One of the highest rates of return on vacation rental homes is in Palm Springs, CA. Guests at Land … [+] Rover 4XFAR on January 19, 2020 in Palm Springs, California. (Photo by Stefanie Keenan/Getty Images for Land Rover)
Getty Images for Land Rover
The new way to go on vacation during the Covid era involves seeking out locations with wide open spaces and a multitude of options for outdoor recreation. According to the Vacasa, a vacation rental management platform that manages over 25,000 homes throughout the United States, there is still strong demand for people looking to get out of town for a week or two—they just want to choose a place they can drive to instead of fly and entertain themselves without having to risk being in close quarters with strangers. Vacasa analyzed the rental rates across all the cities where they have a strong presence and compared them to the median home sale prices to determine the places where you can see the greatest returns. The results show: people want the great outdoors.
The list below shows the annual gross rental revenue (as the first number) and the median sales price (as the second). Their full report goes in to detail on the net annual profits, or cap rate, by estimating the averages property taxes, utilities, HOA fees, insurance, and property management fees. All the places listed below have cap rates of 6% or higher. Number one of the list, Big Sky in Montana, has an estimated cap rate of 9.2% which is nearly double its rate from last year of 5.4%, indicating the strong shift in preferences from vacationeers to visit areas where there is an ample amount of space for everyone to move around.
Big Sky, Montana is this year’s winner for best places to buy a vacation rental home.
Most of the locations have median sales prices of under half a million dollars, though a few cities are around $600,000 or higher. In several cases, the median price isn’t necessarily an indicator of having a higher rate of return. Vail, for example, is about $50,000 higher than Kauai for home prices, but they both have about the same annual gross profit ($65,000). Big Sky is roughly $100,000 less than both of them, but has a higher return at $79,000.
Big Sky, MT: $79,726 (median home sale price: $541,842)
Cape Hatteras, NC: $63,029 (median home sale price: $379,248)
Poconos, PA: $38,079 (median home sale price: $200,190)
Gatlinburg, TN: $39,693 (median home sale price: $269,523)
Dauphin Island, GA: $43,316 (median home sale price: $289,623)
Corolla, NC: $65,222 (median home sale price: $560,599)
Conway, NH: $31,971 (median home sale price: $238,930)
Palm Springs, CA: $51,483 (median home sale price: $459,857)
Ellijay, GA: $30,971 (median home sale price: $226,685)
Blue Ridge, GA: $36,686 (median home sale price: $291,595)
Killington, VT: $37,121 (median home sale price: $218,917)
South Kauai, HI: $65,162 (median home sale price: $593,554)
Vail, CO: $65,998 (median home sale price: $648,651)
Kissimmee, FL: $33,969 (median home sale price: $250,210)
Big Bear, CA: $35,988 (median home sale price: $313,667)
For a look at all 25 cities and their cap rates, head over to the full report from Vacasa.