Where’s the Best Place to Invest in a Vacation Rental?

Lauren KayeLeave a Comment

10 vacation Rental Markets Worth Investing In

Are you thinking about investing in a vacation rental?

Then you’re probably wondering where your second home will have the most potential to generate income.

We sought out the latest data on earning potential and traveler demand from TripAdvisor, FlipKey, Rented.com, and AIRDNA, and combined those figures with our own internal data. The numbers below should give you a good idea of how average – and above-average – owners perform in each of these locations.

For all above-average performing properties, we nixed the data on any properties that are at the very top of the performance metric. That is, we tried to give a baseline for the potential of each area, when the owners fully optimize their properties with good marketing, prompt response times, and professional booking experiences.

Which means the numbers below aren’t aspirational. These aren’t rental incomes that only enormous mansions or luxury condos can achieve. They’re fully within the reach of your average investor.

Let’s take a look at our top 10 picks for the best return on your vacation rental investment.

1. Destin, Florida

Tourism has made Florida one of the top vacation rental markets across the board, and Destin is particularly attractive to homeowners looking to invest.

With the median price of homes around $323,000 and a strong traveler demand for accommodation, there’s a lot of opportunity to generate a solid rental income in Destin.

According to TripAdvisor, a 2-bedroom home in Destin can bring in:

  • $1,093 per week
  • $28,418 per year at 50% occupancy (26 weeks)

That’s not a bad side income for a relatively low investment – but your potential is actually higher.

Those numbers are based on the average-performing property, but if you’re willing to put in the time or partner with the right professional, you can perform significantly better. One Evolve property in Destin made $59,705 in its first 10 months, and another – a classic 2-bedroom beachfront condo – made $43,158 in just 4 months.

The average income would be good, but an above-average owner can earn a lot more.

2. Gatlinburg, Tennessee

If you’re not from the mid-Atlantic seaboard or the South, you might be surprised that tucked-away Gatlinburg is one of the most profitable places to invest in a vacation rental. The small mountain town is a popular retreat at the edge of the Great Smoky Mountain National Park, with easy access to Dollywood, natural attractions, and small businesses.

TripAdvisor reports that a 2-bedroom house in Gatlinburg could bring in:

  • $1,240 per week
  • $32,240 per year at 50% occupancy (26 weeks)

Again, while the average would still be a good return on your investment, these numbers do not quite capture the area’s full potential.

A couple that had never had a vacation rental before partnered with Evolve and generated $163,718 in rental income in 1 year with their 4-bedroom house. They’ve made so much, they purchased 2 more properties to grow their business. There’s huge potential in Gatlinburg if you’re willing to put in the time to properly market and dynamically price your investment.

3. Siesta Key, Florida

Siesta Key, a barrier island on the Gulf of Mexico, is known for sparkling quartz sand beaches and clear turquoise water – both of which helped the the 8-mile long Siesta Key Public Beach earn the “best beach in the U.S.” title twice.

Despite higher real estate costs (the median price of a home in Siesta Key is $585,600), the steady tourism and demand for vacation rentals make Siesta Key a stand-out investment opportunity.

TripAdvisor’s numbers suggest that a 2-bedroom vacation rental in Siesta Key could bring in:

  • $1,319 per week
  • $34,294 per year at 50% occupancy (26 weeks)

But as we’ve established, the average isn’t necessarily the full potential. Rented.com estimates that homeowners could make around $70,214 a year with a property in Siesta Key. This seems far more likely to be the true potential with a properly marketed and managed property, considering the area’s popularity and current pricing.

4. Galveston, Texas

Galveston is a family-friendly destination that attracted 6.5 million visitors in 2016 to its 30 miles of beaches, amusement parks, and prohibition-era casinos. With the median price of a home in Galveston listed at $264,000, there’s a lot of room to make a nice profit with a rental property.

From TripAdvisor’s averages, a 2-bedroom vacation rental in Galveston, has the potential to generate:

  • $1,408 per week
  • $36,608 per year at 50% occupancy (26 weeks)

Our own data suggests that the average in this case is pretty accurate to the potential of the market – Galveston has long been a vacation rental town, and its owners tend to be on top of their marketing and management game.

Evolve owners Sallye Stapleton and Matt Schooler, for example, earned over $73,000 in 1.5 years with their 2 properties in Galveston.

5. Las Vegas Area, Nevada

Sin City may be famous for the mega hotels and resorts lining its iconic Strip, but there’s a growing demand for alternative accommodations in the area. Groups that are traveling to Las Vegas together appreciate the luxury of having a private home where they can stay together, have the space to spread out, and split the costs. A vacation rental is the ideal solution.

TripAdvisor supports this with its data, showing that a 2-bedroom rental in Las Vegas would bring in:

  • $1,170 per week
  • $30,430 per year at 50% occupancy (26 weeks)

Meanwhile, AIRDNA’s data suggests that the average homeowner in Las Vegas will bring in around $25,000 in rental income, while a top performer will earn over $37,000.

However, we’ve seen homeowners significantly outperform this estimate when they’re managed with care and promoted well, particularly if they can find a property in the surrounding area, rather than Las Vegas proper. Evolve owner Frank Ellis, for example, brought in $127,911 in 1 year with his vacation rental home in the Las Vegas area.

6. Nashville, Tennessee

Nashville has been on our list of dream vacation rentals for a while. It continues to earn a top spot because real estate is still attainable and tourism to the Music City is booming – 2016 broke records with 13.9 million guests. All of those travelers need somewhere to stay, and this is driving up the value of centrally located vacation rentals.

According to TripAdvisor, a 2-bedroom property in Nashville could generate:

  • $1,668 per week
  • $43,368 per year at 50% occupancy (26 weeks)

Nashville currently has restrictions on where vacation rentals can operate in the area, with a limited number of permits per neighborhood. That said, the right investment could generate an enormous return in Music City: Chris and Tori Gerbig’s condo in Nashville booked $58,672 in the first six weeks.

With such a strong and immediate demand, it’s worth looking at Nashville to find a rental property in one of the city’s popular neighborhoods.

7. Myrtle Beach, South Carolina

With a collection of seaside homes, condos, and resorts, Myrtle Beach presents a golden opportunity for people looking to invest in a vacation rental. The real estate supply is there, you have steady tourism from annual summer visitors, and the cost of homes is relatively low.

There’s also room to make a good side income. TripAdvisor found that a 2-bedroom home in Myrtle Beach should generate:

  • $762 per week
  • $19,812 per year with a 50% occupancy rate (26 weeks)

The Mozingos are a great example of a committed owner’s potential to rise above the averages. They earned $12,340 in rental income with their 2-bedroom condo on the coast of Myrtle Beach within 2 months of renting it out. At the pace they’re booking stays, we suspect they are going to outearn TripAdvisor’s estimates by a huge amount.

8. Palm Springs, California

Palm Springs is just a 2-hour drive from Los Angeles, making it a convenient getaway for West Coasters. This desert oasis is proving to have ideal conditions for a successful vacation rental: nearby attractions, year-round tourism, great architecture, and an ample housing supply.

AIRDNA’s study of Airbnb rentals reported the following earning potentials for homeowners in the Palm Springs area:

  • $43,000 per year for the average property
  • $63,000 per year for top-performing properties

We’ve seen similarly impressive results from Palm Springs owners. Sheila Weissberger is a great example of what first-time renters can do with Palm Springs real estate. After getting married, she listed the 3-bedroom home she previously occupied in Cathedral City, California, and made over $44,000 in rental income in less than a year.

9. Panama City Beach, Florida

This Gulf Coast beachside town on Florida’s panhandle is a spring break favorite. With miles of white-sand beaches and boardwalks packed with bars and restaurants, it receives a predictable stream of visitors every year.

PCB is one of the most profitable places to invest in vacation rentals for this reason. Homeowners who invest there are confident they can generate a strong rental income every year.

In fact, Rented.com estimates that homes in this area can bring in $25,736 in rental income per year on average.

We’ve found that it can definitely exceed this cap.

Julie Zintsmaster used her real estate expertise to inform her decision to invest in a condo in PCB. She chose a unit in a popular waterfront resort, listed it for 6 months and made $30,809 with her property. In half a year, she surpassed that estimate and expects the rental income to continue rolling in.

10. Pigeon Forge, Tennessee

To finish out the list of top places to invest in vacation rentals in 2017 is Pigeon Forge. The Tennessee town is the home of Dollywood, one of the biggest attractions in the southern Atlantic seaboard that draws 2.5 million visitors every year.

A tourism-driven market and low real estate costs make Pigeon Forge an excellent place to consider investing in a short-term rental.

It’s estimated that homes in this area could generate:

  • $22,127 per year on average, according to Rented.com
  • $31,492 per year for top-performing properties, according to AIRDNA

Our internal data suggests Pigeon Forge’s potential may be even higher, however. Owners who work with Evolve have beaten those numbers by a substantial margin: one owner earned $64,864 in 4 months; another $58,287 in 8 months; still another $104,849 in 2 years.

It’s just one more example of an area where the average earnings would be a satisfying return, but owners who go the extra mile can expect to see an even more substantial income.

What’s the bottom line on the best place to invest?

Wherever you invest, be sure to approach your new property like a business. Owners who get started in vacation rental as a side project tend to earn numbers that look like the average – not bad at all, but nowhere near the full potential.

If you’re going to invest, we’d recommend taking a look at our Vacation Rental 101 guide to find out what travelers look for in vacation rentals. Ask yourself if you’re ready to deliver the kind of professional marketing, instant response, and seamless booking experience travelers demand.

If you are, great! You’re very likely to be among the top earners in your area. If you can’t make that time commitment, though, know that you have options to keep that high earning potential within reach.

Evolve’s owners have consistently out-performed the numbers reported as average, and it’s because we make it easy for owners to provide the professional experience guests demand. If you’re not ready to make vacation rental your full-time job, but still want to get a great return on your investment, we might be the right partner for you.

After all, that investment is only worthwhile if it’s reaching its full potential. Whether you fly solo or get a professional partner, you’ll want to be sure you’re prepared to earn the best income you can.

We’ve worked with hundreds of first-time owners to help them skip the learning curve and make money with their vacation rentals right away. If you’re interested in learning how, click here for an overview of our services, or call our Homeowner Consultants at 877.818.1014 (press 2). We’re more than happy to help you get the most out of your vacation rental investment.