Summer is already here in real estate terms. Bidding on auction homes that sit near the mountains or by an ocean may be especially profitable if the location is right (and ripe) for short-term summer rental investments.
More and more investors are buying auction properties explicitly to renovate and rent out on a short-term basis to generate seasonal capital for both traditional and Airbnb properties.
Should You Invest in Vacation Rental Homes?
It’s probably a good idea. Short-term rental homes have higher Return on Investment (ROI) than long-term ones, according to Mashvisor, a real estate data analytics company. Vacation homes tend to yield higher cap rates* and cash-on-cash return than traditional rental properties. In addition, rental income from short-term seasonal leases can be considerably higher than long-term ones.
Other benefits of investing in vacation properties:
- If you plan to rent out your investment home on a weekly or monthly basis, you might also benefit from being able to stay there during your own vacations.
- With short-term rentals you can develop a flexible pricing scheme to reflect higher demand during peak season. This allows you to increase your rental income in the up season and decrease your vacancy rate in the low season.
- You may enjoy tax deductions by owning summer vacation homes. While we cannot offer legal advice, look into how many days a year you stay on this property and how many days you rent it out for any tax benefit. Talk to your accountant or real estate attorney for advice.
What to Know Before Investing in Rental Properties
Before you take on the exciting journey of buying an investment property, make sure that you’re prepared:
- Decide on the best locations to invest in real estate for your own rental strategies.
- Research the local short-term rental regulations to know what rules and restrictions apply to this type of property.
- To make money with a vacation home, you have to actively market the rental home 365 days a year. Be aware of the demands.
- Alternatively, you may want to hire a vacation rental company to manage all aspects of the property. While they charge a fee, these companies also drive occupancy rate up and free up your time to focus on expanding your real estate portfolio.
Across the country, here are popular summer rental locations and other details like expected occupancy rate:
Near the Mountains
| Town | Average Short-Term Rental Cap Rate | Median Property Price | Average Short-Term Rental Income | Average Short-Term Occupancy Rate |
| Roanoke, VA | 7.7% | $208,200 | $2,500 | 64% |
| Harpers Ferry, WV | 7.0% | $290,100 | $3,090 | 45% |
| Eureka Springs, AR | 6.3% | $273,700 | $2,600 | 42% |
| Bryson City, NC | 5.5% | $380,700 | $3,030 | 55% |
| Rapid City, SD | 5.4% | $284,500 | $2,760 | 52% |
| Asheville, NC | 4.7% | $420,500 | $3,330 | 63% |
| Chattanooga, TN | 3.1% | $294,200 | $2,050 | 52% |
* Data Source: Mashvisor March 2019
Near the Coastline
| Town | Average Short-Term Rental Cap Rate | Median Property Price | Average Short-Term Rental Income | Average Short-Term Occupancy Rate |
| Key West, FL | 7.1% | $967,100 | $8,650 | 75% |
| Savannah, GA | 6.6% | $338,700 | $3,350 | 60% |
| Daytona Beach, FL | 5.8% | $238,000 | $2,210 | 55% |
| North Bend, OR | 5.7% | $308,400 | $3,070 | 54% |
| Gulfport, MS | 5.2% | $192,100 | $1,810 | 43% |
| Virginia Beach, VA | 4.7% | $361,600 | $3,100 | 47% |
| Chincoteague, VA | 4.3% | $269,800 | $2,220 | 46% |
| Clearwater, FL | 4.3% | $283,000 | $2,200 | 55% |
| Galveston, TX | 4.1% | $362,200 | $2,910 | 50% |
| La Porte, TX | 3.8% | $267,400 | $2,400 | 39% |
| Newport, RI | 3.4% | $852,100 | $4,480 | 52% |
* Data Source: Mashvisor March 2019
Increase Your Return on Investment (ROI)
Foreclosure homes may sell for well below the median listing price in the local housing market. This means that your return on investment increases.
Remember that these capitalization rates are based on properties that are available on MLS and not on foreclosed properties. If you invest in an auction property, your return may be higher.
Daniela Andreevska is Marketing Director at Mashvisor, an analytics tool which helps real estate investors quickly find traditional and Airbnb investment properties. A research process that usually takes three months can now take 15 minutes.
Sources:
Airbnb Rentals
https://www.mashvisor.com/blog/category/investor-blogs/airbnb-rentals/
Buying Investment Property
https://www.mashvisor.com/blog/category/investor-blogs/buying-investment-property/
Best Places to Own a Vacation Rental Property in 2019
*This data has been provided by Mashvisor, which takes investment property data from the MLS and other public sources; the traditional rental comps from Rent Jungle, Hotpads, MLS and Zillow; and the short-term rental comps from Airbnb. Cap rate is one of the most popular metrics of profitability in real estate investing.
