Forty-nine percent of vacation homebuyers plan to use their property for vacations or family getaways while 45 percent of investment property buyers purchased a vacation home to generate an income through renting (instead of generating the income through flipping the property or waiting for the price to appreciate), according to research from The National Association of Realtors (NAR).
Thirty percent of vacation property owners plan to rent their homes as short-term rentals in 2018 -- up 25 percent in 2017, according to the NAR report.
While more buyers and investors seeking vacation rental properties, the return on investment depends mainly on the strength of the market where the property is located.
A recent study from Rented.com evaluated 150 U.S. markets, comparing the cost of home ownership and short-term rental potential to find the destinations with the best value for buyers.
The study looked at features including purchase price, local property taxes, home insurance and maintenance. To figure out the short-term rental potential, Rented.com evaluated data from management companies, Everbooked and Airdna occupancy data and rental rate projections in each market, among other measures.
Here is a list of the best places to buy a vacation rental property based on return on investment:
10. Atlanta, Ga.
Score: 85.2
Estimated Rental Income: $34,502
Short-term rentals are highly profitable in Atlanta. Many homeowners benefit from occupancy secured through Airbnb, an online marketplace that connects homeowners with people who are looking for accommodations. Atlanta placed in the top three urban markets for generating income via Airbnb, according to a report from Curbed Atlanta.
9. Navarre, Fla.
Score: 86.0
Estimated Rental Income: $48,349
While Navarre has been a popular beach destination, there are some risks to renting in the region. Due to rising sea levels, 72 homes with a current market value of $19.9 million could be at significant risk of flooding in the future, says a report from the Union of Concerned Scientists.
8. Seattle, Wash.
Score: 87.80
Estimated Rental Income: $90,766
After a steep decline in rent prices following an abundance of new apartment construction in Seattle’s most popular neighborhoods, supply and demand has seemingly caught up. Rent continues to rise eight times faster than the national average, according to a 2018 report from The Seattle Times.
7. Killington, Vt.
Score: 88.30
Estimated Rental Income: $46,709
A new law governing short-term rentals is in effect as of July 2018. The new law will likely close the tax loophole enjoyed by property owners who used services like Airbnb. All short-term rental operators must post Vermont meals and rooms tax account number on any advertisement for the short-term rental. The Vermont General Assembly also passed Act 10, which assures renters receive safe and sanitary conditions, according to a report from The Vermont Department of Taxes.
6. Nashville, Tenn.
Score: 90.30
Estimated Rental Income: $30,620
In recent years, Nashville has been improving tourism in the city. A convention center was recently built in the city center that informs tourists of what the city has to offer -- outside of the “honky-tonk” culture. Nashville attracts over 14.5 million visitors every year, according to a report from the Nashville Convention and Visitor’s Corp.
5. Memphis, Tenn.
Score: 90.50
Estimated Rental Income: $55,690
Dan Butler of CrestCore Realty told Roofstock.com,"The price-to-rent ratio has continued to keep Memphis on the map for out-of-town investors."
4. Tulsa, Okla.
Score: 92.50
Estimated Rental Income: $26,350
Tulsa ranked fourth for its abundance of attractions for visitors, according to a report from Best Cities. The city is home to a 6,000 object Bob Dylan Archive, The Guthrie Center, devoted to folk singer Woody Guthrie and protest singer Phil Ochs, according to the report.
3. Napa Valley, Calif.
Score: 93.10
Estimated Rental Income: $61,898
Napa Valley has been a strong market for years, but wildfires last October destroyed so many homes -- an estimated 569 -- that rents have sharply increased as a result, says The Napa Valley Register. The Napa Valley had 3.5 million visitors who spent nearly $2 billion, according to a recent Napa Valley Visitor Industry Economic Report.
2. Chicago, Ill.
Score: 95.30
Estimated Rental Income: $68,522
Compared to other top locations, Chicago was a particularly unusual location due to the high cost to own a home in the city. However, demand and demand growth have exceeded supply and supply growth, which caused occupancy and nightly rental rates to rise significantly, according to the report.
1. Panama City Beach
Score: 98.90
Estimated Rental Income: $26,301
The reason Panama City Beach ranks no. 1 "is we're still affordable. We're not priced out of the market yet because you can still get a 10 percent return on your money on many of the condos here," Realtor Karen Smith told ABC News. "You can't do that many other places."