Best Places to Invest in Vacation Rentals in 2021 & 2022

The ongoing COVID-19 pandemic changed where people want to live and travel. These changes have led to unprecedented growth for both the housing market and the short-term rental (STR) industry. Our latest vacation rental forecast report predicts that short-term rentals will achieve an average occupancy of over 60% for a second consecutive year.

Similarly, housing prices continue to rise: Zillow’s Home Value Index is up 19.6% from December 2020, with an annual growth rate at its highest level in more than 20 years. As prices increase, the number of homes for sale has reached an all-time low, according to Redfin. The scarcity of homes for sale could impact the short-term rental industry in two ways:

Low supply and high demand could continue to push prices higher. Home prices increased almost 20% in 2021. If short-term rental revenue growth doesn’t keep pace with home price appreciation, the attractiveness of short-term rental investments will diminish.

Limited availability could present difficulties in finding attractive rentals. While investor appetite is high for short-term rental investment homes, the overall market for homes remains high for other uses as well, which may limit how much supply is ultimately purchased for STR use.

With this analysis, we provide a framework for finding profitable investment markets, using the most up-to-date data. However, just because a market is listed here doesn’t mean that all investments will be profitable. Likewise, excellent investments can be found in markets not listed here. AirDNA’s Rentalizer tool brings together the latest short-term rental and housing market data to analyze specific investment opportunities.

Market Conditions for Vacation Rental Investments

The year 2021 was the best on record for short-term rental performance. On average, U.S. short-term rentals achieved 62% occupancy, which is up 5% compared with 2020 and a full 10% higher than in 2019. U.S. short-term rentals are earning an average of 39% more annually than they were prior to the pandemic, benefiting from significantly higher average daily rates (ADRs) and occupancy, as well as fewer competitive listings in many areas.

Our 2022 list is dominated by small and mid-sized cities, as it was in 2021. In fact, the revenue potential of small city/rural areas in the U.S. has risen 55% since the start of the pandemic, followed closely by mountain/lake destinations and mid-sized cities. The chart below shows the average annual potential for a typical property by location type and how trailing 12 months (TTM) revenue has evolved over the past three years.

The revenue potential turning point for properties in large cities came in 2021. At the start of the year, the average property was earning 20% less revenue, but by the end of the year, that had reversed to 20% more revenue than prior to the pandemic.  

It was also another popular year to hit the great outdoors. Markets located at the entrance to or bordering national or state parks or forests and wildlife refuges made a strong showing on our list. 

Many of the markets that came to the top of our list don’t represent the most popular markets to invest in today. Our list tries to point out the best markets to invest in regardless of the value that an owner may attribute for their own current or future use.

Just because a destination is a popular place to visit doesn’t necessarily make it a strong investment, especially if other factors are driving up the underlying costs of the inventory. This is happening in many areas throughout the country where it is attractive to buy and use second homes as primarily residences. This has grown in popularity, given the flexibility people now have to work from home. 

Home values in these areas have grown at more than double the national average; in markets such as Vail, CO; Breckenridge, CO; Park City, UT; and Big Bear, CA, home values have risen more than 40%, according to data from Zillow. 

Methodology for The Best Places to Own an Airbnb:

Using AirDNA’s property-level performance data for Airbnb and Vrbo, we created an updated index of the best markets for investment in the coming year. This methodology allows us to find high-performing, growing short-term rental markets that provide returns for investors.

The pillars of our Investor Score include:

Rental Demand: How often are rentals booked throughout the year? By using a combination of the TTM occupancy and listing growth rates, this metric shows the relative strength of travel demand in each market.

Revenue Growth: Did properties earn more this year than they did last year? This is calculated by looking at the TTM year-over-year change in revenue per available room (RevPAR) for properties that were booked over the past two years.

Investability: This metric compares the expected income of a property relative to the cost of buying it. This is calculated by using the average revenue potential of homes in the area, subtracting the average cost for operating the property, and then dividing that by the typical home value in the same area for similar-type homes. We weight home values by the number of short-term rentals in each zip code, to make the home values more compatible with the relevant earnings in the same market.

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

The Best Short-Term Rental Markets in 2022

For those seeking the best beach rental investments, you’ll want to read about this destination. High Occupancy, very strong revenue growth from 2020, and high Investability earn Maui to the top spot for Airbnb investments in 2022. Known as “The Valley Isle”, Maui is the second-largest Hawaiian island beloved for its world famous beaches, views of migrating humpback whales, and radiant golden hour views. If you’re buying rental property in Hawaii, Lahaina and Wailuku are the hot markets for investment according to our investor score, but almost all areas on the island score high on our list for 2022. The average full time rental property in Maui earns $102K per year with an Average Daily Rate of $375.

Not all top Airbnb locations have to be beach destinations. For a typical home value of $237K, the Kenai Peninsula offers wilderness seekers the true awe and beauty of the Alaskan experience with no shortage of access to national parks, fjords, and wildlife viewing. With increased demand for outdoor exploration since the pandemic, it's no surprise that revenue growth for the area reached a score of 94. Less than three hours from Anchorage, Seward and Soldotna both have high Investability and have seen strong demand and revenue growth in 2021. Despite lower winter visitation; during the summer months, people come from around the globe to the many flowing rivers along the peninsula to partake in some of the best salmon fishing in the world. Prior to the pandemic, occupancies averaged just 60% during peak season while in 2021, they pushed well over 80% over the 2021 summer. So yes, Alaska is a good place to invest in Airbnb real estate.

Set in the foothills of the Appalachian Mountains along the Tennessee River, Chattanooga, TN provides a strong investment opportunity with Zillow forecasting home values to increase 17% in 2022. Likely being supported by increased regional travel, Chattanooga scores an exceptional 98 points in Rental Demand, the second strongest score on our list, with an average occupancy level of over 70% for the year. One of the biggest attractions to the area is the Lookout Mountain Incline Railway, which brings passengers to historic sites and trails with stunning views. In addition to the city of Chattanooga, the surrounding areas of Lookout Mountain and Dunlap provide attractive Airbnb investment opportunities.

Located on the Gulf of Mexico, tourists are drawn to Gulfport and Biloxi, MS, to pay a visit to Mississippi's coastal casinos and pristine white sand beaches. Those looking for a coastal area with high rental income have a new city to keep tabs on. With high revenue potential relative to a low average home value of $155K, Gulfport/Biloxi earns a hefty overall Investability score of 95. While all areas within the Gulfport/Biloxi region score high in Investability, Long Beach and Ocean Springs are the two standouts within this market, offering the highest short-term rental occupancy over the past year at over 68%.

Looking for an investment property near New Orleans? Touted as one of the easiest places to access in Louisiana, Slidell is conveniently located only 40 minutes from New Orleans’ French Quarter as well as the casinos and beaches of the Mississippi Gulf Coast. In this position, Slidell should reap the benefits of increased regional travel demand, scoring 100 in both our Revenue Growth and Investability metrics. Visitors find Southern charm and hospitality in the historic Old Towne district and adventure in the nearby Honey Island Swamp, all while paying an ADR of $339 to stay in a short-term rental in the area. The Louisiana housing and rental markets provide opportunities for profitable Airbnb investments. Those nights at $399 add up to a lofty yearly revenue of $69K—not bad in an area with a typical home value of $225K.

Sometimes referred to as the Manatee Capital of the World, Crystal River lies less than two hours from Orlando on the western Florida coast. The area scores an exceptional 95 in our Rental Demand metric by maintaining a Last Twelve Months (LTM) occupancy of 69%, even with the number of listings rising by 75% over the past year. A growing number of visitors are discovering Kings Bay and the surrounding wildlife refuges that shelter manatees year-round. With strong Rental Demand and an Investability score of 85, Crystal River lands itself in the sixth spot on our Best Places to Invest list and is a great opportunity for anyone looking to own an Airbnb in Florida.

Located in the Mojave Desert to the north of the West Entrance Station to Joshua Tree National Park, the town of Joshua Tree is a perennial favorite for short-term rental investment. With an average home price in Joshua Tree of $343K and average revenue of $85K per year, the market tallied an impressive 95 in Investability. Joshua Tree scored a 97 in Rental Demand, with neighboring markets benefiting. Nearby Yucca Valley has been popular for Airbnb real estate investors and guests, with a 58% increase in the number of booked listings over the past year. In Joshua Tree, it pays to invest in a larger property, with larger homes more than tripling revenue potential, with a much lower impact on the acquisition cost of the home.

The luster of Charleston is fashioned by its rich history, cobblestone streets, antebellum mansions, and Southern hospitality. The city also boasts easy beach access, with Folly Beach and Isle of Palms just a short drive from the city. The area scores high for Revenue Growth, due in part to the increased demand for larger rental homes, which has also pushed ADRs to $386. In addition to the increase of revenues and rates, the current average home value of $504K in Charleston will continue to grow by 19%, Zillow trends show.

A small town located in northwestern Illinois, Galena, IL, attracts visitors with its historic sites and architecture. During the summer months, regional travelers vacation in cabins near Lake Galena or stay downtown in historic 19th-century buildings. This opens up a profitable opportunity. Average yearly revenue potential in the city has climbed to $67K, while home values stay near $215K on average. This has allowed Galena to score a 100 in Investability and earn an overall AirDNA Investor Score of 80.

As the largest city on the “Quiet Side” of Mount Desert Island, home to Acadia National Park, Southwest Harbor is a popular alternative for guests looking to escape the crowds of Bar Harbor. Guests find reprieve in seaside cottages that are valued at $399K on average while paying an ADR of $330. With a TTM occupancy of 76%, Southwest Harbor has benefited from an expansion of its peak season, with guests visiting earlier and staying later in the season than ever before. Combine the higher occupancy levels with the average daily rate, and it’s obvious how properties in this area reach an annual revenue of $73K. Other nearby markets with high Investability and slightly lower price points include Bernard, ME, and Ellsworth, ME.

Located at the entrance of both Sequoia and Kings Canyon National Parks, Three Rivers caters to those looking for adventure in the oak woodland forest and foothills of the Sierra Nevada. If you’re looking for a quality short-term rental market near national parks, keep reading. The area has garnered a Rental Demand score of 80 while maintaining a TTM occupancy of 68%. At an average daily rate of $304, short-term rentals within the Three Rivers area earn an average of $80K per year. Overall, Three Rivers earned an AirDNA Investor Score of 77, landing it at No. 11 on our Best Places to Invest list.

Northern Florida’s Gainesville is said to be a place “where nature and culture meet.” Gainesville, one of the best places to buy vacation rental property in Florida, is home to the University of Florida, and the area boasts the cultural vitality of a college town with access to seven area Florida state parks. The typical home value of $201K in Gainesville won’t set you back too much, and with an average revenue of $38K, the city earns an Investability score of 82. Gainesville also scored 82 in Revenue Growth, along with an LTM occupancy of 63% and $180 ADR. 

The best real estate investments in New York look a bit different this year. Acclaimed for the growth and potential of its cultural institutions (and the invention of Buffalo wings!), the Buffalo real estate market is the second largest in New York. Located on the eastern end of Lake Erie and just a short distance from Niagara Falls, Buffalo is one of three cities on our list to score a 100 in Revenue Growth, driven by a jump in ADRs (now at $223) since the beginning of the pandemic. With average revenues for a short-term rental at $55K and a typical home value of $227K, New York property investors won’t have to break the bank to enter the Buffalo market.

Oregon is a great place for an investment property, and this tiny market is one to keep your eye on. Noted as one of the best stops on the Oregon Coast, Brookings is known for its mild year-round climate, stunning views, and outdoor recreational activities. Road trippers have come to relish in the beauty of Oregon’s southernmost coastal city, which has earned Brookings a high-tide Rental Demand score of 94. With TTM occupancy at 74%, the city saw stronger than usual occupancy throughout all of 2021.

Known for its Bavarian-style architecture and vineyards, Helen is a mountain town in Northeast Georgia with an “Alp in the Appalachians'' feel that primarily caters to regional visitors. With $49K in annual revenue on a $206K typical home value, this market secures an Investability score of 100. Helen is a top short-term rental market near Atlanta with an AirDNA Investor Score of 76, ranking it No. 15 on the Best Places to Invest.

Located just west of Gatlinburg, TN, Townsend is another popular jumping-off point into Great Smoky Mountain National Park. Referred to as the “Peaceful Side of the Smokies,” the town is the most low-key of the three main entrances to the national park, with the least amount of traffic. Smoky Mountain cabin investments can be profitable in 2022; the city scored a 99 in Rental Demand while maintaining a TTM occupancy of 73%. The average annual revenue for a short-term rental in Townsend has grown to $55K per year, earning the city a 91 in Revenue Growth.

Set in the foothills of the Kiamichi Mountains, Broken Bow is a small city in southeastern Oklahoma. Home to Broken Bow Lake, it provides a gateway for tourists to visit Beavers Bend State Park, Hochatown State Park, and Cedar Creek Golf Course at Beavers Bend. A popular year-round destination for regional travelers, the area is best known for its lake activities, abundance of wildlife, and pine forest trails. Broken Bow earned the highest Investability score on our list with an astonishing annual revenue of $85K per year. Investment properties in Broken Bow have grown 50% in popularity since last year, with more than 2,200 homes now available for short-term rent. 

Key West, FL, is one of the best Florida cities for Airbnb investment in 2022. The southernmost point in the contiguous United States, Key West is a small island known for its beaches, watersports, historic sites, and lively nightlife. Visitors flock to the Key West Historic District and enjoy the bars, shops, and cafes along Duval Street. Out of all markets on our list of Best Places to Invest in vacation rentals, Key West has the highest home value ($852K) and ADR ($664). Some investors may see the high cost of entry to the Key West market as a barrier, but it's more enticing when considering the annual revenue of $128K per year with a Revenue Growth score of 87. 

Located within the Lincoln National Forest and home to Ski Cloudcroft, the village of Cloudcroft, NM, is one of the highest cities in the U.S. at 8,676 feet. The climate features mild summers and snowy winters, making it a popular tourist attraction for residents of West Texas and southern New Mexico. Cloudcroft scores an impressive 94 in Investability by earning revenue of $41K per year on a typical home value of $186K. The strength of Cloudcroft’s Rental Demand (88) reflects the popularity of remote destinations with outdoor activities.

An exception to this list dominated by small towns, Kansas City, MO, is the largest city in the state, with a population of over 500K in 2020. Home to a thriving creative arts scene, die-hard sports lovers, unmatched barbecue, and a distinct jazz heritage, this city in the center of the country has something to offer every variety of visitor. Real estate prices have yet to reflect the vibrancy of the city, with typical home values coming in at $209K. Kansas City offers a low barrier to investment entry and average annual revenues of $38K. Kansas City racks up an admirable Investability score of 85. 

Looking for an affordable investment home in a small town? Williamstown, KY, is home to the Ark Encounter, a Christian theme park with a full-scale interpretation of Noah’s Ark. The attraction brings in nearly 1 million visitors each year to an unsuspecting and otherwise small town in rural Kentucky. A typical home value of $128K makes Williamstown the most affordable market on the Best Places to Invest in Airbnb list. With average earnings at $37K per year, the town earns a prodigious Investability score of 95.

Owning rental property in Tennessee can be profitable in high-growth cities. Situated along the Mississippi River and home to Elvis Presley’s Graceland Mansion, Memphis is Tennessee’s second-most populous city (behind Nashville), with a population over 600K in 2020. As one of the more historic and culturally rich cities in the southern United States, the city is known for its museums, fine art galleries, and performing arts venues. Memphis registers an Investability score of 84 while maintaining a low typical home value of $203K and yearly average revenues of $36K. The city also records a Revenue Growth score of 78, driven primarily by ADRs increasing to $173.

Home to the Mount Rushmore and Crazy Horse memorials, the Black Hills are a small and isolated mountain range that encompasses Black Hills National Forest. Rental Demand has climbed to a score of 94 as road-trippers come to the national and state parks in the area to see wildlife, tour scenic byways, and admire the memorials and monuments. Strong demand for the Black Hills has led to 72% TTM occupancy in homes valued at $338K on average. The area has a few standout vacation rental markets: Custer, Keystone, and Hill City.

Buying rental property in St. Louis can be profitable due to low financial barriers. As the “Gateway to the West,” St. Louis is known for the iconic Gateway Arch and offers a variety of museums, parks and gardens, eateries, and architecture that are sure to pique the interest of the urban explorer. The area scored high in Revenue Growth at 86 points, with average revenue of $35K per year. With home values averaging $212K, the financial hurdle to enter the St. Louis market is low, earning the city a 75 in Investability.

Buying rental property in California doesn’t have to be on the beach. The largest city in California’s Wine Country and Redwood Coast, Santa Rosa sits at the northwestern gateway to the Sonoma and Napa Valleys. This city scores a 93 in Revenue Growth as visitors are drawn to explore the parks, gardens, wineries, historic buildings, and museums in the area. ADRs in Santa Rosa have climbed to $506, resulting in annual revenues of $101K and the third-highest average revenue potential on the Best Places to Invest list, behind Maui, HI, and Key West, FL.

Strong growth within a market can sometimes be met with growing pains as the community seeks to find an adequate balance of short-term rental capacity in their area. Many of the past and current markets listed in AirDNA’s Best Markets to Invest have or will see regulation that may impact the future viability of a short-term rental investment within that market. Potential investors are urged to look carefully into local short-term rental regulations and zoning laws, current and proposed, and invest responsibly. 

Investors must acknowledge that short-term rental market conditions are dynamic and always subject to change. Cities that are attractive for investment today will, in all likelihood, gain additional supply, potentially diluting the earning potential of other homes within that market. Generally, the smaller the market, the greater the risk to short-term rental property investors, as smaller markets tend to have difficulty absorbing additional supply. 

Markets that have found themselves in increasingly higher demand since the onset of the pandemic can also be viewed as higher risk. As demand preferences begin to normalize with the return of overseas and urban travel, markets with strong/weak demand today could see a reversal in performance. Stay on top of Airbnb occupancy rates by city to compare historical growth as well as future performance of top markets. 

So, Where is The Best Place to Invest in Vacation Rentals?

Top short-term rental markets continue to highlight small towns in close proximity to larger cities. Market research is necessary in order to analyze ZIP codes within top Airbnb cities, size of vacation rentals, and local competition. Whether you’re seeking to own an Airbnb in another state or choose a local hot spot, we recommend checking out our Guide to Airbnb Real Estate Investing or hopping right into MarketMinder to analyze any short-term rental market around the globe.  

For the short-term rental pros out there analyzing multiple regions or states, you can customize your research by purchasing MarketMinder for the entire U.S. or entire state of your choosing. Choose your next property with confidence. 

Historical Best Places to Invest AirDNA Reports 

Best Places to Invest in 2020-2021   |   Rural, drive-to markets saw unprecedented demand for short-term rentals due to limited air travel and the ability to work remotely.

Best Places to Invest in 2018-2019   |   Dominated by world-class ski resorts, Florida beaches, and southern coasts such as Alabama and South Carolina. The best places to invest in 2019 charged a high dime per night, increasing annual revenue for hosts in these regions. 

Best Places to Invest in 2017-2018   |   The best places to buy a vacation rental home in 2018 included Tennessee, Florida, Hawaii, and popular destination towns. 

Wondering what are the best places in the US for vacation rental investments 2021-2022? Learn how 2021 changed the short-term rental landscape & where to invest now.

Best Places to Invest in Vacation Rentals in 2021 & 2022

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