In recent years, investing in vacation rentals has become a popular real estate trend. The short-term rental industry’s annual revenue in the U.S. is expected to exceed $21 billion by 2028 as more and more travelers choose to stay in vacation homes instead of hotels. Therefore, many investors are considering buying a vacation home to rent out for profit.
If you want to start or scale your business, it’s important to research the best short-term rental markets in advance because the property’s location is key to its success. It should be where both the demand for short-term rentals and rental income are high without breaking the bank to buy the property.
Luckily, short-term rental data analysis company AirDNA recently came out with its Best Places to Invest in Short-Term Rentals in 2024 report. To help you decide where to invest, we’re sharing highlights from their report plus some additional data to bring you the U.S.’s best places to buy vacation rental property in 2024.
What do we mean by the best short-term rental markets?
There are many ways to define the best places for short-term rentals, but for most aspiring investors it comes down to profitability. For its report, AirDNA analyzed the following elements:
- Rental demand
- Revenue growth
- Government regulations
- Investability
AirDNA explains that “investability” measures how profitable a property is going to be compared to its asking price, which you can find by calculating the property’s capitalization (or “cap”) rate. The cap rate is a relatively simple real estate profitability metric that allows investors to compare different housing markets and decide which offers the best opportunities to make money.
While AirDNA doesn’t provide specific cap rates for its recommendations, we’ve gone out of our way to calculate them for you to help provide an even better picture of each market.
How to calculate cap rate for vacation rentals
For those of you who are new to the real estate investing world, cap rate is a real estate metric that is calculated by dividing the net operating income of a rental property by its current market value. Although not the only indicator of success, it is an important marker for the best vacation rental markets.
Cap rate formula:
Cap Rate = Net Operating Income (NOI) / Current Market Value (CMV)
Keep in mind that in order to find your net operating income, you need to subtract your operating expenses from your expected revenue.
NOI = real estate revenue – operating expenses
If you’re not sure what your operating expenses will be, real estate data analytics tool Mashvisor recommends using the 50% Rule. This rule assumes that vacation rental operating expenses make up 50% of its gross income.
Since AirDNA didn’t provide operating expenses for its recommended markets, we’ve used the 50% rule to calculate cap rates.
What cap rate indicates the best vacation rental markets?
What is the golden number for cap rates? As with most things in vacation rental investments, it depends.
A higher cap rate, typically speaking, projects a better investment. However, it could also mean that it’s riskier. “Good” depends on how you’d like to define it. Striking a balance between high investment and risk is what will really determine what a good cap rate for your vacation rental is.
With that in mind, it’s advisable to hover between a 5-10% cap rate. Low cap rates of around 1 to 2% could still be profitable, but they’re typically found in highly saturated areas like bigger cities with a well-established short-term rental market.
On the other hand, a high cap rate could be a good investment, but it’s better suited for the gambler willing to take more of a risk.
Also, cap rates can be very specific to neighborhoods and particular areas. Analyzing an entire city or county may not give you an accurate representation of the cap rate in your specific location.
Take New York City, for example. The current cap rate in Times Square comes in at -1.76%, while just a stone’s throw away in Queens, the cap rate is 1.54%. Your best investment should consider all these factors, as no two cap rates are created equal.
The best places to buy vacation rental property in 2024
The market is constantly changing, and last year’s top vacation rental markets differ from this year’s. These are the best markets for short-term rentals in 2024 based on cap rates, median home prices, occupancy rates, average daily rates (ADR), and annual revenue.
| Market | Cap Rate | Median Home Price | Occupancy Rate | Average Daily Rate | Annual Revenue |
| Columbus, Georgia | 9% | $161K | 60% | $178 | $29K |
| Ellsworth, Maine | 6.3% | $325K | 73% | $335 | $41K |
| Logan, Ohio | 12.2% | $233K | 57% | $343 | $57K |
| Spring Hill, Florida | 5% | $389K | 62% | $251 | $39K |
| Sneads Ferry, North Carolina | 6.4% | $555K | 63% | $461 | $71K |
| Winter Haven, Florida | 5.9% | $264K | 62% | $206 | $31K |
| Stanton, Kentucky | 14.7% | $146K | 56% | $236 | $43K |
| Port Angeles, Washington | 6% | $390K | 64% | $289 | $47K |
| Akron, Ohio | 9% | $145K | 57% | $199 | $26K |
| Fairbanks, Alaska | 6.7% | $239K | 65% | $225 | $32K |
1. Columbus, Georgia
- Cap rate: 9%
- Median home price: $161K
- Occupancy rate: 60%
- ADR: $178
- Annual revenue: $29K
Columbus, Georgia is known as a hub for outdoor enthusiasts and Civil War buffs…and now as the best place to buy vacation rental property in 2024.
Solid cap and occupancy rates (9% and 60%, respectively) as well as a low median home price of just $161K are to thank for this top position. And while you may not think of Columbus as a huge tourist destination, it had nearly 2 million visitors in 2023 thanks to its numerous museums, ideal location on the banks of the Chattahoochee River, and urban whitewater course (the longest in the world).
2. Ellsworth, Maine
- Cap rate: 6.3%
- Median home price: 325K
- Occupancy rate: 73%
- ADR: $335
- Annual revenue: $41K
Ellsworth, Maine stands out not only for being the second best place to buy a vacation rental property, but also for having the highest occupancy rate of all the recommended markets. Vacation rentals in Ellsworth, Maine are booked 73% of the year, their high demand being driven primarily by the city’s proximity to Acadia National Park.
3. Logan, Ohio
- Cap rate: 12.2%
- Median home price: $233K
- Occupancy rate: 57%
- ADR: $343
- Annual revenue: $57K
Rounding out the top three best places to buy a vacation rental is Logan, Ohio. This small city in southeastern Ohio is known for its picturesque scenery in Hocking Hills State Park and along the Hocking River, as well as its vibrant arts scene. While Logan may not have the highest occupancy rate, strong all-around numbers make it an excellent option for investors.
4. Spring Hill, Florida
- Cap rate: 5%
- Median home price: $389K
- Occupancy rate: 62%
- ADR: $251
- Annual revenue: $39K
Spring Hill, Florida is a nature-lover’s paradise: Its proximity to the Weeki Wachee Springs State Park and the Chassahowitzka Wildlife Management Area drive a strong occupancy rate of 62%. This makes up for its having the lowest cap rate in the list (5%) as well as a relatively high median home price ($389K).
5. Sneads Ferry, North Carolina
- Cap rate: 6.4%
- Median home price: $555K
- Occupancy rate: 63%
- ADR: $461
- Annual revenue: $71K
Don’t be alarmed by Sneads Ferry’s higher median home price of $555K (the highest on the list): It’s matched by equally high ADR and annual revenue, coming in at a whopping $461/night and $71K/year.
Tucked away on the Atlantic Ocean’s gentle shores, Sneads Ferry beckons travelers with its close proximity to North Topsail Beach and vast stretches of untouched coastline. This enchanting town offers the perfect escape for those craving a coastal getaway, making it a prime destination for both visitors and budding Airbnb entrepreneurs seeking to capitalize on thriving short-term rental markets.
6. Winter Haven, Florida
- Cap rate: 5.9%
- Median home price: $264K
- Occupancy rate: 62%
- ADR: $206
- Annual revenue: $31K
The second Florida city to make the list of best places to invest in short-term rentals, Winter Haven stands out as being an affordable alternative to the state’s more expensive real estate markets. Its proximity to LEGOLAND, charming downtown, and nearby lakes also make it a great family-friendly location—something to keep in mind when marketing your vacation rental.
7. Stanton, Kentucky
- Cap rate: 14.7%
- Median home price: $146K
- Occupancy rate: 56%
- ADR: $236
- Annual revenue: $43K
With the highest cap rate and the lowest median home price on the list, Stanton, Kentucky stands out as an obvious choice for investing. Its proximity to Natural Bridge State Resort Park and the Red River Gorge Geological Area make it a popular destination for outdoor enthusiasts and help drive its occupancy rate of 56%.
8. Port Angeles, Washington
- Cap rate: 6%
- Median home price: $390K
- Occupancy rate: 64%
- ADR: $289
- Annual revenue: $47K
Located in Washington state, Port Angeles offers a convenient gateway into the vacation rental market, boasting a reasonable typical home value of $390,480. Investors stand to benefit from its advantageous positioning near the Port Angeles Fine Arts Center and the breathtaking Olympic National Park, featuring both majestic mountain summits and flourishing temperate rainforests.
9. Akron, Ohio
- Cap rate: 9%
- Median home price: $145K
- Occupancy rate: 57%
- ADR: $199
- Annual revenue: $26K
Akron’s low median home price of just $145K as well as its strong cap rate of 9% give it the second-to-last position in the list of best places to buy a vacation rental property. While Akron benefits from being next to its more popular neighbor, Cleveland, it has its own attractions as well, including Stan Hywet Hall & Gardens and Akron Art Museum.
Also note that Akron is the second city from the Buckeye State to make the list, positioning Ohio as one of the best states for short-term rental investment.
10. Fairbanks, Alaska
- Cap rate: 6.7%
- Median home price: $239K
- Occupancy rate: 65%
- ADR: $225
- Annual revenue: $32K
Rounding out the list of the top 10 best places for short-term rental investments in 2024 is Fairbanks, Alaska. Fairbanks’ exposure to the Northern Lights, its location within the Arctic Circle, and its other unique natural and cultural attractions ensure a steady stream of tourists to the city, earning it a solid occupancy rate of 65% and a spot on AirDNA’s list for the second year in a row.
Legislation and taxes
Promising some of the highest returns on investment nationwide, these 10 destinations are currently some of the best places to buy short-term rental property in the U.S.
However, before you decide to become a vacation home investor in any of them, check the local short-term rental legislation before committing. In addition, familiarize yourself with the taxes and fees you will need to pay and research which states have the lowest property taxes for short-term rental investments.
If you’re looking to own an Airbnb in Texas, Florida, or California, you can check out our guides on Airbnb and short-term rental laws and regulations.
Once you have all legislation issues covered, you can embark on the exciting and profitable journey of investing in real estate and starting your vacation rental business!
Over to you
Buying a vacation rental is only the beginning of the adventure that lies ahead. Owning a short-term rental is a great investment, but it doesn’t end once you sign the deed. Even the best vacation rental investments need property management software.
Try Lodgify with a no-commitment, 7-day free trial to see how you can manage your bookings, connect with major OTAs like Airbnb and Vrbo, and run your own website from one convenient place.
Contributing Author
