Top 5 Short-Term Rental Markets In 2024

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A trip house or short-term rental (STR) is usually a incredible funding alternative— if you already know the place to look. Location actually is every part within the short-term rental market.

As an investor, you’ll be on the lookout for houses in areas that can ship a great cap fee and rental income whereas nonetheless being inexpensive (except you could have the money to purchase in Malibu, during which case you most likely don’t want this text).

Late in 2023, we coated 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 Greatest Locations to Purchase a Trip Residence record compiled by Vacasa.

What Is a Good Cap Fee on a Quick-Time period Rental?

However first, what’s a cap fee, and what is an efficient one in the event you’re shopping for a short-term rental?

Fairly merely, the cap fee is the quantity you get (in share) if you divide a property’s internet working revenue (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 fee, the higher the return in your funding. As a basic rule, a cap fee of underneath 5% is taken into account low in actual property. Something between 5% and 10% is the best cap fee. Cap charges of over 10% are comparatively uncommon, however they do exist, as a few of our high trip leases will show.

They won’t be the place you count on, although. As everyone knows, the pandemic housing market growth precipitated house costs to undergo the roof in lots of areas. When house costs respect dramatically, the cap fee is routinely lowered, which might make an funding too costly to be price it.

High 5 Greatest Locations to Purchase a Quick-Time period Rental

As a substitute of chasing the most well-liked trip locations, take into account making a savvier alternative that can ship higher ROIs. Listed below are a few of these savvy decisions.

1. Lake Anna, Virginia

Cap fee: 10.32%
Median house sale worth: $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 general 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, house costs are very cheap. Evaluate it with the median house worth at Lake Tahoe, for example—an eye-watering $907,000.

2. Okaloosa Island, Florida

Cap fee: 9.08%
Median house sale worth: $360,000
Annual gross rental income: $53,832

It’s unsurprising to discover a Florida location among the many hottest trip areas, however in the event you’re Florida as an investor, look away from the plain 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 provide a considerably extra relaxed really feel because of its location in northwestern Florida. An enormous draw for vacationers is how small and comfortable this place is, with every part inside a simple strolling distance. And a median house worth of simply $360,000 is inexpensive for such an excellent location.

3. Sandbridge, Virginia

Cap fee: 6.47%
Median house sale worth: $928,900
Annual gross rental income: $88,702

Sandbridge, Virginia, could be very near Virginia Seaside, however it couldn’t be extra completely different. There are not any lodges 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 affordable vacation spot, however visitors are ready to pay premium costs for the unique trip ambiance this place gives—therefore the superb cap fee.

4. Rehoboth Seaside, Delaware

Cap fee: 6.46%
Median house sale worth: $618,000
Annual gross rental income: $58,992

Rehoboth Seaside gives a standard coastal appeal that’s more and more a rarity, which explains its recognition with vacationers. From a scenic boardwalk to slender streets with eating places and outlets, it’s a cultured vacation spot that pulls tens of 1000’s of holiday makers through the summer season months. The comparatively excessive house worth is price it right here as a result of visitors are prepared to pay high greenback for the classic seaside city really feel.

5. Navarre, Florida

Cap fee: 6.42%
Median house sale worth: $420,000
Annual gross rental income: $47,531

One other picture-perfect trip rental vacation spot that’s someway nonetheless inexpensive, Navarre attracts in big crowds through the summer season because of its unbelievably stunning seaside. The seaside is just not truly composed of sand however quartz, which is the place the dazzling white colour comes from. Water sports activities, snorkeling, and swimming are the most well-liked actions right here, so on the lookout for an oceanfront property is nicely definitely worth the excessive short-term rents you’ll be capable of command.

Do Your Homework

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

Pristine seashores are dependable attracts for the summer season, however it’s also possible to search for cities with a novel classic really feel (see Rehoboth Seaside) or a lakeside appeal that can save folks time driving right down to the coast.

And keep in mind to lookup these cap charges: They’ll provide you with a good suggestion of whether or not a trip rental funding in your chosen location is price it.

The Most Worthwhile Locations to Purchase a Trip Rental Property

Greater than half of the markets we’re highlighting have trip houses both underneath or across the median house worth 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 total record!