The 20 Best Places to Buy a Vacation Home in the US at the Beginning of 2018: Part 1

With the beginning of the New Year, you are probably thinking about the beginning of a new real estate investing business. New Year is the time to be positive and optimistic and to be thinking about expanding your real estate investment portfolio. Or if you are not a real estate investor yet, this is the time to become one by buying your first investment property. Whether you are a beginner real estate investor searching for his/her first rental property or an experienced real estate investor looking for another income property, you should consider the option of buying a vacation home. “Why investing in a vacation home in particular?”, you might be thinking. “What are the benefits of investing in a vacation home over other types of investment properties?” We will come back to these real estate questions in a bit. And after we answer them, we will focus on the best places to buy a vacation home in the US housing market at the moment because as all real estate experts know, location is nearly everything in real estate investing.

Note: This is part 1 of The 20 Best Places to Buy a Vacation Home in the US at the Beginning of 2018. To go to part 2, click here.

Why Should You Invest in a Vacation Home?

Buying a vacation home is an excellent choice, especially for beginner real estate investors. It serves a double purpose: first, functioning as your own vacation spot during your annual vacation; and, second, serving as a rental property, or a vacation rental, for the rest of the year. If you buy a vacation home, you will have a homey place to spend your days off and relax in your favorite location from the comfort of your own home. When you are not using your second home though, you can easily rent it out as an Airbnb rental. After all, if you want to spend your vacation in this particular location, probably many other Americans as well as foreigners would like to do the same.

Related: Vacation Rental Websites: Comparing Airbnb, VRBO & Booking.com

If you are a new real estate investor, you must be worried about the risks associated with real estate investing, especially when it comes to rental properties. One of the main risks of the rental properties business is having low occupancy rate and high vacancy rate. Investing in a vacation rental somewhat reduces this risk. A vacation home is a second home, after all. So, even if you don’t manage to rent it out for as long as you want as a real estate investor, you are still not losing all its value because you get to enjoy it during your own vacation days. While this is not optimal from the point of view of a real estate investor, it is at least somewhat comforting from the point of view of a homeowner.

Nonetheless, in order to decrease the risk of high vacancy rate, it is important to choose from the best places to buy a vacation home in the US housing market so that you can rent it out at maximum capacity on Airbnb.

Related: Four Things to Consider Before Purchasing an Airbnb Investment Property

To find the best vacation homes to serve your personal and investment needs, sign up for Mashvisor now.

What Are the Advantages of Investing in a Vacation Home?

Investing in a vacation home has some specific advantages in terms of tax deductions. The IRS has developed a very strict set of regulations determining when you can take advantage of tax deductions for your vacation home and to what extent. There are a number of factors which determine whether you can benefit from tax deductions, and the most important ones are for how long you stay at your property, for how long you rent it out as an income property, what your annual income is, what part of the vacation home you own, etc. For example, if you rent out your vacation home for up to 14 days a year, your rental income is tax-free. To sum up, tax deductions on vacation homes are complicated enough to require the hiring of a tax adviser, unless you are an expert real estate investor.

Related: Should You Be Buying a Second Home to Rent It Out?

What Makes for the Best Places to Buy a Vacation Home?

Now that we know why vacation homes are such great real estate investments, it’s time to consider what makes for the best places to buy a vacation home. As we all know by now, location is nearly everything in real estate investing. It determines the demand for and supply of rental properties, the tenants pool, the rent rate, the rental income, the return on investment (cap rate and cash on cash return), the operating expenses (property tax, property insurance, property management), the best property type, the optimal rental strategy (traditional rentals or Airbnb rentals), etc.

When you are buying a vacation home to rent out, you are basically looking for two factors: 1) A place where you want to spend your own vacation and 2) A place which yields high return on investment. Since you will be renting out your investment property for only a part of the year, you must be looking for locations that are profitable for short-term rentals, also known as Airbnb rentals. When it comes to return on investment metrics, it is best to use cash on cash return as – unlike the cap rate – the cash on cash return considers the financing method for buying your rental property (whether all cash or a mortgage).

Related: What is a Good Cash on Cash Return?

To help new real estate investors as well as experienced ones buy their next investment property, we have compiled a list of the best places to buy a vacation home in the US housing market right now, along with some crucial return on investment metrics for each of these cities. For some of the best places to buy a vacation home, we show you not only the city but also the best neighborhoods within the city to make your job as a real estate investor even easier. The cities on this list come from data from TripAdvisor as the most popular summer vacation rental spots in the US. You should note though that many of these cities are top vacation spots in the winter as well due to the pleasant climate and the local attractions. The data for each city, meanwhile, is generated by Mashvisor’s investment property calculator to help you choose among the best places to buy a vacation home according to your own investment needs and preferences. Before we move any further, you should note that the cap rate and the cash on cash return for Airbnb rentals (as well as traditional rentals) calculated by Mashvisor’s rental property calculator is the same as our calculator assumes all cash investment property payments.

Related: Why An Investment Property Calculator Tells You More Than Just Numbers

To start searching for and finding the best investment properties – whether traditional rentals or Airbnb rentals – across the US housing market, sign up for Mashvisor now.

What Are the Best Places to Buy a Vacation Home in the US Housing Market Now?

Please note that this list of the best places to buy a vacation home in the US housing market consists of 20 cities, which we have divided in two articles. To go to part 2, click here.

As it could be expected, many of the best places to buy a vacation home in the US on this list are located in the State of Florida, which is a top vacation destination in the US. Thus, we present the 9 best places to buy a vacation home in Florida in part 1 of this article, while the other 11 best places to buy a vacation home in the US are presented in part 2.

Related: The 7 Best Places to Buy a Vacation Home in Florida

1. Panama Beach City, FL

  • Median Property Price: $299,000
  • Airbnb Rental Income: $2,710
  • Airbnb Cash on Cash Return: 7.1%
  • Airbnb Cap Rate: 7.1%
  • Airbnb Occupancy Rate: 53.3%%
  • Traditional Rental Income: –
  • Traditional Cash on Cash Return: –
  • Traditional Cap Rate: –

The first on this list of the best places to buy a vacation home in the US housing market in general and in the State of Florida in particular (in no specific order) is Panama Beach City, a relatively small resort famous for its trademark white sand and warm Gulf of Mexico water. It attracts all types of short-term visitors, including students during spring break, singles, families, and retirees. Panama Beach City is quite affordable for buying an investment property, while the expected Airbnb cash on cash return and Airbnb cap rate are excellent.

Now, before we continue, we should clarify something with regards to return on investment. Many real estate professionals say that good cap rate and good cash on cash return are anything in the range of 8-12%. However, we have to be realistic here. With the recent growth in the real estate investing business, real estate investors should be very happy with any rental property generating 5% or more in cap rate and cash on cash return.

Related: What’s a good cap rate for investment properties?

2. Destin, FL

  • Median Property Price: $500,000
  • Airbnb Rental Income: $4,700
  • Airbnb Cash on Cash Return: 10.5%
  • Airbnb Cap Rate: 10.5%
  • Airbnb Occupancy Rate: 62.0%
  • Traditional Rental Income: $1,670
  • Traditional Cash on Cash Return: 1.9%
  • Traditional Cap Rate: 1.9%

Next among the best places to buy a vacation home for real estate investors is Destin, which enjoys a double-digit Airbnb cash on cash return and Airbnb cap rate, according to Mashvisor’s investment property calculator. While the median property price here is relatively higher, the Airbnb rental income is outstanding, which adds to up to excellent return on investment for Airbnb rentals.

3. Orlando, FL

  • Median Property Price: $283,000
  • Airbnb Rental Income: $770
  • Airbnb Cash on Cash Return: 2.1%
  • Airbnb Cap Rate: 2.1%
  • Airbnb Occupancy Rate: %
  • Traditional Rental Income: $1,590
  • Traditional Cash on Cash Return: 2.3%
  • Traditional Cap Rate: 2.3%

While Orlando does not seem to be such a great place to invest in short-term rentals according to figures provided by Mashvisor’s investment property calculator, there is a reason why TripAdvisor considers it one of the best places for vacation rentals in the US, and thus one of the best places to buy a vacation home at the beginning of 2018. Namely, there are two particular neighborhoods in Orlando – Florida Center North and Millenia – which are doing very, very well. We particularly recommend Florida Center North to new real estate investors who still lack big cash for the highly affordable median property price. Moreover, 12.7% in expected Airbnb cash on cash return as well as Airbnb cap rate is not something to just walk by without considering as a possible investment property.

Related: Orlando and Tampa Are to Invest in Florida Real Estate

Florida Center North, Orlando, FL

  • Median Property Price: $165,000
  • Airbnb Rental Income: $2,230
  • Airbnb Cash on Cash Return: 12.7%
  • Airbnb Cap Rate: 12.7%
  • Airbnb Occupancy Rate: 69.9%
  • Traditional Rental Income: $1,370
  • Traditional Cash on Cash Return: 3.3%
  • Traditional Cap Rate: 3.3%

Millenia, Orlando, FL

  • Median Property Price: $140,000
  • Airbnb Rental Income: $1,440
  • Airbnb Cash on Cash Return: 7.5%
  • Airbnb Cap Rate: 7.5%
  • Airbnb Occupancy Rate: 51.5%
  • Traditional Rental Income: $1,140
  • Traditional Cash on Cash Return: 4.3%
  • Traditional Cap Rate: 4.3%

4. Kissimmee, FL

  • Median Property Price: $220,000
  • Airbnb Rental Income: $2,110
  • Airbnb Cash on Cash Return: 6.8%
  • Airbnb Cap Rate: 6.8%
  • Airbnb Occupancy Rate: 65.0%
  • Traditional Rental Income: $1,120
  • Traditional Cash on Cash Return: 1.8%
  • Traditional Cap Rate: 1.8%

Another option among the best places to buy a vacation home in Florida in early 2018 is Kissimmee, where affordability among property pricing results in good cash on cash return and good cap rate for short-term rental properties.

5. Davenport, FL

  • Median Property Price: $223,000
  • Airbnb Rental Income: $1,790
  • Airbnb Cash on Cash Return: 5.3%
  • Airbnb Cap Rate: 5.3%
  • Airbnb Occupancy Rate: 59.0%
  • Traditional Rental Income: $1,020
  • Traditional Cash on Cash Return: 1.2%
  • Traditional Cap Rate: 1.2%

Davenport is another city which offers Airbnb cash on cash return and Airbnb cap rate of above 5%, which makes is one of the best places to buy a vacation home in the US right now. Davenport is such a great location to invest in real estate mostly due to the affordable property price levels.

6. Miami Beach, FL

  • Median Property Price: $561,000
  • Airbnb Rental Income: $2,260
  • Airbnb Cash on Cash Return: 1.9%
  • Airbnb Cap Rate: 1.9%
  • Airbnb Occupancy Rate: –
  • Traditional Rental Income: $3,110
  • Traditional Cash on Cash Return: 2.2%
  • Traditional Cap Rate: 2.2%

As you might have already noticed, Miami Beach doesn’t seem to be a particularly lucrative location for investing in real estate through short-term rentals, according to data from Mashvisor’s investment property calculator. However, it is on the list of the best locations for vacation rentals according to TripAdvisor, and we just couldn’t leave out such a top tourist destination in our list of the best places to buy a vacation home in the US. As a new real estate investor or an experienced real estate professional, you should know that the housing market is dynamic, and what is not a particularly profitable location today might be a top location for real estate investments tomorrow.

7. Fort Walton Beach, FL

  • Median Property Price: $325,000
  • Airbnb Rental Income: $3,850
  • Airbnb Cash on Cash Return: 13.4%
  • Airbnb Cap Rate: 13.4%
  • Airbnb Occupancy Rate: 59.6%
  • Traditional Rental Income: $1,230
  • Traditional Cash on Cash Return: 2.0%
  • Traditional Cap Rate: 2.0%

On this list of the best places to buy a vacation home in the US right now, Fort Walton Beach is actually the most profitable, according to figures from Mashvisor’s rental property calculator. Cash on cash return and cap rate of 13.4% for short-term rentals is not something you see every day in the world of real estate investing. So, real estate investors looking for a place to buy an investment property to rent out through the Airbnb rental strategy in the New Year should definitely consider Fort Walton Beach.

8. Miramar Beach, FL

  • Median Property Price: $399,000
  • Airbnb Rental Income: $3,880
  • Airbnb Cash on Cash Return: 7.7%
  • Airbnb Cap Rate: 7.7%
  • Airbnb Occupancy Rate: 53.4%
  • Traditional Rental Income: $1,660
  • Traditional Cash on Cash Return: 1.8%
  • Traditional Cap Rate: 1.8%

Another option if you are looking for the best places to buy a vacation home in the US housing market at the moment is Miramar Beach, which is a hub for all sorts of vacation activities, attracting a wide range of short-term visitors including Airbnb guests.

9. Daytona Beach, FL

  • Median Property Price: $170,000
  • Airbnb Rental Income: $2,150
  • Airbnb Cash on Cash Return: 9.9%
  • Airbnb Cap Rate: 9.9%
  • Airbnb Occupancy Rate: 48.2%
  • Traditional Rental Income: $1,180
  • Traditional Cash on Cash Return: 3.7%
  • Traditional Cap Rate: 3.7%

Needless to say, Daytona Beach is another of the best places to buy a vacation home in the US right now, particularly in the State of Florida. It’s such a top tourist destination that we barely need to say anything more. Just look at the expected cash on cash return and cap rate for Airbnb rentals, and you as a real estate investor will make the right investment decision immediately.

Related: The 4 Best Places to Invest in Real Estate in Florida

Now that we have gone over all the best places to buy a vacation home in Florida on our list, it is important to highlight a trend, which will be of major help to real estate investors. Before you decide to invest in real estate in any of these top vacation cities, you should note that, according to data from Mashvisor’s rental property calculator, none of these locations makes for a good place to invest in traditional rentals. Thus, if you decide to buy an investment property (in the form of a vacation home) in any of them, you should be really convinced of the Airbn rental strategy. Remember, these are the best places to buy a vacation home in the US housing market now, not the best places to rent out traditionally.

Related: Why It Totally Makes Sense to Rent Out Your Vacation Homes

Are Airbnb Rentals Legal in the State of Florida?

Since we have been talking about the best places to buy a vacation home to rent out as an Airbnb rental for most of the year, it is important to consider the legality of short-term rentals in the State of Florida. Real estate investors will be glad to know that the Airbnb rental strategy is legal in Florida. However, 2017 witnessed numerous changes in the local legislation in various Florida cities, so before you decide to buy a vacation home to rent out on Airbnb as an investment property, you should study the local legal situation with regards to Airbnb in your location of choice.

When deciding where to buy a vacation home to spend your vacation days in and to rent out as a rental property for the rest of the year, you don’t have to be limited to Florida. In part 2 of this article, you can read about the best places to buy a vacation home in the US in other states.

Whether you opt for Florida or another location, you can start searching for the best real estate investment properties on Mashvisor immediately. Just sign up. Remember that Mashvisor’s investment property finder and Mashvisor’s investment property calculator will provide you with the best investment properties and figures related to them, for both traditional rentals and Airbnb rentals. Mashvisor is the top real estate investing tool, regardless of your preferences of a rental strategy as a real estate investor. Whether you are looking for a traditional rental or a short-term rental property, you are guaranteed to find an optimal choice on Mashvisor, always in a top location.

Meanwhile, if you think that buying a vacation home is the right investment decision for you as a real estate investor but are not in favor of any of the best places to buy a vacation home in Florida, you should take a look at our blogs:

Note: This is part 1 of The 20 Best Places to Buy a Vacation Home in the US at the Beginning of 2018. To go to part 2, click here.

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