Investing in vacation rentals? Here’s where to get the most bang for your buck

The best bets for buying in

Investors looking to cash in on vacation rentals might want to set their sights southward. According to new data, markets in Florida, Tennessee and South Carolina hold the most earning potential, with Florida’s Forgotten Coast claiming the No. 1. spot.

Top-earning vacation destinations

According to data from Vacasa, rental property investors stand to make the most in Forgotten Coast, Florida, where vacation rentals boast an average annual capitalization rate of 9.6 percent.

Investors make more than $46,000 in property revenues each year, and homes cost just $336K in the area. The market has more than 1,000 rental units.

Tips for landlords: how to set your rent

Vacation rentals in Smoky Mountains, Tennessee, stand to earn the second-most, with the annual cap rate of 8.1 percent. Investors in the area make just under $30,000 per year on each property.

Rounding out the top five markets are Kissimmee, Florida (7.1 percent), Myrtle Beach, South Carolina (6.9 percent); and Hilton Head Island, South Carolina (6.8 percent). The only island destination to make the top 10 was North Kona, Hawaii. The only western spot was Lake Chelan, Washington.

Complete guide to buying an investment property

Other ways to make bank

Though earning potential should certainly influence where an investor buys in, according to Eric Breon, CEO and founder of Vacasa, there are other factors at work, too.

“Making an investment in a vacation rental is no small task when you consider the amount of available properties around the country and the variables that come with each,” Breon said. “Not only is it important to consider the earning potential of the home to ensure the return on investment is on par with expectations, but also the factors that could draw guests to the area.”

A good tip? Vacasa’s experts say buying larger properties can help.

“To maximize ROI, consider investing in large vacation homes that make good family rentals, but don’t have much demand as primary residences,” Vacasa reported. “For example, seven-bedroom homes make great income-generating properties, but there’s little demand for these homes because seven-bedrooms is more than most families need as a primary residence.”

Get today’s mortgage rates

Ready to start investing in vacation rentals in one of these high-earning cities? Then shop around and see what mortgage rates you qualify for today.