Investing in a vacation rental property can be an enticing opportunity. Not only can you earn equity while someone else pays off the mortgage, but you can also enjoy tax advantages and use the property for yourself. But how do you choose the best place to buy a short-term vacation rental? Let's explore the key factors to consider and review some of the top vacation rental markets in 2022 and 2023.
The Importance of Location For Vacation Rental Properties
The location of your vacation rental property plays a vital role in its performance. While primary cities like San Diego and Miami have been popular choices for investors, the availability of opportunities in these markets has decreased due to high demand. As a result, it's essential to consider alternative cities that offer similar earning potential.
According to the National Association of Realtors (NAR), investment home sales have steadily increased over the past seven years. Lawrence Yun, NAR's chief economist, highlighted that rising home prices and strong rental demand have motivated individual investors to diversify their portfolios with real estate.
11 Factors To Consider Before Buying A Vacation Rental Property
When buying a vacation rental property, it's crucial to evaluate various factors to make an informed decision:
- Personal use: Determine if personal enjoyment or financial gains are more important to you.
- Rental income: Consider the potential rental income in different markets.
- Appreciation: Research which markets have a history of property appreciation.
- Expenses: Plan for routine expenses and unforeseen repairs.
- Taxes: Understand the tax implications of owning a vacation rental property.
- Risk: Be aware of potential risks and plan accordingly.
- Insurance: Protect your investment with the right insurance coverage.
- Legality: Ensure that the property can be legally rented out in its location.
- Property management: Decide if you'll hire a property management company.
- Marketing: Develop a marketing strategy to attract potential renters.
- Partnerships: Consider partnering with friends or family members for investment opportunities.
Vacation Rental Market Conditions
The vacation rental market experienced significant fluctuations due to the impact of COVID-19. However, the market has rebounded, with higher daily rates and fewer listings in competitive markets. This makes it an opportune time for investors to venture into short-term rentals.
Impact Of COVID-19 On Vacation Rentals
COVID-19 had a profound effect on the vacation rental market in 2020. Travel restrictions and closures led to a significant decline in bookings. However, as restrictions eased, vacationers quickly rebooked their trips. In 2022, the most profitable vacation rental locations are expected to bounce back in terms of rental rates and occupancy.
Best Vacation Rental Markets 2022
Determining the best vacation rental markets is subjective, as different people have different preferences. However, analyzing property prices, rental income, occupancy rates, and cash on cash returns can provide more objective insights. Based on these factors, the following markets are predicted to be among the best in 2022:
- Berkeley, New Jersey
- Englewood, Colorado
- Levittown, Pennsylvania
- Covington, Georgia
- Abilene, Texas
- McGaheysville, Virginia
Let's take a closer look at one of these markets:
Berkeley, New Jersey
- Airbnb Cash on Cash Return: 9.2%
- Airbnb Daily Rate: $283
- Airbnb Occupancy Rate: 59%
- Airbnb Rental Income: $4,479
- Median Property Price: $243,475
- Average Price per Square Foot: $190
Best Short Term Rental Markets 2023
Looking ahead to 2023, the best short-term rental markets are expected to be concentrated in Ohio. These emerging markets show promising potential for investors:
- Reading, OH
- Forest Hills Boro, PA
- Delhi Charter Township, OH
- Port Allen, LA
- Pleasantville, NJ
- North College Hill, OH
- Richmond Heights, OH
- Kenmore, NY
- Portsmouth, VA
- Silverton, OH
Let's highlight one of these emerging markets:
Reading, OH
- Airbnb Cash on Cash Return: 9.2%
- Airbnb Daily Rate: $100
- Airbnb Occupancy Rate: 57%
- Airbnb Rental Income: $2,865
- Median Property Price: $234,520
- Average Days on Market: 51
- Average Cap Rate: 7.58%
Summary
While a great vacation rental market doesn't guarantee success, understanding the crucial factors mentioned above can guide your investment decisions. The best places to buy vacation rental property in 2022 and beyond continue to demonstrate positive potential for investors. Keep these market conditions and tips in mind as you explore investment opportunities.
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Please note that this information is for educational purposes only and should not be the sole basis for investment decisions. Always consult with professionals for personalized advice.
Sources:
- National Association Realtors (NAR)
- Mashvisor
- Airbnb