Best short term rental markets for investment

The United States vacation rental market has seen huge growth, reaching $64 billion in revenue in 2023. Each Airbnb listing made over $26,000 on average. This shows there are many chances for smart investors in short term rentals.

To find the best places to invest, look at several things. These include return on investment (ROI), how much money can be made, and the average daily rate (ADR). Also, consider the occupancy rates, the number of listings, and the average property prices.

It’s also important to think about tourist attractions and the area’s appeal. These factors help decide where to invest for the best results.

Key Takeaways

The US vacation rental market grew to $64 billion in 2023, with average individual listings earning over $26,000 in revenue.
Top short-term rental markets offer strong year-round demand, good daily rates, excellent revenue, and high profit.
Key factors for selecting the best markets include ROI, revenue, ADR, occupancy rate, number of listings, average property price, tourist attractions, and geography.
The vacation rental market is projected to continue growing, with a forecasted revenue of $20.27 billion by 2024 and a CAGR of 4.10% through 2029.
Online sales channels are expected to contribute to 85% of total revenue in the short-term rental market by 2029.

Understanding Short-Term Rental Investment Metrics

Short-term rental investments rely on several key metrics to measure success. These metrics help investors see how well a property might do. They offer insights into the property’s performance and if it’s a good investment.

Return on Investment (ROI) Analysis

ROI is a key metric that shows how much profit a property makes. It compares the rental income to the cost of buying and running the property. This helps investors know if they’ll make a good return on their investment.

Average Daily Rate (ADR) Importance

The ADR shows how much money a property makes each day. It’s found by dividing the total money made from bookings by the number of days booked. This metric helps understand if a property can make more money by setting higher prices.

Occupancy Rate Considerations

The occupancy rate shows how well a property is doing compared to demand. It’s the percentage of nights booked by guests. Things like the time of year, how many other properties there are, and local tourism can affect this rate. It’s important because it directly affects how much money a property makes.

Also, the adjusted paid occupancy rate is used. It’s like the regular occupancy rate but it doesn’t count nights when the property isn’t available for guests. This gives a clearer picture of how well the property is doing.

Understanding these metrics, along with the local market, tourist spots, and the time of year, is key. It helps investors see if a short-term rental property is a good investment.

Metric	Description	Impact on Investment
ROI Calculation	Measures the property’s profitability by comparing rental income to purchase cost and operating expenses.	Helps investors determine the expected return on their investment.
Average Daily Rate (ADR)	Calculated by dividing the total reservation revenue by the number of reserved days.	Indicates the property’s pricing power and ability to generate higher revenues.
Occupancy Rate	Represents the percentage of available nights that were booked by guests.	Reflects the balance between supply and demand in the local market, directly impacting rental income.
Adjusted Paid Occupancy Rate	Calculated by subtracting owner stays and maintenance holds from the total nights available for booking by guests.	Provides a more accurate representation of the property’s performance by excluding non-revenue-generating nights.

Knowing these key metrics is vital for checking if a short-term rental property is a good investment. By looking at ROI, ADR, and occupancy rates, investors can make smart choices. They can find the best opportunities in the short-term rental market.

Top Performing Vacation Rental Cities for 2024

The short-term rental market is changing fast. Investors are looking for the best Airbnb locations and vacation rental hotspots to make more money in 2024. Several cities are now leading as the top vacation rental markets to watch in the new year.

Kissimmee, Florida, is at the top with an average annual revenue of $50.6K. It has an occupancy rate of 64% and an average daily rate (ADR) of $216.7. Charleston, South Carolina, and Sevierville, Tennessee, are close behind. Sevierville offers easy access to the Smoky Mountains.

New Orleans, Louisiana, is known for its cultural experiences. Henderson, Nevada, is close to Las Vegas. Abiquiu, New Mexico; Cooke City, Montana; and Creede, Colorado, are also worth watching.

City	Annual Revenue	Occupancy Rate	Average Daily Rate	RevPAR
Orlando, FL	$50.6K	64%	$216.7	$145.8
Fairbanks, AK	$45.1K	63%	$196.6	$125.4
Waldport, OR	$72.6K	64%	$311.7	$204.8
Sevierville, TN	$87.6K	67%	$357	$240.8

The typical home price in the top 25 cities for investing in a short-term rental ranged from $145,000 to $868,000. 17 out of 25 areas have home prices below the national median of about $418,000 in December 2023. Smaller cities with less home-value appreciation can still offer high profits from short-term rentals.

“Revenues for short-term rentals are forecasted to grow in 2024 after a decline in 2023 following two years of intense growth.”

Investors should keep an eye on these top-performing cities and emerging vacation rental hotspots. This will help them find the best spots for their short-term rental portfolio in 2024.

Best Short Term Rental Markets: Location Analysis

When you invest in short-term rentals, where you choose to invest is key. Look at tourist attractions and demand drivers, seasonality impact on revenue, and market saturation. These factors help find the best places for short-term rental investments.

Tourist Attractions and Demand Drivers

Being close to tourist attractions is crucial for success. Kissimmee, Florida, is near major theme parks. Charleston, South Carolina, has history and culture that attract visitors all year. Knowing where the demand is can help keep guests coming back.

Seasonality Impact on Revenue

The impact of seasonality on rental income is big. Places like Charleston, with a steady 78% occupancy, are better investments. Knowing when to expect more guests helps ensure steady income.

Market Saturation Assessment

It’s important to check how saturated the market is. Kissimmee, Florida, has 17,557 listings, showing it’s a competitive market. But places like Abiquiu, New Mexico, for art tours, or Cooke City, Montana, for outdoor fun, might offer a chance to stand out.

By looking at these location factors, investors can make smart choices. They can find the best short-term rental markets for their money.

Coastal Investment Opportunities in Short Term Rentals

The charm of beach rentals, coastal properties, and oceanfront investments is unmatched. The vacation rental market is booming. Savvy investors are looking at coastal areas for profitable short-term rentals.

Rodanthe, North Carolina, in the Outer Banks, is a prime example. It has an Average Daily Rate (ADR) of $376.4 and a 72% occupancy rate. This shows the high interest in vacation homes by the beach. These homes offer special features like outdoor showers and water sports rentals.

Charleston, South Carolina, is another example. It has a 78% occupancy rate and an $244 ADR. This highlights the appeal of coastal cultural spots. It shows the potential for investors in coastal properties and oceanfront investments.

“The U.S. short-term rental market is projected to surpass $20 billion by 2027, highlighting the immense opportunities for savvy coastal investors.”

From the Outer Banks to Charleston, the U.S. coast offers many beach rental investment chances. By grasping the unique aspects of these markets, investors can tap into the vacation rental boom. They can unlock the full potential of coastal properties and oceanfront investments.

Mountain and Rural Market Investment Potential

Mountain and rural markets are very appealing to short-term rental investors. They offer unique experiences and access to nature. Places like Sevierville, Tennessee, near the Smoky Mountains, have a 7% return on investment and an average daily rate of $240.

National Park Proximity Benefits

Cooke City, Montana, is close to Yellowstone National Park. It shows the potential of mountain markets. With an ADR of $317.9 and a 67% occupancy rate, it proves the demand for vacation rentals near national parks. Visitors enjoy skiing in winter and hiking in summer.

Year-round Activity Markets

Mountain and rural areas are popular for their activities all year. Places like Rico, Colorado, and Paradise Valley, Montana, attract visitors. They offer nature-based adventures and a break from daily life.

Revenue Growth in Rural Areas

Rural markets are seeing more investment, with places like Rico, Colorado, and Paradise Valley, Montana, showing revenue growth. As more people look for tranquility and unique experiences, investors are making money. This is increasing ADRs and occupancy rates.

FAQ

What is the size of the US vacation rental market?

The US vacation rental market grew to $64 billion in 2023. On average, each listing made over $26,000 in revenue.

What are the key factors for selecting the best short-term rental markets?

Important factors include ROI, revenue, ADR, and occupancy rate. Also, the number of listings, average property price, tourist attractions, and geography matter.

How is ROI calculated for short-term rental investments?

ROI is about how profitable a property is. It compares rental income to the cost of buying and running the property.

What is the significance of ADR (Average Daily Rate) in short-term rental markets?

ADR shows how much money a property makes each day. It’s key for figuring out if an investment is good.

How does occupancy rate impact short-term rental investments?

Occupancy rate shows if there’s enough demand for properties. It affects how much money a property can make and its profitability.

What are the top short-term rental markets for 2024?

The top markets for 2024 are Kissimmee, FL, and Charleston, SC. Sevierville, TN, New Orleans, LA, and Henderson, NV are also great choices.

How do tourist attractions impact short-term rental success?

Places with attractions draw more visitors. Being close to theme parks or having cultural sites boosts demand and revenue.

How does seasonality affect short-term rental revenue?

Seasonality changes how much money a property makes. Places like Charleston, SC stay busy all year, making more money.

How do coastal areas perform as short-term rental investments?

Coastal areas are great for investing. Places like Rodanthe, NC, and Charleston, SC have high ADRs and occupancy rates.

What is the investment potential of mountain and rural short-term rental markets?

Mountain and rural areas near national parks are promising. Sevierville, TN, and Cooke City, MT have high ADRs and occupancy rates. They’re good for year-round visits.

Best short term rental markets for investment