The Best Vacation Rental Markets to Buy a Property

If you’re looking to expand your vacation rental portfolio, searching for opportunities in the best vacation rental markets is a great place to start. The goal is to find the most lucrative opportunities with great long-term prospects. However, how do you identify the best vacation rental markets? 

Here are some tips to help you in your property search along with data from recent studies conducted to identify the best places to buy vacation rental property.

Identifying the Best Vacation Rental Markets

As you search for vacation rental properties to invest in, it’s important to keep in mind that vacation rental business in almost every market is seasonal. Some markets are even driven by local events and not the weather or time of year. As a result, your cash flow forecasts should account for the fact that the volume of inquiries from guests will differ significantly depending on the time of year.

That said, the best places to buy a vacation rental often share these three common factors: rental demand, seasonality, and property revenue growth. When these factors come together, your chances of finding good investment opportunities are high.

Here are some other factors that can be used to identify the best vacation rental markets:

Taxes

Taxes may be considered as both an advantage and a disadvantage when considering a vacation rental market. First, you need to be able to afford all local, state, and federal property taxes. At the same time, you also need to pay attention to the taxes that will be assessed on any income that you earn from your rental activities. The best vacation rental markets offer tax write-offs that specifically apply to vacation rental property businesses.

Legality 

The legal climate regarding vacation rental platforms is constantly in flux as a result of many municipalities trying to establish boundaries with companies like Airbnb. As a result, the best places to own vacation rental property are those where properties can be rented out legally (with clearly-defined regulations) as short-term rentals. 

Risk 

Although any type of investment is subject to risk, vacation rental investors should be especially mindful of risks to a vacation rental market, such as adverse weather or economic stability. Finding the best vacation rental markets will allow you to minimize these risks and sufficiently protect your interests with affordable, comprehensive business and property insurance policies.

Owning a vacation rental property in a hot market can bring in a good ROI if you are able to maximize your bookings throughout the year. However, the trick to maintaining profitability is to ensure that you’ve properly calculated the potential cash flow to your property by taking all of these factors into account.

The Overall 10 USA Best Vacation Rental Markets in 2019

There are opportunities in many vacation rental markets across the U.S. According to a study conducted by Rented.com, the 10 best vacation rental markets to invest in for 2019 are:

1. Pigeon Forge, TN, which has an annual estimated rental income of $43,500.

2. Gatlinburg, TN, which has an annual estimated rental income of $45,000.

3. Panama City Beach, FL, which has an annual estimated rental income of  $20,000.

4. Killington, VT, which has an annual estimated rental income of $39,000.

5. Palm Coast, FL, which has an annual estimated rental income of $33,000.

6. Myrtle Beach, SC, which has an annual estimated rental income of $46,000.

7. Saint George, UT, which has an annual estimated rental income of $69,500.

8. Sevierville, TN, which has an annual estimated rental income of  $34,000.

9. San Antonio, TX, which has an annual estimated rental income of $24,000.

10. Seaside, OR, which has an annual estimated rental income of $53,000.

Tennessee cities appear in three of the top 10 spots on this list thanks to low annual mortgage estimates combined with high vacation rental revenue. It’s important to note that these are city-wide averages and the study does not differentiate between low- and high-performing neighborhoods.

Hidden Gem Vacation Rental Markets for 2019

Where you buy a vacation rental property has a major impact on its performance. While major metros have proven to be excellent places to buy for savvy investors, these cities are often too pricey for many investors. 

As a result, many vacation rental investors are now looking to smaller cities that can provide similar potential returns but don’t have the same high cost of entry into the market. According to GOBankingRates, the top 3  cities that are considered to be the “hidden gems” for vacation rental investment in 2019 are:

• Corpus Christi, TX: Corpus Christi offers plenty of entertainment and nightlife, as well as, beautiful beaches and offshore islands with Padre Island and Mustang Island nearby. For this city, the estimated 1-year gross profit from renting is $31,552.

• Daytona Beach, FL: Daytona Beach offers 23 miles of white sandy beaches. Tourists can also enjoy free summer concerts and amusement rides at the Daytona Beach Boardwalk and Pier. For this city, the estimated 1-year gross profit from renting is $29,493.

• Fort Walton Beach, FL: Fort Walton Beach is highly recommended and is still underrated as a vacation destination, making it one of the best vacation rental markets for investment in 2019. It offers golf courses, big game fishing, and beautiful beaches which tourists will enjoy. For this city, the estimated 1-year gross profit from renting is $44,384.

Vacation Rental Market Conditions for 2020 and Beyond

The popularity of vacation rentals is increasing every year as vacation rental platforms become more established. As a result, hosts should become proactive about investing in properties in markets that are expected to see future growth.

According to several real estate studies, the national housing market is expected to become a buyers market in 2020. Analysts expect that the Midwest will become a buyers market before the rest of the country. However, the conditions regarding vacation rentals are localized which means that you’ll have to do your research on local housing markets to determine the trends.

Conclusion

If you want to grow your portfolio or even choose the best place to purchase your first vacation rental property, knowing the best vacation rental markets to invest in is the first step. Every short-term rental market is different therefore it is important that you do your research, crunch the numbers, and even request the advice of a local real estate agent before you decide to invest. The next step for PRO hosts is to optimize and automate your daily routine. This is where iGMS can come in handy. Your free trial starts here.