If you’re looking to invest in a vacation rental property, a lake house could be a winner for your business. The United States is home to some of the world’s most awe-inspiring lakes, which attract millions of visitors every year and provide a stunning backdrop for some of the country’s most successful vacation rentals.
Lake houses are popular within each demographic due to the different types of guest experiences they can offer. Not only do they boast views of the water and surrounding nature, but they also provide access to an array of outdoor activities such as fishing, boating, and paddleboarding, making them perfect for relaxing getaways and activity-packed adventures.
However, with so many lakeside locations to choose from, it can be overwhelming to decide where to invest your money. In this article, we’ll explore some of the best places to buy a lake house in 2023 in the U.S., evaluating various factors, including location and cap rates.
So, if you’re looking for a property that can generate seasonal or year-round rental income, there’s sure to be a lakeside destination that meets your needs—and budget.
What do we mean by the best place to buy a lake house?
We’ll take into account insights from Evolve, AirDNA, and Zillow, such as median home prices, predicted average rental revenue, and occupancy rates, as well as factors like location, short-term rental regulations and taxes, and popularity among tourists. We’ll then order the locations based on their cap rates, from the highest to the lowest.
What is a vacation rental cap rate?
A vacation rental cap rate is a financial metric that measures a vacation rental property’s potential return on investment (ROI). It is calculated by dividing the property’s net operating income (NOI) by its purchase price or market value. The resulting percentage indicates the expected rate of return on investment over a given period.
For example, if a vacation rental property generates $50,000 in annual revenue and has $30,000 in operating expenses, the NOI would be $20,000. If the property was purchased for $400,000, the cap rate would be calculated as follows:
Cap rate = NOI / Property value
Cap rate = $20,000 / $400,000
Cap rate = 0.05 or 5%
This means that the expected rate of return on the investment in the vacation rental property is 5%. A higher cap rate indicates a higher potential return on investment, while a lower cap rate suggests a lower expected return.
Best locations to buy a vacation rental lake house
The lake house market has become increasingly competitive, with property owners and managers vying for guests with attractive amenities and pricing. To help you make the right decision for your business, let’s look at the top 14 lakeside locations and evaluate their potential for profitability.
| Market | Cap Rate | Median Home Price | Vacation Rental Occupancy Rate |
|---|---|---|---|
| Seneca Falls, NY | 7.56% | $162,149 | 63% |
| Saranac Lake, NY | 7.1% | $250,190 | 57% |
| Branson, MO | 5.9% | $232,208 | 50% |
| Brainerd, MN | 5.5% | $346,333 | 63% |
| Traverse City, MI | 5.5% | $425,165 | 57% |
| Smith Mountain Lake, VA | 5.1% | $462,772 | 68% |
| Granbury, TX | 5.0% | $394,776 | 52% |
| Pocono Lake, PA | 4.9% | $273,682 | 50% |
| LaFollette/Norris Lake, TN | 4.4% | $427,366 | 61% |
| Lake Ozark, MO | 4.3% | $344,707 | 58% |
| Gilford, NH | 4.0% | $518,389 | 57% |
| Lake Havasu City, AZ | 2.9% | $499,776 | 58% |
| South Lake Tahoe, CA | 2.65% | $646,493 | 63% |
| Big Bear Lake, CA | 2.3% | $643,468 | 42% |
1. Seneca Falls, New York
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- Cap rate: 7.56%
- Median home price: $162,149
- Occupancy rate: 63%
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Seneca Falls is located in the heart of the Finger Lakes region, surrounded by picturesque lakes, vineyards, and rolling hills. Visitors can enjoy hiking, biking, and water sports in the summer, and skiing, snowmobiling, and ice skating in the winter. Seneca Falls is also home to numerous wineries, breweries, and restaurants, offering guests a diverse range of dining and entertainment options.
A relatively low median home price combined with a high occupancy rate puts Seneca Falls at the top of our list. The average monthly revenue here is $3,944.
Should you buy a lake house in Seneca Falls, you would need to comply with certain regulations, which you can find and download on the Town of Seneca Falls website here.
2. Saranac Lake, New York
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- Cap rate: 7.1%
- Median home price: $250,190
- Occupancy rate: 57%
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The town is situated in the heart of the Adirondack Mountains, offering excellent views and ample outdoor activities. Renowned for its fall foliage, guests travel from far and wide to marvel at its beauty.
Depending on the season, the town offers various hiking, fishing, boating, skiing, and snowshoeing opportunities. Every year, thousands of visitors attend the Saranac Lake Winter Carnival, and it’s easily accessible from major cities such as New York City and Montreal.
The average monthly revenue from short-term rentals in Saranac Lake is $3,570, and 50% are fully booked for at least 90 days a year.
You can follow the updates on the latest progress on short-term rental regulations in Saranac Lake here.
3. Branson, Missouri
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- Cap rate: 5.9%
- Median home price: $232,208
- Occupancy rate: 50%
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Branson, Missouri, is an ideal place to purchase a lakehouse vacation rental due to its beautiful scenery, lively entertainment scene, and abundant recreational opportunities. The city is in the heart of the Ozark Mountains and is surrounded by pristine lakes, including Table Rock Lake and Lake Taneycomo. An array of water sports are available, as well as cruises and boat tours.
The average daily rate for a vacation rental in Branson is $189, and the average monthly revenue generated by short-term rentals is $2,573.
4. Brainerd, Minnesota
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- Cap rate: 5.5%
- Median home price: $346,333
- Occupancy rate: 63%
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Home to more than 500 lakes that provide water-based activities such as fishing, boating, and swimming, Brainerd is in the top 5 locations for those looking to invest in a lake house. The lakes are perfect for relaxing and unwinding while enjoying stunning views and peaceful surroundings. Additionally, Brainerd is easily accessible from major cities such as Minneapolis and St. Paul.
With 95% of all Brainerd rentals rated at least 4.5 stars by guests, successful property managers can expect to receive good reviews and a high occupancy rate of 63%.
5. Traverse City, Michigan
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- Cap rate: 5.5%
- Median home price: $425,165
- Occupancy rate: 57%
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Located on the stunning shores of Lake Michigan’s Grand Traverse Bay, Traverse City, Michigan, is an idyllic location for a lake house vacation rental. Firstly, it provides ample opportunities for water-based activities such as swimming, boating, and fishing. Secondly, the area is known for its beaches and crystal-clear waters, making it a popular vacation destination for families and outdoor enthusiasts.
To apply for a vacation home rental license, you can follow the steps to do so on the city’s official website here.
6. Smith Mountain Lake, Virginia
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- Cap rate: 5.1%
- Median home price: $462,772
- Occupancy rate: 68%
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Smith Mountain Lake is a renowned lake in southwestern Virginia. It offers over 500 miles of shoreline and is an excellent spot for fishing, boating, and swimming. The area also features several award-winning wineries and is only a short drive from Roanoke, the nearest city.
Smith Mountain Lake is an enticing investment opportunity due to its strong rental market, with high demand for vacation rentals during peak season.
Lake houses boast high occupancy rates here; the average daily rate is $340 in and around Smith Mountain Lake.
7. Granbury, Texas
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- Cap rate: 5.0%
- Median home price: $394,776
- Occupancy rate: 52%
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Based just southwest of Fort Worth, Granbury offers a picturesque lakefront setting on the shores of Lake Granbury, one of the top recreational lakes in the state. The lake spans over 8,000 acres, with visitors coming for its boating, fishing, and other water-based activities.
Granbury’s historic downtown square is also a popular attraction, with quaint shops, restaurants, and live music venues. The city’s central location also makes it easily accessible from major cities in Texas, including Dallas and Austin.
46% of all rentals in the town are booked out for at least 90 days a year, and the median rental revenue per year is $28,305.
8. Pocono Lake, Pennsylvania
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- Cap rate: 4.9%
- Median home price: $273,682
- Occupancy rate: 50%
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Pocono Lake boasts beautiful natural scenery and a serene atmosphere that is perfect for relaxation and rejuvenation. The lake itself is one of the cleanest and clearest in the region, so swimming, boating, and fishing are popular. The Poconos region attracts nearly 30 million visitors a year thanks to its suitability for outdoor enthusiasts, with a plethora of hiking and biking trails, ski resorts, and golf courses in the area.
If you’re looking to start a vacation rental business in Pocono Lake, you can find information on short-term rental regulations here.
9. LaFollette/Norris Lake, Tennessee
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- Cap rate: 4.4%
- Median home price: $427,366
- Occupancy rate: 61%
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Investing in a lake house in LaFollette is a pretty safe bet, thanks to its natural beauty and numerous recreational activities. Located in the heart of the Cumberland Mountains and surrounded by Norris Lake, it’s a dream location for nature lovers.
In addition, the city offers a variety of cultural and historical attractions, including museums and art galleries, that provide entertainment and educational opportunities for visitors.
Potential property managers will be pleased to know that the average monthly revenue for short-term rentals is $5,764, and 45% of all rentals are fully booked for at least 90 days a year.
You can download the short-term rental policy of LaFollette from its official website here.
10. Lake Ozark, Missouri
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- Cap rate: 4.3%
- Median home price: $344,707
- Occupancy rate: 58%
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Lake Ozark is attractive to investors and guests. For those looking for a city escape, it is situated on the shores of the beautiful Lake of the Ozarks, one of the largest artificial lakes in the United States, and only an hour’s drive from Branson. There are plenty of water activities to enjoy, such as swimming, boating, fishing, and water skiing. In addition, Lake Ozark offers a wide range of entertainment options, including shopping, dining, and nightlife.
Short-term rental regulations were amended in January 2023 after a decades-old ordinance that prohibited its practice was overturned. You can find more information about the update here.
11. Gilford, New Hampshire
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- Cap rate: 4.0%
- Median home price: $518,389
- Occupancy rate: 57%
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Gilford is a charming and picturesque town situated in the heart of the Lakes Region. With its stunning natural scenery and outdoor recreational activities, Gilford has something for everyone. The town is home to Lake Winnipesaukee, one of the largest lakes in New Hampshire, and offers boating, fishing, and swimming.
Additionally, Gilford is surrounded by mountains, meaning many visitors are hikers and nature enthusiasts. The town also boasts various restaurants, shops, and cultural attractions, ensuring visitors have plenty of options to explore during their stay.
Gilford is a shrewd location to invest in, considering the average monthly rental revenue is $4,532, with 56% fully booked for at least 90 days.
12. Lake Havasu City, Arizona
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- Cap rate: 2.9%
- Median home price: $499,776
- Occupancy rate: 52%
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The city is located on the beautiful Lake Havasu, which offers a wide range of recreational activities such as fishing, boating, water sports, and sunbathing. It has a warm and dry climate year-round, which makes it a sought-after destination for those looking to escape cold weather. Lake Havasu City is relatively affordable compared to other popular vacation spots in the U.S., which makes it perfect for a lake house rental.
Potential investors can find everything they need to know about short-term rental registration on the official website of Lake Havasu City.
13. South Lake Tahoe, California
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- Cap rate: 2.65%
- Median home price: $646,493
- Occupancy rate: 61%
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One of the most stunning and sought-after destinations in the United States, Lake Tahoe offers a wide range of recreational activities such as hiking, skiing, snowboarding, water sports, and fishing. South Lake Tahoe is home to several world-class ski resorts, including Heavenly Ski Resort, Kirkwood Mountain Resort, and Sierra-at-Tahoe Resort, making it a prime location for winter sports lovers.
Moreover, the town is known for its vibrant nightlife, top-rated restaurants, and excellent shopping, offering a well-rounded experience for vacationers.
Short-term rental permit applications and zoning in South Lake Tahoe can be found on its official website.
14. Big Bear Lake, California
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- Cap rate: 2.3%
- Median home price: $643,468
- Occupancy rate: 42%
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Big Bear Lake, located in Southern California’s San Bernardino Mountains, is an ideal location for purchasing a vacation rental property. The town is surrounded by natural beauty, with a stunning lake and scenic forests.
Big Bear also boasts a vibrant tourism industry, attracting visitors year-round for various events such as Oktoberfest, the Big Bear Lake International Film Festival, and the annual Christmas Tree Lighting Ceremony.
As a world-renowned destination with over 3,500 registered rentals, it’s certainly a competitive market; however, it also has huge potential to be very profitable.
News and information on Big Bear’s vacation rental program can be found on its official website.
What else to consider when buying a lake house for short-term renting?
Taxes and regulations
Is a lake house a good investment? Well, before you decide to part with your money, check the local short-term rental legislation of your desired location. In addition, all investors should familiarize themselves with the taxes and fees they must pay and research which states have the lowest property taxes for short-term rental investments.
It’s important to be aware that regulations are constantly being updated and amended, potentially impacting the profitability of a short-term rental.
If you’re looking to own a lake house in Texas, Florida, or California, you can check out our guides on short-term rental laws and regulations specific to these states.
Insurance for lakefront rentals
As well as short-term rental taxes and regulations, investors must ensure their short-term rental insurance covers waterfront properties. Water-based activities such as swimming and boating come with different hazards than most vacation rentals. Furthermore, the property may be vulnerable to particular risks, including water damage or flooding, so finding the right insurer will also help when evaluating potential investments.
Is buying lakefront property a good investment?
Lakefront vacation rentals provide a unique and desirable experience for guests and can provide a strong return on investment through revenue and potential appreciation in property value. The right lake houses offer something to all types of guests, whether they’re looking for a relaxing getaway in nature or an adventure packed with water sports.
Moreover, many of the locations analyzed above are popular year-round destinations with something to offer in both summer and winter. If you want to ensure you’re generating a steady income over 12 months, then choose an area that’s not just near the lake but near the mountains or a ski resort as well.
