderdale has a great climate, with an average of 300 sunny days per year. This makes it a perfect destination for people looking to escape the cold winters up north.  

Fort Lauderdale is a relatively affordable destination, which can help to keep your rental rates reasonable. Finally, the city is continuing to grow and develop, which means there is potential for appreciation on your investment property. 

Average Daily Rate: $238

Occupancy Rate: 73%

Typical Home Value: $500,443

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Certain information contained in here has been obtained from third-party sources. While taken from sources believed to be reliable, Getaway has not independently verified such information and makes no representations about the accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Getaway has not reviewed such advertisements and does not endorse any advertising content contained therein. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters.

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