Market Analysis: Best Places to Invest in Vacation Rentals Right Now

Industry Insights, Short-Term Rental Insurance

Insurance Claims Leader

Investing in vacation rentals can be a profitable venture, but it’s essential to choose the right location. The best places to invest in vacation rentals not only have a strong tourism market but also offer a favorable climate for property owners. Whether you’re a first-time investor or a seasoned property manager, understanding where to invest is key to maximizing your returns. In this post, we’ll break down some of the top markets for vacation rental investments, considering factors like demand, return on investment (ROI), and market trends.

Understanding the Best Places to Invest in Vacation Rentals

Before diving into specific locations, it’s important to define what makes a market ideal for vacation rental investments. Here are the key factors to look out for when assessing the best places to invest in vacation rentals:

Strong Tourist Demand: A steady flow of tourists is essential for high occupancy rates and good rental yields.
Regulatory Environment: Research local laws regarding short-term rentals. Cities with restrictive laws may not be the best investment.
Property Prices: Affordable properties in high-demand areas tend to offer the best ROI.
Seasonality: Some locations may perform well year-round, while others are seasonal—understanding this will help you forecast income.

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

The United States has a diverse set of locations that are prime for vacation rental investment. Whether you’re looking for beachfront properties, mountain retreats, or city escapes, there’s an ideal place for every type of investor. Let’s explore some top U.S. cities to consider:

Smoky Mountains, Tennessee

Tourism: The Smoky Mountains attract millions of visitors each year for hiking, wildlife viewing, and the Great Smoky Mountains National Park. The area’s natural beauty and year-round appeal make it a strong contender.
Rental Demand: Vacation rentals are popular among families, nature lovers, and honeymooners. Gatlinburg and Pigeon Forge are particularly in demand.
Investment Potential: With affordable property prices compared to major tourist hubs, the Smoky Mountains offer a strong ROI and steady rental income.

Destin, Florida

Tourism: Destin is a prime beach destination along the Gulf Coast, attracting visitors with its white sandy beaches and family-friendly atmosphere.
Rental Demand: Vacation rentals in Destin tend to see high occupancy rates, particularly during peak beach seasons.
Investment Potential: While property prices can be higher than other regions, the consistent demand for beach rentals ensures high returns during both peak and off-peak seasons.

Asheville, North Carolina

Tourism: Known for its artsy vibe, craft breweries, and proximity to the Blue Ridge Parkway, Asheville is a popular destination for tourists looking for a mix of culture and nature.
Rental Demand: The area’s popularity with visitors looking for a mix of urban and outdoor experiences boosts demand for vacation rentals.
Investment Potential: As a mid-sized city with affordable real estate options, Asheville offers a balance of property value and rental income potential.

Austin, Texas

Tourism: Austin has grown tremendously as a cultural and tech hub, attracting visitors for live music, food, and festivals like South by Southwest (SXSW).
Rental Demand: Austin sees year-round demand, with peak seasons surrounding events, music festivals, and conferences.
Investment Potential: Austin’s real estate market has appreciated significantly, but the city’s ongoing growth in tourism and business ensures strong future returns for vacation rental investments.

Palm Springs, California

Tourism: Palm Springs is a top desert getaway destination known for its upscale resorts, golf courses, and sunny weather.
Rental Demand: This area has long been a favorite among high-income travelers and retirees looking for luxury short-term rentals.
Investment Potential: Palm Springs is one of the most desirable luxury markets in California, with high rental yields, especially for well-maintained, luxury properties.

Best Places to Invest in Vacation Rentals Internationally

If you’re open to international investments, several global locations offer great opportunities for vacation rental investments. Here are a few international markets to consider:

Lisbon, Portugal

Tourism: Lisbon’s cultural landmarks, nightlife, and coastal beauty attract millions of tourists annually.
Rental Demand: The city is a top European destination for travelers seeking both culture and beautiful beaches, making vacation rentals highly sought after.
Investment Potential: Lisbon has relatively affordable property prices compared to other European capitals, while the growing tourism sector ensures high rental yields.

Bali, Indonesia

Tourism: Bali’s popularity as a tropical vacation destination makes it one of the top places in Southeast Asia for vacation rentals.
Rental Demand: With millions of international visitors each year, Bali is in constant demand for vacation rentals, especially villas and luxury properties.
Investment Potential: Bali offers relatively low property costs compared to many Western vacation markets, but the potential for high returns is strong, particularly in areas like Ubud and Seminyak.

Cancun, Mexico

Tourism: Cancun is a top destination for travelers seeking all-inclusive resorts, beaches, and lively nightlife.
Rental Demand: Cancun’s tourism remains strong throughout the year, with an especially high demand during the winter months when visitors flock from colder climates.
Investment Potential: While property prices have been rising, the continued influx of tourists makes Cancun a strong contender for vacation rental investors looking for robust demand.

Barcelona, Spain

Tourism: Barcelona’s stunning architecture, beaches, and cultural landmarks make it a major tourist destination in Europe.
Rental Demand: Short-term rental demand in Barcelona remains high, particularly in the summer months, due to its reputation as a cultural and beach city.
Investment Potential: With a relatively high cost of entry, Barcelona’s rental market remains strong, especially for owners who can offer unique properties or experiences.

Costa Rica

Tourism: Costa Rica has become a prime destination for eco-tourism, adventure travelers, and beach lovers alike.
Rental Demand: Areas like Tamarindo and Manuel Antonio see a lot of rental demand, as tourists flock to these areas for their natural beauty and outdoor activities.
Investment Potential: The country’s growing tourism industry and affordable property prices offer excellent potential for those looking to invest in a vacation rental with long-term growth prospects.

Key Considerations When Investing in Vacation Rentals

As you evaluate the best places to invest in vacation rentals, it’s important to keep the following factors in mind:

Market Trends: Stay updated on current travel trends, such as the rise of remote work and the increased popularity of longer stays, which can influence rental demand.
Legal Regulations: Research local zoning laws and short-term rental regulations in your target area to ensure your investment is compliant with local ordinances.
Property Management: If you’re managing the property remotely, consider the costs and logistics involved in maintaining your vacation rental and providing a great guest experience.
Seasonality: Understand whether your chosen market experiences high-season peaks, low-season slumps, or steady year-round demand. Diversifying with seasonal strategies can help maximize your rental income.

Choosing the best places to invest in vacation rentals can be a game-changer for property managers and investors looking to maximize their returns. By focusing on areas with strong tourist demand, favorable property prices, and solid future growth prospects, you can ensure a steady stream of rental income and long-term success. Whether you opt for well-established markets in the U.S. or emerging international destinations, it’s crucial to conduct thorough market analysis to make informed decisions.

Explore related content on how Safely’s property management expertise, guest screening services, and short-term rental insurance can help streamline your vacation rental business. Let Safely help you make your investment journey smoother and more profitable.

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Amber Harris

Insurance Claims Leader

Amber is the Claims Leader at Safely and has been with the company for over four years. She manages a team of claims adjusters, working with company leadership to improve processes, maintain accurate documentation and educate team members across various departments on best practices. Before joining Safely, Amber worked as a GAP Adjuster Supervisor. Her early career includes serving as a customer service representative and unit manager at Assurant Specialty Properties as well as business operations manager at Farmers Insurance. Amber was born in Dayton, Ohio and earned a Bachelor of Science degree in Finance.