As the popularity of alternative accommodations soars, many investors are asking, are vacation rentals a good investment? With platforms like Airbnb and Vrbo making it easier than ever to manage short-term rentals, investing in vacation properties has become a great way to generate passive income. Learning how to invest in short-term rentals effectively can lead to substantial returns, especially if you focus on the best places to buy vacation rental property.  

This blog will explore everything from top markets to essential metrics. Read on to find out if vacation rentals are the right move for you!

Are Vacation Rentals a Good Investment?

Never invest in anything you don’t understand. Before you put your money into vacation rentals, you’re probably wondering, “are vacation rentals a good investment?” The statistics don’t lie. Hotels are becoming a thing of the past, and we are in the prime moment to invest in vacation properties. 

Check out these statistics:

Demand Surge: In 2022, vacation rentals surged in popularity, with more than 1.6 million listings available on platforms like Airbnb and Vrbo, showcasing a 30% increase in rental options compared to previous years.

Traveler Preference: Gen Z and Millenials comprise over two-thirds of Airbnbs customer base, reflecting that vacation rentals are more attractive to younger generations than hotels.

Revenue Generation: The average annual income for a vacation rental property owner in the United States can range from $20,000 to $50,000, depending on location, property type, and management practices.

Occupancy Rates: The average occupancy rate for vacation rentals in the U.S. hovers around 65%.

Vacation rentals also give you options. I recommend having two exit strategies when you purchase an investment property. You need multiple avenues for making a profit if you get in a pinch. When you purchase a property that has the potential to be a vacation rental, you really have three options for how you will make money: through short-term vacation rental income, long-term rental income, or selling the property. If you are doing a fix and flip, keeping the property as a vacation rental for at least a year is a good option to help you avoid capital gains taxes.

Related: How to Earn Tax-Free Income: 3 Real Estate Investing Strategies

Best Places to Buy Vacation Rental Property

Now that it’s pretty clear that vacation rentals are a good investment, you are probably wondering about the best spots to purchase property. Of course, destinations near naturally beautiful places like the beach or mountains tend to perform well. You definitely want to invest somewhere you like to travel, too! However, you need to pay attention to a few key metrics as well:

• Occupancy Rate: High occupancy typically signifies strong demand.
• Average Daily Rate (ADR): Higher ADRs mean more revenue potential per booking.
• Cash-on-Cash Return: Net income generated as a percentage of total cash investment, important for determining actual profit potential.
• Seasonality: Understand peak times and low seasons to manage expectations and budgeting.
• Local Regulations: Check local policies on short-term rentals as they can impact profitability.

Based on those qualifications, here are some of the best places to buy vacation rental property in the United States (data obtained from AirDNA). 

1. Smoky Mountains, Tennessee (Gatlinburg & Pigeon Forge)

Why: These areas see high tourism year-round due to their proximity to Great Smoky Mountains National Park, Dollywood, and other attractions.

Occupancy Rates: Often above 70%, with some properties reaching 80-90% during peak seasons.

Average Daily Rate (ADR): Ranges from $200-$350 depending on the property type and location.

2. Orlando, Florida

Why: Near Disney World, Universal Studios, and other major attractions, making it a hotspot for families.

Occupancy Rates: High year-round, often between 65-80%.

Appreciation & Growth: Real estate in Orlando has seen steady appreciation due to demand.

ADR: Between $150 and $250 for standard rentals, with luxury properties commanding much higher rates.

3. Phoenix and Scottsdale, Arizona

Why: A popular destination for winter travelers due to warm climate and golf tourism.

Occupancy Rates: Peaks in winter and early spring, often reaching 80% in peak months.

Appreciation Potential: Phoenix has experienced rapid appreciation in recent years, driven by a housing shortage and population growth.

4. The Florida Panhandle (Destin & Panama City Beach)

Why: Known for beautiful beaches and family-friendly amenities.

Occupancy Rates: Can reach 70-80% during peak summer season.

ADR: Typically between $200-$300, with beachfront properties achieving higher rates.

5. Big Bear Lake, California

Why: A popular year-round getaway for both summer lake activities and winter skiing.

Occupancy Rates: Strong throughout the year, with peaks in summer and winter.

ADR: Properties typically range from $250-$400.

6. Blue Ridge, Georgia

Why: Known for scenic mountains, outdoor activities, and a year-round tourism season.

Occupancy Rates: High, often between 65-80%.

ADR: Around $175-$300 depending on size and amenities.

 7. Maui, Hawaii

Why: Always a top vacation spot with beaches, outdoor activities, and high-end tourism.

Occupancy Rates: Among the highest in the U.S., often around 80-90%.

Appreciation: High property appreciation, though initial investment is also high.

ADR: Around $400-$600, depending on location and views.

8. Lake Tahoe, California/Nevada

Why: Popular year-round destination for skiing in winter and lake activities in summer.

Occupancy Rates: Peaks during summer and winter.

ADR: Typically ranges from $250-$400.

Appreciation: Tahoe has consistently appreciated due to high demand and limited property availability.

9. Charleston, South Carolina

Why: Known for its historic charm, coastal access, and steady tourism.

Occupancy Rates: Generally high year-round, with peaks in spring and fall.

ADR: Typically between $200-$350.

10. Branson, Missouri

Why: Known for live entertainment, theme parks, and outdoor activities.

Occupancy Rates: Often around 60-70%, with higher rates during summer.

ADR: Typically around $150-$250.

How to Invest in Short Term Rentals 

To invest in short-term rentals successfully, there are several steps including:

• Locating the right market
• Getting your financing in place
• Finding the right property
• Determining if you want a property manager or to manage it yourself
• Setting up hosting platforms: VRBO, AirBnb, or a combined platform like Evolve or Vacasa
• Checking the city guidelines and culture
• Setting it up for success with staging 
• Communicating with excellent customer service

If that list seems overwhelming, don’t worry– we show you how to do all this and more in our Vacation Rentals Intensive Seminar USB! This product contains all of the teachings from our one-day crash course featuring experienced investor Karen Conrad Metcalfe and renowned legal expert Bill Bronchick. They share proven strategies for building a successful vacation rental business in your favorite destinations. Whether new to the industry or looking to scale, this product will provide the expertise you need to thrive! Click here to learn more and purchase.