How do property managers decide which cities or destinations will be the most profitable additions to their management portfolios? If you operate regionally, is now a good time to add more properties in your area? Where do you stand to generate the most profit for the lowest marketing investment? And how do you protect new properties from noise complaints, ordinance violations and damage, once they’re under your umbrella?
Read on, for our top 6 picks, and tips on protecting your vacation-rental revenue, plus homeowner acquisition insights from top leaders in industry!
Cape Hatteras, North Carolina
Lovely coastal vistas, large homes and relatively ample inventory make Cape Hatteras a prime spot for beach rental revenue. With a median home sale price of $379,250 and cap rate of 8.6%, beach houses in this Outer Banks destination are a dream for investors looking to start or scale up their vacation-rental business. Cape Hatteras beach houses are equally valuable to vacation-rental property managers. One reason: Many of the area’s rental homes can accommodate 10, 12 or even 14 guests. This makes them attractive to families and young groups alike. Plus, the area’s abundant water activities and charming surrounding towns make for fabulous OTA photo galleries and travel tips. These are just some of the reasons Vacasa recently tapped Cape Hatteras as its top spot to buy a beach house in 2021.
“If you don’t have inventory on shelves, you don’t have a business. That’s why supply is so critically important. Anybody can get guests. Getting guests is not a problem, it was a problem for yesterday’s property managers. Homeowner acquisition is number 1 most important thing for property managers right now.”
-D. Brooke Pfautz, Vintory
The Catskills, NY
Southeastern New York’s Catskills Mountains region is enjoying a boom in vacation popularity not seen since the 1950s. As COVID travel restrictions lift and city-dwellers seek a relaxed, rural escape, demand is high for Catskills vacation rentals. In the past two years, the area has seen massive STR growth, fueled not just by tourists, but also by New Yorkers seeking a more peaceful place to work remotely. These guests tend to stay longer, and with an average nightly rate of $228 according to Airdna, that’s good vacation rental income news for owners and managers. The Catskills’ median home price of roughly $270,000, occupancy rate of 74% and estimated cap rate of 8% are just some of the incentives for new vacation-rental investors and vacation-rental property managers.
Castroville, CA
Nestled in California’s Salinas Valley, Castroville is known as “the artichoke capital of the world.” Even if you’re not a fan of the ubiquitous edible thistle bud, you may want to consider investing in vacation rentals in this small agricultural city. Why? Well, for starters, it’s a short drive from the Monterey Peninsula’s historic Old Fisherman’s Wharf, and plenty of other coastal Monterey Bay attractions. Santa Cruz, home to one of the University of California’s most popular campuses, is just over 30 minutes away. And San Francisco is under two hours’ drive. Which makes Castroville a desirable destination for local, national and international visitors. There’s also the fact that short-term rentals in the Castroville area average 86% occupancy on Airbnb and Vrbo. Homes are not super cheap in Castroville一this is California, after all. But with a median home price of $540,000, investors can still expect solid vacation rental income. How solid? Try a potential annual revenue of $110,000 to $130,000!
“When you go to a homeowner and say, we’re successful, look at our PMS data, look at what we’ve done, that’s nice. But everyone is doing that. However, if you can go to a property manager and say this is how much business I turn down because I don’t have a property like yours, well, that’s a different story.”
-JACK NEWKIRK, NAVIS
Broken Bow, OK
Southeastern Oklahoma is one of those rustic destinations that’s tailor-made for the short-term-rental boom of 2021. And Broken Bow is its vacation-rental income hub. Located just outside Beavers Bend State Park, and home to excellent hiking, fly fishing and boating, the Broken Bow area is a major draw for both outdoor adventurers and R&R seekers. It’s also got plenty for upscale travelers, including wineries and fine eateries, plus luxury cabins complete with soaring cathedral ceilings, pool tables, hot tubs…and room for up to 16 guests. And here’s the best part: a median rental revenue of just under $40,000 and an estimated 9% cap rate, according to vacation rental management and marketplace platform Evolve.
Sevierville, TN
More residential than its touristy neighbor Gatlinburg, Sevierville is an up-and-coming vacation-rental hot spot near popular Pigeon Forge, Tenn. A recent report by Rented.com in tandem with real-estate forecasting firm Weiss Analytics identified the Smoky Mountains as one of the top five spots for vacation-rental investment. And laid-back Sevierville, with its proximity to hiking trails, caves and waterfalls, and its statue of Dolly Parton (a Sevierville native) is fast becoming a favorite place to spend a night, or a week, in the area. Sevierville vacation rentals have seen consistent growth throughout 2021, with an average occupancy rate of 80%. And Vacasa gives Sevierville short-term rental homes, with a median sale price of just under $240,000, a NOI of $24,727, and a whopping 10.3% cap rate.
“On a municipal level, every house is part of a community. And fundamentally, that community is made up of people. VRMs need to think about their responsibility as stewards of that community, by protecting the reputation of the homes they manage. Word of mouth makes the world go round. Word of mouth implies that an actual human is telling you about something, not some wonderful flyer or postcard. Managers need to consider community relations in a city where they manage properties as paramount, not just to protect themselves and their business, but because it’s the right thing to do.”
-DAVID KRAUSS, RENT RESPONSIBLY
Lincoln City, OR
Looking to make a move in the Pacific Northwest? Key Data Dashboard recently noted Oregon’s jump in adjusted paid occupancy from 25% in 2019 to 47% in 2021. In January, the month with the state’s lowest paid occupancy. And the summer and fall outlook are even better for the Beaver State. Realtor.com taps coastal Lincoln City as a top spot for vacation-rental revenue, noting a median list price $764,950 for homes in the area (some with ocean views), and an average daily rate of $250. Lincoln City vacation-rental permits are limited and some come with transfer restrictions, but investors who have them can generate around $30,000 in annual rental revenue. And the region, with its spectacular coastal vistas, serene beaches, excellent restaurants and casino, is forecast for continued growth as travelers seek an escape from the stressors of the past 18 months.
How to protect your vacation-rental revenue against neighbor complaints, damage and loss of occupancy:
No matter where you invest in vacation-rental property, once you invest, you need to protect that investment. Purchasing a property for your small vacation-rental business or growing your property-management portfolio? Do these things to make sure you’re not losing vacation rental income to fighting neighbor complaints, paying noise fines or spending $$$ to repair or replace damaged property:
- Thoroughly screen guests prior to accepting bookings.
- Communicate house rules in your OTA listings, booking confirmation communication, and on-property.
- Install privacy-safe noise monitoring sensors both indoors and out, so you can gently remind guests to take it down a notch if things get a little rowdy.
Natasha Garber covers short-term-rental industry trends, news, regulations and compliance for NoiseAware. Her posts on STR property management technology, privacy-safe noise monitoring, and licensing laws can be found weekly on the NoiseAware blog.