The concept of buying a vacation rental property investment is so appealing in today’s market that every investor should at least consider the idea for him or herself. Vacation home rentals are great investments for real estate investors who want to make money in real estate. With the high demand for vacation rentals in the current housing market, the formula for success is finding the right location. If you are wondering where the best places to buy vacation rental property 2018 are, then you’ve come to the right place.
Related: Vacation Home Rentals: Can You Really Make Money in Real Estate with Them?
I already know what you are thinking, “Why should I invest in vacation home rentals? If I do decide to invest in vacation homes, what should I look for to ensure that the rental property I am purchasing will generate positive cash flow? And what factors make for the best places to buy vacation rental property 2018?” It’s okay, don’t panic and stop overthinking. I have all the answers to your questions and more!
Why should you invest in a vacation rental property? Here are the benefits!
1. Two purpose property
We all know that the main goal for every real estate investor is to make a profit from property investments. The cool thing about vacation rentals is that they are two-in-one properties. What do I mean? You can use them as a “second home” where you spend your vacations with your family and enjoy a time of relaxation on your days off and you can rent them out as an Airbnb rental to guests and make money when you are not using them. Long-term rental properties do not come with this full package!
Related: Should You Be Buying a Second Home to Rent It Out?
2. Less risk
A major concern for many beginner real estate investors is the risk related to real estate investing. For rental properties, real estate investors always fear they might end up dealing with low occupancy rates and high vacancy rates. Buying a vacation rental property reduces this risk. How? With Airbnb rentals, you have control over the rental rates to a greater extent than with traditional rental properties. Therefore, you can combat any kind of vacancy rate with the right Airbnb pricing strategy.
3. Generate rental income
So many real estate investors jump into real estate investing for the primary advantage of gaining a source of steady income and generating positive cash flow. Rental properties generate a steady income in the form of monthly rental income.
Vacation home rentals in the right location can provide a reliable income, contrary to popular belief. While it may not be as consistent as traditional rental properties, your Airbnb pricing strategy will dictate the amount you get every month. A real estate investor can make more on a monthly basis than with a traditional rental. The money you get from bookings and the rent can be used to pay off the mortgage, property tax, repair costs, or maintenance.
Related: The Top 6 Strategies to Boost Your Rental Income as a Real Estate Investor
4. Increase value through appreciation
In real estate, any form of investment property generally appreciates in value over time. You can make money from your vacation rental property in the long run when you come to sell it. You can sell it at a higher price and cash in on the profit. The cool part is that you don’t have to do anything, real state appreciation will do the job for you.
Additionally, you can make some improvements and renovations to your short-term rental to increase the market value of your vacation rental even more. This is generally known as “forced appreciation.”
5. Tax deductions
Like an investment property, a second home also comes with tax deductions. These tax deductions apply to mortgage payments, property tax, rental income, insurance premium, utilities, and other rental expenses. It is advised to work with an accountant to calculate the number of days you live in the property and the number of days you rent it out to guests to ensure you are getting full advantage of tax deductions.
6. Easy to manage and control
Renting out your vacation rental does not have to be a full-time job or take up most of your time. You can manage and control your vacation property easily and without being there. Hire vacation rental management services to take care of your property and do all the day to day work. Self-managing a rental property can be very time-consuming especially with vacation rentals where guests are always coming and going.
As you can see, investing in vacation rentals has its benefits. But if you’re a beginner real state investor, there are certain factors you need to consider when you look for vacation rental properties. Before I name the best places to buy vacation rental property 2018, let’s review these factors.
-
Pick a popular location
If you want your vacation rental to succeed and maintain a high occupancy rate, you need to choose a popular location. Usually, these locations are those that attract tourists and places where travelers would enjoy. Continue reading as I mention the best places to buy vacation rental property 2018 further down in the blog. Furthermore, to make your search for the best locations for short-term rentals easy, use Mashvisor’s property finder tool!
Do you have a free Mashvisor account? Click here to use our Property Finder and find properties in a matter of minutes!
-
Learn about short-term regulations
Every day a new short-term regulation is enforced in a different city across the US. Once you’ve found an attractive location for your vacation rental, make sure you read through that city’s regulations regarding short-term rentals. Visit Airbnb’s website to find out your city’s regulations to make sure you don’t run into any legal issues. For more information about Airbnb legal issues, read through Which Are the US Cities with the Most Airbnb Legal Issues at the Beginning of 2018?
-
Perform comparative market analysis
To make sure you don’t fall into common real state investment pitfalls like overpaying, you need to conduct real state market analysis. Also known as comparative market analysis, it helps you determine your property’s market value through real estate comps. When you know your property’s estimated value, you won’t overpay for your second home.
Related: How to Easily Find Real Estate Comps
Finally, we’ve reached the good stuff. Here is a list of the best places to buy vacation rental property 2018.
Read Also: The 20 Best Places to Buy a Vacation Home in the US at the Beginning of 2018: Part 1
Best places to buy vacation rental property 2018: Panama City Beach, Florida
Panama City Beach is gradually claiming the title for a property investment hotspot! This city is the perfect source for an attractive beachfront real estate that can easily be turned into a profitable location for vacation home rentals. Here are the city’s numbers according to Mashvisor’s data:
- Median Property Price: $299,900
- Airbnb Rental Income: $2,709
- Occupancy Rate: 52.09%
- Airbnb Cap Rate: 5.37%
- Airbnb Cash on Cash Return: 5.37%
Best places to buy vacation rental property 2018: Tulsa, Oklahoma
This city came about as a surprise for many real estate investors since it isn’t usually considered a “vacation destination.” However, according to our numbers and the data from Mashvisor’s rental property calculator, this city proved to be a big hit for short-term rentals!
Neighborhood #1: Crutchfield
- Median property price: $54,500
- Airbnb rental income: $1,293
- Occupancy rate: 46.50%
- Airbnb cap rate: 9.22%
- Airbnb cash on cash return: 9.22%
Neighborhood #2: Woodridge
- Median property price: $304,839
- Airbnb rental income: $4,667
- Occupancy rate: 50.80%
- Airbnb cap rate: 8.92%
- Airbnb cash on cash return: 8.92%
Best places to buy vacation rental property 2018: Napa, California
Napa Valley is a favorite destination for many people all around the world. Filled with vineyards and wineries and just an hour’s drive away from San Francisco, this city is a hotspot for investing in vacation rentals.
- Median property price: $1,462,860
- Airbnb rental income: $6,627
- Occupancy rate: 51.21%
- Airbnb cap rate: 3.68%
- Airbnb cash on cash return: 3.68%
Related: The 3 Best Places to Buy a Vacation Home in California in the Summer of 2018
Best places to buy vacation rental property 2018: Chicago, Illinois
Being the third largest city in the US, the Windy City is making its way up to the top of the list for one of the best places to buy vacation rental property 2018. With so many attractions, tourists and travelers, the demand for vacation homes is increasing. Here are the numbers from Mashvisor for the top neighborhood for short-term rentals in Chicago.
Neighborhood: West Loop Gate
- Median property price: $367,868
- Airbnb rental income: $3,312
- Occupancy rate: 54.9%
- Airbnb cap rate: 2.28%
- Airbnb cash on cash return: 2.28%
Best places to buy vacation rental property 2018: Memphis, Tennessee
Memphis hit the top 5 from the best places to buy vacation rental property 2018 according to rented.com. This city is full of attractions that make people from all over the country come and visit it. Below are the numbers for the top neighborhoods that are best for investing in short-term rentals.
Neighborhood #1: Midtown
- Median property price: $221,188
- Airbnb rental income: $2,034
- Occupancy rate: 40.87%
- Airbnb cap rate: 4.47%
- Airbnb cash on cash return: 4.47%
Neighborhood #2: Downtown
- Median property price: $308,042
- Airbnb rental income: $2,479
- Occupancy rate: 49.79%
- Airbnb cap rate: 3.74%
- Airbnb cash on cash return: 3.74%
The bottom line:
Buying a vacation rental property is becoming a popular trend among real estate investors. The demand for these types of rental properties is growing more and more every year. The key to a successful short-term investment is finding the right location, one that is guaranteed to help maximize the return on your investment. Mashvisor has all the necessary tools to help you find and analyze investment properties nationwide.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
