Best Market For Vacation Rentals?

Question

I’m in the Gatlinburg Pigeon Forge Wears Valley (Smoky Mountain) market and I’m very pleased with my returns. It’s easy to scoop up a cabin that will bring in 1.5++% and you can manage it from anywhere in the world.

Obviously this is not suggested in many markets. The other markets that seem to do well are:

Big Bear

Kauai  (@Mike V.)

Orlando (@Chai Xiong)

Where are you having success and how??

Benjamin Vail · Answer

When searching for the “Best market”, you must define what metric you are looking for to be most important.

If you are looking for highest gross revenue, then I would say costal or large popular cities, with STR friendly laws (San Diego, ect).

If you are looking for ROI, then you should consider markets with lower property values, that still have a strong travel industry. I have a house in Columbus OH that I bought for $50,000 and is averaging $2500/month over the last 2 years. (That is a 5% per month).

Sean Wilt · Answer

@Lucas Carl  thanks.  Is that gross or net of tax/fees.  Interesting benchmark and curious how my property stacks up vs. that metric.

Gross Rental Revenue divided by (PITI + utilities)   = 150%?

Or

Gross revenue - occ taxes etc divided by (PITI +utilities) = 150%

Thanks again.

Dan H. · Answer

Our little beach STR duplex in San Diego averages over $15k/month rent and achieves near 100% occupancy.  I agree rent alone is not the best metric for success.   If I use ROI this is like 50 grand slams (it was purchased for $375k and all of the initial investment was pulled out long ago so infinite ROI) but if I use ROE it is likely a base hit, nothing spectacular (not forecasting for future appreciation- current value ~$1.4m).

However, as some have mentioned, the San Diego STR environment is in flux.  Recently the council passed regulations that were STR unfriendly.  Signatures were gathered to place it on the ballot.   Council pulled the regulations prior to it being put before the voters.

If you invest in San Diego STR, you need to plan for STR regulations possibly negatively affecting your returns in the future.  In addition, the entry price is very high.  The initial return via STR of a current San Diego purchase would not be outstanding due to the high entry price (even with the high rent).

In summary, I expect there are more friendly STR markets than San Diego that will produce better initial returns.

Cody L. · Answer

San Diego huffed and puffed about putting in VR rules. Then caved and removed them when Airbnb pulled out their banana and smacked them around.

So at the moment SD is pretty friendly. And insomuch as this city isn’t blue YET, Airbnb may stay safe.

Tim Schroeder · Answer

My sister lives in Big Bear, CA. AirBNB has been causing all kinds of havoc by pricing locals out of places to live. Therefore, it's likely on local government's radar.

Sean Wilt · Answer

@Lucas Carl

Just curious what exactly the 1.5++% is referring to.

To add value to the thread, I am hearing as well as research i have been doing that Galveston is a very strong STR market.

Linda West · Answer

Cody L., you're certainly entitled to your perspective and at the moment San Diego does not have the oppressive legislation which was threatened.   As was pointed out, a referendum saved us from some seriously anti-STR laws which were promulgated by the hotel industry.  If you think the hotel/tourism industry does not have a vested interest here, or that the can have their ass kicked by AirB&B, I believe you have another think coming.  I suggest you look at the history of some North County cities that have anti-STR laws, as well as the situation in Orange County and points north.   The city may not be blue, but the county sure is.   I'm agreeing with Dan from Poway - there are more friendly STR markets than San Diego (though it is and will remain a terrific LTR market).

Linda West · Answer

@ Lucas Carl - that may be true in your market, but not in San Diego.  My point was - the OP was looking for "VR friendly markets" and "areas with favorable VR laws".  Until recently, San Diego was VR friendly.  It is no longer.  Several cities in Southern California have been/are involved in VR legislation litigation.  Assumptions should not be made.

Tim Schroeder · Answer

Nobody should be looking at highest gross revenue -- only ROI counts.

Best Market For Vacation Rentals?

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