Real estate market trends can change rapidly; investors can use some insight into the top cities for profitable short-term rentals.
Table of Contents
- What Is a Short-Term Rental?
- Types of Short-Term Residential Properties
- Top 5 Cities for Profitable Short-Term Rentals
- Starting Up a Rental Business: Tips for Investors
- The Benefits and Drawbacks of Owning Short-Term Rentals
- Short-Term Rentals: Summing Up
The US real estate market is a vast one, and keeping up with current trends can be relatively challenging—especially for someone who’s new to property investments.
Luckily, researching the market and locating profitable investment properties are becoming a bit easier now. Future investors and real estate agents alike are now able to access a wide range of investment tools—allowing them access to crucial information within minutes.
What is evident when looking at the current real estate market trends is that the popularity of short-term vacation rentals is growing by the year. And with the right location, investors can quickly expand their portfolios and generate a steady income.
So, if you are interested in lucrative locations for purchasing an investment property with the intention of turning it into a vacation home, be sure to stick around.
We’ll provide you with an in-depth overview of the best locations—and some tips for turning your investment plans into reality.
What Is a Short-Term Rental?
First of all, let’s clarify the meaning behind “short-term rentals,” bearing in mind that the term may be vague for people just stepping into the real estate game.
In a nutshell, a short-term rental is defined as any type of residential property—or accessory building—that tenants occupy for a SHORT period of time. And by “short,” we mean no more than 30 days.
Who occupies these properties?
Well, pretty much anyone and everyone.
Unlike long-term rentals, which are the preferred choice of families and contract employees, short-term vacation rentals are suitable for virtually anyone looking for some “time-out” from their hometown.
Whether it’s summer vacation, spring break, or winter holidays, short-term rentals are very popular with all age groups.
For example, families who want to spend their vacation somewhere will most likely conduct a thorough Airbnb analysis to find affordable places to stay instead of paying for ten nights in a hotel. It’s often a matter of budgeting for their upcoming vacation.
But besides the fact that vacation rental properties are more budget-friendly, they offer another significant advantage. They’ve got that “home atmosphere” to them, unlike any hotel.
In addition to the usual vacation-related reasons, many people decide to stay in a vacation rental property while they’re getting their home renovated or waiting for the purchase agreement to be completed.
Reasons vary, and, as you’re about to see, so do the types of these properties.
Types of Short-Term Residential Properties
A short-term vacation rental is not associated with just one type of property.
On the contrary, as the housing market evolved, so did the types of home rentals. Currently, the most common types of short-term residential properties include the following:
Seasonal Vacation Rentals
As the leading property for investment among Millennials, seasonal vacation homes have proven to be one of the most profitable investments to date.
These kinds of residential properties will not go out of style so quickly, simply because their purpose is precise—vacationing. When advertised and appropriately equipped, they will always provide a more tempting option than a hotel. It especially goes for more expensive cities and central tourist locations.
In addition to bringing in seasonal profits, they can also serve as an option for the investor if they decide that they want to spend holidays where the property is located.
It’s a win-win for everyone involved.
Luxury Homes
While not as commonly booked as vacation short-term rentals, luxury homes are still a pretty popular choice among beginner investors.
In 99% of cases, luxury homes are intended to be short-term. Primarily for financial reasons, this property type may be easier to locate. Still, it is much more difficult to purchase—you’re going to need a flawless credit score or a lifetime of savings.
On the other hand, this type of investment will most likely not be rented out for an extended period—again, due to the costs. So, you probably shouldn’t get your hopes up as far as your potential return on investment is concerned.
However, once you do rent it out, you can make a lot of money on it.
Getaway Homes
As the name suggests, getaway homes are a type of property located in remote areas, even islands—far from the urban lifestyle. Before you decide to embrace or dismiss this option, be sure to keep a few things in mind, including:
Buying this type of property may not be difficult, but you shouldn’t expect a high profit, either. Even more so, you’ll be free of most legal issues that primarily concern short-term rentals in more populated areas.
But you’ll have to choose your rental property wisely.
Top 5 Cities for Profitable Short-Term Rentals
We’re slowly getting to the heart of the matter regarding home rentals. And now that we’ve managed to clear up what types of properties fall under the umbrella of “short-term rental,” let’s look at some specific examples and locations.
Here are the top 5 short-term rental sites you should be looking up, according to Mashvisor’s latest data, arranged from highest to lowest in terms of cash on cash return:
1. Slidell, LA
- Number of Listings for Sale: 38
- Median Property Price: $406,906
- Average Price per Square Foot: $187
- Days on Market: 61
- Number of Short-Term Rental Listings: 68
- Monthly Short-Term Rental Income: $4,441
- Short-Term Rental Cash on Cash Return: 7.62%
- Short-Term Rental Cap Rate: 7.82%
- Short-Term Rental Daily Rate: $348
- Short-Term Rental Occupancy Rate: 54%
- Walk Score: 69
2. North Charleston, SC
- Number of Listings for Sale: 104
- Median Property Price: $327,792
- Average Price per Square Foot: $202
- Days on Market: 61
- Number of Short-Term Rental Listings: 287
- Monthly Short-Term Rental Income: $3,028
- Short-Term Rental Cash on Cash Return: 6.18%
- Short-Term Rental Cap Rate: 6.36%
- Short-Term Rental Daily Rate: $150
- Short-Term Rental Occupancy Rate: 64%
- Walk Score: 77
3. Gulfport, MS
- Number of Listings for Sale: 90
- Median Property Price: $354,462
- Average Price per Square Foot: $163
- Days on Market: 107
- Number of Short-Term Rental Listings: 198
- Monthly Short-Term Rental Income: $2,982
- Short-Term Rental Cash on Cash Return: 6.07%
- Short-Term Rental Cap Rate: 6.26%
- Short-Term Rental Daily Rate: $154
- Short-Term Rental Occupancy Rate: 58%
- Walk Score: 61
4. Crystal River, FL
- Number of Listings for Sale: 52
- Median Property Price: $469,242
- Average Price per Square Foot: $256
- Days on Market: 60
- Number of Short-Term Rental Listings: 148
- Monthly Short-Term Rental Income: $3,447
- Short-Term Rental Cash on Cash Return: 4.91%
- Short-Term Rental Cap Rate: 5.05%
- Short-Term Rental Daily Rate: $184
- Short-Term Rental Occupancy Rate: 57%
- Walk Score: 51
5. Joshua Tree, CA
- Number of Listings for Sale: 76
- Median Property Price: $581,776
- Average Price per Square Foot: $473
- Days on Market: 61
- Number of Short-Term Rental Listings: 388
- Monthly Short-Term Rental Income: $3,792
- Short-Term Rental Cash on Cash Return: 4.69%
- Short-Term Rental Cap Rate: 4.77%
- Short-Term Rental Daily Rate: $247
- Short-Term Rental Occupancy Rate: 58%
- Walk Score: 53
One crucial factor for managing a successful Airbnb business is having access to real estate information at any given moment.
Now, you can easily do that by using our Rental Property Calculator—which aims to assist investors in researching and assessing the potential profitability of the desired property.
With vacation rental strategies, it’s necessary to be versed in statistics and manage a large amount of data coming your way, like cap rate, cash-on-cash return, occupancy rate, and so on.
Luckily, our tools help you acquire up-to-date information and extensive knowledge of market trends in one place.
Mashvisor’s Rental Property Calculator aims to help investors research and assess the profitability of a particular property, based on cash flow, cash on cash return, cap rate, and occupancy rate.
Starting Up a Rental Business: Tips for Investors
Stepping into the real estate business isn’t something you should do blindly. You need to equip yourself with the knowledge and tools that will help you generate income and keep your short-term rental business afloat.
Whether you’re a real estate newbie—or just looking for some valuable info to refresh your memory—the tips outlined below will come in handy.
Define Your Main Goal
Before you even consider the idea of putting up rooms for rent, you should define your goals clearly. Start by asking yourself questions such as:
- Do I already have a property that I can transform into a rental?
- Do I want short-term or long-term guests?
- Do I have the time to manage the property?
- Can I gather the funds necessary for investing in this property?
Remember, there’s a significant difference between managing and expecting income from long-term and short-term rentals—and you should review your options with extreme care before taking the next step.
Draft Your Strategy and Financial Plan
Investing in real estate property implies establishing a strong strategy and financial plan that will help you manage your rental and prepare it for guests.
In the past, it meant hiring a third party that would help you gather crucial information and evaluate the profitability of potential short-term rentals. Today, however, you have the chance to do it yourself by making use of investment tools.
Your financial capabilities also play a massive part in investing and whether it will succeed or not. You’ll need to figure out which funding method suits you best to ensure the risk of falling into debt and having your property taken away from you is minimal.
Act on Feedback
Now, this can be a double-edged sword since tenants can affect the success of vacation rentals.
How?
Since you’ll be listing your short-term rental property, it automatically means that there is an open space for commenting and rating your accommodation. It, in turn, means you’ll be dealing with both good and bad reviews.
Here’s something to keep in mind:
You must put in more effort than you initially expected, listen to your tenants, and act on their feedback—be it positive or negative. It is because a majority of your potential guests are going to scroll through reviews prior to booking your rental.
And you want them to be pleased with what they read about it—and you, as the host.
The Benefits and Drawbacks of Owning Short-Term Rentals
Owning and running a short-term rental property is not all good or all bad. There’s a delicate balance between the two when it comes to ensuring you’re making money and not losing it.
Let’s discuss some notable advantages—and disadvantages—of owning a vacation rental before we wrap up this guide.
Benefits
- Flexibility: Since it’s not long-term, it allows you to determine the exact dates when your property will be available and when you may receive guests. It becomes even more beneficial if you’re looking to take advantage of your property and spend some time on it.
- Less Wear and Tear: Having less-frequent guests on your property means spending less on cleaning services and repairs.
Drawbacks
- Inconsistent Income: Since you’re opting for short-term stays on your property, you should come to terms with not receiving payments for months at a time. Your rental property may still perform excellently—but only during certain times of the year.
- HOA Charges: Some neighborhoods will not take the idea of investors renting out a property lightly—and may even press charges against you. That’s why neighborhood analysis is a crucial step in planning your next investment.
Speaking of HOA rules and regulations, here’s a good question:
How to Get Around Short-Term Rental Restrictions?
Many cities have placed specific bans on short-term renting. With that said, the rules and regulations vary by city.
What can you do to avoid unnecessary legal action? Well, it’s simple, really:
Get to know the laws of the place you’re planning to invest in beforehand.
One common misunderstanding revolves around subletting. You can sublet your apartment or part of the house to someone else—meaning that they will be renting it out to a third party. The law, however, requires such types of leases to be short-term.
Know that you’ll probably need to obtain a license to operate your short-term rental business, too. So, check the laws—and re-read your lease a few times if needed.
If you violate the laws, you can end up paying a hefty fine or, even worse, going to jail.
Short-Term Rentals: Summing Up
We’ve successfully gone through the most prosperous US cities to invest in short-term rental properties. Now, let’s briefly go over the most critical points.
Before deciding on investing, you should clarify what short-term rentals are and what are the most common types. Gathering the necessary info and knowledge is half the battle.
As outlined in this guide, the most lucrative locations for these types of investment properties currently include Slidell, North Charleston, and Gulfport, to name a few.
Using the right investment tools during your research and establishing a solid strategy will help your property stay in business for a long time—and ensure that you make high returns.
Sign up for today to find your next profitable short-term rental.