The single biggest purchase you may ever make in your life is where you live, but why own just one home when you can also invest in a vacation property and rent it out when you’re not there?
Thanks to hosting platforms such as Airbnb, where vacation home investors can earn on average upwards of $900 per month, short-term rentals can yield long-term profits, especially if they’re located in America’s most in-demand cities where you can charge as much as four times that amount.
There are other perks to being a short-term rental landlord. Besides helping you pay off your second mortgage, if you rent out your vacation property for more than 14 days you can write off many of the expenses you’ll incur to maintain and repair it, such as hosting fees, cleaning costs, property management fees and occupancy taxes.
Most importantly, a vacation home can build long-term wealth and perhaps help ensure healthy finances upon retirement. Sell it and use the cash to cover your future costs of living, travel and healthcare, or keep it and enjoy your retirement there.
To help you find and invest in the nation's most lucrative short-term rental markets, Evolve Vacation Rental has used a combination of proprietary and public data to compile a list of the top-earning locations across three metrics: vacation rental performance bookings; Zillow’s median home value; and the estimated yearly expenses to operate a vacation rental (approximately 30% of total revenue) used to calculate the rate of return (capitalization or cap rate) on a real estate investment property.
Here, in ascending order, are the best places to buy a vacation rental in 2021.
11. The Catskills, N.Y.
The Catskills have seen a 40% growth rate in just the past two years alone, Evolve says. To tap into this profitable vacation home market, Evolve recommends scouting out properties in Woodstock, riverfront Catskill, pastoral Margaretville, or Windham at the area's northernmost tip. The median rental revenue is $30,953; the median listing price is $256,709; and the estimated cap rate is 8%.
10. Cape Coral, Fla.
Located on the Gulf of Mexico, Cape Coral is a coastal vacation haven. Home owner association costs may be high, but local government believes in laissez-faire regulation of vacation properties, making them less expensive to own and more profitable to rent, Evolve says. The median rental revenue is $29,515; the median listing price is $248,354; and the estimated cap rate is 8%.
9. Lake Havasu City, Ariz.
Whether you’re a hiker, water sports fanatic or history buff, you’ll find something to do while on vacation in Lake Havasu. For the most part, Arizona takes a hands-off approach to regulating rental properties, and there is year-round demand for them, Evolve says. The median rental revenue is $33,588; the median listing price is $272,509; and the estimated cap rate is 9%.
8. Branson, Mo.
A popular family destination in the Ozarks, this small town with Wild West vibes offers a variety of fun-filled, year-round entertainment options. The median rental revenue is $21,488; the median listing price is $162,496; and the estimated cap rate is 9%.
7. Broken Bow, Okla.
Broken Bow attracts outdoor enthusiasts 12 months a year. If you invest in cabins along Broken Bow Lake or in Hochatown, equip your rental property with luxury amenities and you can earn even more when you rent it, Evolve says. The median rental revenue is $47,866; the median listing price is $400,000; and the estimated cap rate is 9%.
6. Ruidoso, N.M.
Offering a wide selection of outdoor recreational activities, glittering casino nightlife and ever-popular rustic cabin aesthetic, Ruidoso is an investment dream come true, Evolve says. The median rental revenue is $26,372; the median listing price is $192,932; and the estimated cap rate is 10%.
5. Hot Springs, Ark.
Located next to Hot Springs National Park, this Ouachita Mountains location draws visitors worldwide for its naturally-heated, mineral-rich springs and bathhouses, and picture-perfect natural wonders. List prices are surprisingly low in the area, Evolve says, so you should recoup your investment quickly. The median rental revenue is $22,739; the median listing price is $159,408; and the estimated cap is 10%.
4. Granbury, Tex.
Sandwiched between Dallas and Fort Worth, this outdoor recreation hotspot offers easy access to big city attractions in the Lone Star State. The median rental revenue is $42,500; the median listing price is $262,265; and the estimated cap is 11%.
3. Pigeon Forge, Tenn.
Known for its numerous family friendly activities and breathtaking natural beauty, visitors flock to Pigeon Forge all year round. The median rental revenue is $42,085; the median listing price is $221,610; and the estimated cap is 13%.
2. Blue Ridge, Ga.
From hiking and horseback riding to apple picking and trout fishing, this rustic slice of Southern life is a must-visit vacation destination. To maximize your return on investment, look for cabin homes that open up to the area’s spectacular mountain views, Evolve says. The median rental revenue is $47,042; the median listing price is $260,476; and the estimated cap rate is 13%.
1. The Poconos, Pa.
Enjoy the small town charm of Tobyhanna, Pocono Lake, and Albrightsville when vacationing in the Poconos, but waterfront properties near Lake Wallenpaupack or Arrowhead Lake offer the best investment potential and are booking like wildfire, Evolve says. The median rental revenue is $36,254; the median listing price is $180,581; and the estimated cap is 14%.
