The Real Deal reported on a new survey by Rental.com regarding the best states and cities for vacation rental investors. Rental.com considered local regulations on short-term rentals, costs associated with buying and owning a home in each city/state and the demand for vacation spots based on data from Rental.com and Airbnb.
The top states for vacation rental demand were Florida with 19 top cities, California with 13 top cities and Texas with nine top cities. The cost of buying and owning a home in California, however, pulled the state down in terms of appeal to vacation rental investors.
The top 5 cities for vacation rental investors, according to Rental.com, may surprise you…
- Pigeon Forge TN
- Gatlinburg TN
- Panama City Beach FL
- Killington VT
- Palm Beach FL
“Urban destinations fell off as good investments,” said Rental.com’s Andrew McConnell to Forbes Magazine. “A year or two ago those urban destinations generated the highest ROI but that’s fallen dramatically. The Southeast did extremely well this year, especially in non-luxury, more traditional, markets like the Smoky Mountains.”
Rental.com’s tips to vacation rental investors include:
- Look at friendly, short-term rental opportunities in four-season markets that are relatively close (no more than a five-hour drive) to several major cities.
- Do your due diligence.
- Identify opportunities in markets where asset prices are relatively low to the market’s attractiveness as a vacation destination.
- Seek a clear and thorough understanding of necessary improvement costs, insurance costs, HOA fees, etc.
- Learn about the community’s regulations/restrictions on rental properties.
- If the property is a condominium, check out all the condo’s documents regarding assessment history, reserves and the expected lifetimes of basics such as roofs and roads.
- The Midwest is trending upwards in terms of vacation rentals and the alternative accommodations market due to the lower cost of homeownership
- Know that many urban markets, such as Boston and Chicago, are experiencing long, draw- out regulatory battles regarding vacation rentals. Such battles are red flags for investors.