Top 5 Short-Term Rental Markets In 2024

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A trip residence or short-term rental (STR) could be a improbable funding alternative— if you already know the place to look. Location actually is all the pieces within the short-term rental market.

As an investor, you’ll be searching for houses in areas that may ship a superb cap charge and rental income whereas nonetheless being inexpensive (except you could have the money to purchase in Malibu, by which case you in all probability don’t want this text).

Late in 2023, we lined the highest 5 most worthwhile trip rental areas in an episode of our On The Market podcast. On this article, we’ll cowl the important thing metrics that make these short-term rental areas unmissable.

The info is available in courtesy of the High 25 Finest Locations to Purchase a Trip Residence listing compiled by Vacasa.

What Is a Good Cap Price on a Brief-Time period Rental?

However first, what’s a cap charge, and what is an effective one for those who’re shopping for a short-term rental?

Fairly merely, the cap charge is the quantity you get (in proportion) whenever you divide a property’s internet working earnings (together with insurance coverage and upkeep prices) by its present market worth. The quantity you get is the property’s annual yield or return you’ll generate as an investor.

Clearly, the upper the cap charge, the higher the return in your funding. As a common rule, a cap charge of below 5% is taken into account low in actual property. Something between 5% and 10% is the best cap charge. Cap charges of over 10% are comparatively uncommon, however they do exist, as a few of our high trip leases will show.

They may not be the place you anticipate, although. As everyone knows, the pandemic housing market increase triggered residence costs to undergo the roof in lots of areas. When residence costs respect dramatically, the cap charge is robotically lowered, which may make an funding too costly to be value it.

High 5 Finest Locations to Purchase a Brief-Time period Rental

As a substitute of chasing the preferred trip locations, take into account making a savvier selection that may ship higher ROIs. Listed below are a few of these savvy decisions.

1. Lake Anna, Virginia

Cap charge: 10.32%
Median residence sale value: $405,500
Annual gross rental income: $64,121

The crème de la crème of trip rental locations in 2023 is the charming lakeside vacation spot in Virginia. Lake Anna is the state’s third-largest lake, with 200 miles of sandy seashores.

Why is that this such a preferred vacation spot? Its location proper between Fredericksburg and Richmond is one purpose, however we wager that the pristine seashores, clear water, and total high-end really feel of this trip vacation spot is what makes it so fascinating, particularly in the summertime.

And for a lakeside vacation spot, residence costs are very cheap. Examine it with the median residence value at Lake Tahoe, for example—an eye-watering $907,000.

2. Okaloosa Island, Florida

Cap charge: 9.08%
Median residence sale value: $360,000
Annual gross rental income: $53,832

It’s unsurprising to discover a Florida location among the many hottest trip areas, however for those who’re Florida as an investor, look away from the apparent locations (e.g., Miami, West Palm Seaside, and Tampa) and towards the hidden gem that’s Okaloosa Island.

Situated on Santa Rosa Island and boasting three miles of ultra-white sandy seashores, it’s not an off-the-beaten-track vacation spot by any means, however it does supply a considerably extra relaxed really feel due to its location in northwestern Florida. A giant draw for vacationers is how small and comfy this place is, with all the pieces inside a simple strolling distance. And a median residence value of simply $360,000 is inexpensive for such a terrific location.

3. Sandbridge, Virginia

Cap charge: 6.47%
Median residence sale value: $928,900
Annual gross rental income: $88,702

Sandbridge, Virginia, may be very near Virginia Seaside, however it couldn’t be extra completely different. There are not any inns right here, which suggests guests get pleasure from a relaxed and secluded vibe, with sand dunes, seashores, and a wildlife refuge to discover.

It’s not an inexpensive vacation spot, however company are ready to pay premium costs for the unique trip environment this place presents—therefore the superb cap charge.

4. Rehoboth Seaside, Delaware

Cap charge: 6.46%
Median residence sale value: $618,000
Annual gross rental income: $58,992

Rehoboth Seaside presents a standard coastal attraction that’s more and more a rarity, which explains its reputation with vacationers. From a scenic boardwalk to slender streets with eating places and retailers, it’s an aesthetic vacation spot that pulls tens of hundreds of tourists throughout the summer time months. The comparatively excessive residence value is value it right here as a result of company are keen to pay high greenback for the classic seaside city really feel.

5. Navarre, Florida

Cap charge: 6.42%
Median residence sale value: $420,000
Annual gross rental income: $47,531

One other picture-perfect trip rental vacation spot that’s by some means nonetheless inexpensive, Navarre attracts in large crowds throughout the summer time due to its unbelievably lovely seaside. The seaside will not be truly composed of sand however quartz, which is the place the dazzling white coloration comes from. Water sports activities, snorkeling, and swimming are the preferred actions right here, so searching for an oceanfront property is properly well worth the excessive short-term rents you’ll be capable of command.

Do Your Homework

It pays to do your analysis when searching for a short-term rental alternative. Steer your search away from main trip locations which can be oversaturated with inns and have unaffordable residence costs. As a substitute, search for smaller locations with a high-end really feel which can be nonetheless widespread with guests however are nonetheless capable of preserve a way of identification that’s completely different out of your common resort city.

Pristine seashores are dependable attracts for the summer time, however you can even search for cities with a novel classic really feel (see Rehoboth Seaside) or a lakeside attraction that may save individuals time driving all the way down to the coast.

And keep in mind to search for these cap charges: They’ll offer you a good suggestion of whether or not a trip rental funding in your chosen location is value it.

The Most Worthwhile Locations to Purchase a Trip Rental Property

Greater than half of the markets we’re highlighting have trip houses both below or across the median residence value of the US, so that you don’t have to splurge to purchase your good beach-side short-term rental. Study what the highest markets are and the place to search out the complete listing!