Best Places to Invest in U.S. Vacation Rentals in 2020

Dillon DuBois | September 25, 2020

It goes without saying that the U.S. vacation rental investment landscape has changed drastically in 2020. After COVID-19 upended the travel space earlier this year, the best places to invest are looking far different with some profound new characteristics.

Before diving into this year’s nuances, let’s address the economic elephant in the room: Is now even a good time to invest in short-term rentals? Does the current climate present any added risks?

The short (and least favorite) answer is: it depends. Many investment portfolios that made sense in 2019 are now struggling to stay afloat while others are seeing unprecedented booking demand.

In general, there’s still a major discrepancy between home values and the demand for alternative accommodations. In other words, it’s not so much a pay-to-play industry — some of the most profitable locations on this year’s list maintain very modest home values. Coupled with record-low mortgage rates, vacation rentals are also now far more accessible for aspiring investors.

The primary takeaway from this year’s report is that returns remain strong, but the cards have been shuffled. Here are the best places to buy a short-term rental in the U.S. in 2020.

How We Chose the Best Places to Invest in Short-Term Rentals

In order to locate the best places to invest in Airbnb and Vrbo in 2020, we’re now leveraging several metrics to gauge the true, updated investment potential of each market. Things are changing dynamically amidst the ongoing pandemic, so we’ve done away with simple cap rate formulas and moved on to a far more comprehensive analysis. 

Here are the pillars of this year’s analysis:

  • Rental Demand: How often are rentals booked throughout the year? By using a combination of annual occupancy and listing growth rates, this metric shows the relative travel demand in each market.
  • Revenue Growth: Did properties earn more this month than they did in the same month last year? This is calculated by looking at the change in year-over-year RevPAR for properties that received bookings in both time periods.
  • Investability: This metric compares the cost of homes using Zillow home value data to the average income of full-time short-term rentals on Airbnb and Vrbo.

Together these data points combine to create our ultimate proprietary ranking metric, the AirDNA Investor Score.

Why the Best Places to Buy a Vacation Rental in 2020 are Different

It’s worth noting that a large percentage of the markets on this year’s list are entirely new, having never before been featured on an AirDNA investment report. Here are some of the major reasons why:

  • Rural, drive-to markets are seeing unprecedented demand for short-term rentals with limited air travel
  • Urban-centric business travel has significantly stalled
  • Remote work and school are blurring the lines between living and traveling
  • A drop-off in the number of hosts and listings = more revenue per property owner

Best Places to Invest: Up-and-Coming Markets

Our first category hones in on the hidden gems — the off-the-beaten-path spots that have flown under the radar until just recently. These markets currently host between 25 and 100 active properties, but likely won’t stay so for long.

Standouts here include cities throughout the Appalachian mountains, Minnesotan lakes, northern California, and upstate New York.

CityStateActive PropertiesAnnual Rev. PotentialRevenue GrowthRental DemandInvestabilityInvestor Score
CastrovilleCalifornia27$113,934989110097.2
SladeKentucky39$39,124959210096.6
Cherry LogGeorgia97$41,3991008510096.2
ShenandoahVirginia32$44,426879410095.2
AthensNew York31$39,8701007410093.4
Apollo BeachFlorida54$48,101898410093.3
StantonKentucky92$34,231987510093.2
KerhonksonNew York93$41,160917810092.3
Two HarborsMinnesota60$32,35593869491.9
GertonNorth Carolina27$51,8581006710091.8
RileyvilleVirginia36$46,144739310091.4
WhitwellTennessee31$35,116838210091.4
NevisMinnesota27$30,29793839491.4
ClevelandGeorgia85$36,701996510091.1
RockbridgeOhio39$45,447937010090.9
ManisteeMichigan99$50,459986410090.6
ManchesterCalifornia26$62,403768510090.4
LakeheadCalifornia71$66,359996110090.0
LutsenMinnesota64$62,635649610089.8
Pocono SummitPennsylvania46$55,023936610089.8
PioneertownCalifornia64$54,1811005910089.7
TuckasegeeNorth Carolina51$38,1881005910089.7
DenisonTexas39$26,854100878589.4
West GlacierMontana61$49,291619610089.3
GarfieldArkansas79$35,1041005710089.2

Best Places to Buy a Vacation Home: Mid Sized Markets

Midsized markets — characterized by those with between 100 and 1,000 active vacation rental listings — are an excellent category for investors. The cities on this list are more accessible and commonplace than the up-and-coming spots, but not as competitive as top-tier destinations.  

Some of the best midsized markets include those throughout the southeast California desert, nature spots in Arizona, and many towns throughout the Midwest.

CityStateActive PropertiesAnnual Rev. PotentialRevenue GrowthRental DemandInvestabilityInvestor Score
Yucca ValleyCalifornia399$45,691100929896.9
RidgedaleMissouri152$52,3241008210095.5
FairplayColorado184$44,15286899993.2
OrdervilleUtah138$59,992927910092.9
LurayVirginia199$40,497967110091.7
MorgantonGeorgia174$45,0541006610091.6
Satellite BeachFlorida156$42,000996610091.3
KingstonNew York148$32,74386829991.3
Joshua TreeCalifornia671$40,485100898690.0
Mineral BluffGeorgia157$43,4271005910089.7
Broken BowOklahoma883$57,335946110088.7
Three RiversCalifornia212$54,560777610088.4
Depoe BayOregon188$43,021837010088.2
Bullhead CityArizona143$34,817827010087.9
Sturgeon BayWisconsin212$33,17181829487.8
TobyhannaPennsylvania224$38,960945510087.4
NashvilleIndiana166$41,439965310087.2
SpringdaleUtah101$54,68394639687.1
Bella VistaArkansas122$39,01688659786.8
Crystal RiverFlorida127$29,42680829286.3
JulianCalifornia135$43,08099718886.2
CaptivaFlorida260$106,964816410086.2
Grand MaraisMinnesota141$27,22164899686.1
WilliamsburgMichigan123$42,308875710086.1
Munds ParkArizona105$40,80189719285.9

Best Places to Own Rental Property: Large Markets

Although the markets in this final category have over 1,000 active vacation rentals, it’d be unfair to call them large cities. No Boston, no Chicago, no Seattle — these markets are still a ways from any urban metropolis. 

Many of these top destinations have been on the vacation rental investment radar for quite some time. Even in the face of the 2020 pandemic, they’re proving to be dependable refuges for travel-hungry Americans.

CityStateActive PropertiesAnnual Rev. PotentialRevenue GrowthRental DemandInvestabilityInvestor Score
Palm SpringsCalifornia2,154$64,571996010089.7
La QuintaCalifornia1,323$77,93699529384.1
SeviervilleTennessee3,064$61,961657110083.9
South Lake TahoeCalifornia2,057$62,18791479581.9
GatlinburgTennessee1,801$55,439567010081.6
Pigeon ForgeTennessee1,036$51,85770429977.1
Saint AugustineFlorida2,341$47,37168628273.4
Gulf ShoresAlabama2,538$99,095741910073.2
Bradenton BeachFlorida1,052$60,051484310072.9
Panama City BeachFlorida4,815$59,986553610072.7
ScottsdaleArizona2,725$48,96698656070.8
Mammoth LakesCalifornia1,863$72,56092327870.3
Santa Rosa BeachFlorida1,905$94,523472810068.9
KiheiHawaii2,472$84,10617110068.0
Fort Walton BeachFlorida1,356$46,067353510067.6
FlagstaffArizona1,093$37,20490854767.3
DestinFlorida2,580$57,012372910066.5
LahainaHawaii2,344$80,76716510066.5
CharlestonSouth Carolina1,563$47,63925579166.1
Big Bear LakeCalifornia2,421$50,638100396265.9
Las VegasNevada6,559$32,90649518064.8
Miramar BeachFlorida2,183$60,37051238963.0
SedonaArizona1,497$46,24698793762.5
SavannahGeorgia1,824$39,99762327561.1

Next Steps to Finding Your Next Vacation Rental Investment

Once you’ve got your eye on a few destinations for potential investment, it’s time to take your analysis to the next level. 

MarketMinder’s Market Comparison tool allows users to conduct a side-by-side comparison for up to 4 subscribed markets. Compare specific neighborhoods, bedroom counts, # of accommodations, and see how they stack up in terms of revenue, ADR, and occupancy.

For data on specific properties, use Rentalizer, the world’s leading Airbnb calculator. Simply enter any address, anywhere in the world, and see what it could earn as a full-time short-term rental. Give the tool a test run below.

What will you make on your rental property?

Rentalizer is the first automated valuation model (AVM) to accurately predict what a property can earn as a vacation rental.

Assess revenue potential, ADR, and occupancy of a property based on local Airbnb and HomeAway comps over the last twelve months.

Make the best real estate investment with Rentalizer.

 

Get access to the Full Report on where to invest in short-term rentals

Interested in finding out more about the best places to invest in short-term rentals? We’ve compiled an investor package that takes investment analysis to the next level.

Here’s what’s included:

  • 5 years of downloadable data on over 3,250 cities across the United States
  • 5 years of Zillow home values for each city
  • Filterable and sortable by over 20 metrics not featured above including seasonality, regulation, occupancy, average daily rate, # of booked listings, and much more.
  • Plus, we’ll tack on 3 months of unlimited MarketMinder access for the entire United States.

Contact us for pricing and more information.

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