Top Locations to Purchase Vacation Rental Property: A Comprehensive Guide

After the founding of Airbnb.com, vacation rentals quickly emerged as the most profitable real estate investment strategy. However, because of the influx of investors in the vacation rental space, simply buying a property and renting it out on a short-term basis in any market does not guarantee high return. Instead, focus your investment efforts on the locations with the highest potential.

Researching and analyzing locations across the US market will take a lot of time and financial resources if you don’t know where to start. To help you concentrate your efforts, we’ve put together this list of the 8 best places to buy vacation rental properties for every investor type and expectations.

Let’s take a quick look at the top Airbnb locations for different investment strategies before we dive into the factors that make each market the best choice for each strategy:

• Fredericksburg, TX: Airbnb near wineries in Central Texas
• Chattanooga, TN: Affordable vacation rental properties with multiple destination types
• Pinellas County, FL: Florida waterfront and beachfront short-term rental properties
• Georgia Mountains, GA: Cabins and Airbnbs for year-round nature
• Kissimmee, FL: Hospitality opportunities near Disney World and Universal Studios
• Gatlinburg, TN: Short-term rentals near the Smoky Mountains National Park
• Orange Beach, AL: Vacation rental in the hub for water sports on the Gulf Coast
• Galveston, TX: Airbnb property in a popular waterfront destination in Texas

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How We Chose the Best Places to Buy Vacation Rental Property

In our ranking of the top markets for investing in short-term rentals, we’ve factored in a lot of quantitative and qualitative data. We’ve developed a comprehensive approach which combines both data and machine-learning algorithms at scale with personal investor and agent experience.

We focused our selection process around the following criteria:

• Location fits with a particular STR investment type: Whether you’d like to invest in a waterfront or mountain vacation rental, we’ve looked at which markets offer the best results for this investment property type.
• Review of affordability, profitability, and growth data: Property prices, return on investment, and long-term appreciation all play a role in making a location a good or bad fit for a short-term rental property. We’ve used big data on these and many other indicators to choose the most promising markets.
• Vacation rental investment experiences: Every day we work hand-in-hand with multiple Airbnb investors to help them choose the best location for their strategy. We’ve analyzed the results they’ve been able to achieve and incorporated them into our analysis.
• Recommendations from local in-house agents: We’ve hired top STR investment agents who work only with investor buyers in all top Airbnb markets through Awning. We’ve consulted with them on refining our list and confirming that each proposed place is indeed the best for the recommended strategy.

While you might repeat excellent profits with many STR investment types in each of these locations, we selected the best strategies to achieve positive cash flow and good return on investment more easily than other alternatives.

1. Fredericksburg, TX

The City of Fredericksburg is a perfect investment destination for investors who want to provide renters with unique experiences and ample entertainment opportunities throughout the year.

In Central Texas, everyone knows Fredericksburg for its wineries. This attraction has built a rich and prospering tourism industry around the wineries, attracting over 1.5 million visitors per year.

This large number of visitors compared to the relatively small population of the city creates strong Airbnb investment opportunities for local and remote real estate investors.

The major tourist attractions include historic sites, vineyards and wineries, agri-tourism farms, and year-round festivals. The Pioneer Museum, Marktplatz, and the Vereins Kirsche bring in tourists interested in the German heritage of Fredericksburg, Texas.

The relatively mild climate ensures that short-term guests keep coming throughout the year, so seasonality is not a major concern for Fredericksburg vacation rental hosts.

Importantly, the relaxed Texas short-term rental laws make non-owner occupied vacation rentals a viable investment strategy in the city. In most cases, Fredericksburg Airbnb hosts need to get a short-term rental permit and pay occupancy tax.

One mild concern for short-term rental property investors are the somewhat high property prices with a median value of $530,869. This is above the national average. However, the strong Airbnb demand and good daily rates provide excellent ROI for investors who can afford the prevailing home prices.

2. Chattanooga, TN

The unique combination of natural attractions and the arts scene make Chattanooga, Tennessee an ideal location for short-term rentals that cater to the interests of various visitors and guests.

Visitors nicknamed Chattanooga the Scenic City for a reason. The Tennessee city is famous for its gorgeous natural surroundings. The abundant outdoor activity opportunities include climbing, hiking, mountain biking, walking, swimming, kayaking,and rafting.

A major natural attraction is Ruby Falls, the tallest and deepest underground waterfall open to the public in the US.

Visitors can enjoy multiple indoor attractions too, such as museums, theaters, art galleries, and historic sites.

Chattanooga has something to offer to basically everyone, whether young people looking for outdoor adventures, families with children interested in mild physical activities, or older people attracted to beautiful nature.

That’s why it’s not surprising that Chattanooga attracts 4.4 million overnight visitors per year. While spring and fall are the best seasons to visit the city and the surroundings, summer and winter attract visitors too.

A major reason to rank Chattanooga among the best places to buy vacation rental properties are the affordable home values. At $286,174, a typical Chattanooga real estate property costs only a fraction of what we see investors pay across the US. This means that even beginner vacation rental property investors with limited budgets can find profitable opportunities.

3. Pinellas County, FL

Waterfront and beachfront vacation rental properties make some of the most profitable investments in real estate. And Florida short-term rentals benefit from outstanding demand while being able to charge above-average daily rates.

What many investors don’t know, however, is that Pinellas County is the best of the best Florida Airbnb markets for properties on the water.

St. Petersburg, Clearwater, Largo, St. Pete Beach, Treasure Island, and Belleair are just some of the popular resort cities in Pinellas County. Each of those comprises some of the most popular tourist destinations across the US. Indeed, three of the ten best US beaches are in Pinellas County: Fort De Soto Park, Clearwater Beach, and Caladesi Island State Park.

The endless beaches, the amazing water, the beautiful landscape, the warm weather, and the water sport opportunities attract guests most of the year. Over 15 million domestic and international visitors come to Pinellas County each year, and many of them choose to stay in short-term rentals rather than hotels.

Besides the strong demand from vacationers, the favorable Florida short-term rental laws are another factor that makes Pinellas County one of the best places to buy vacation rental property, especially on the water. 

While cities within the area face some restrictions and regulations, non-owner occupied Pinellas County vacation rentals are legal. If legislation is not your forte, you can always hire one of the top Airbnb management companies to help you navigate the regulatory framework.

Regarding affordability, despite the demand from short-term rental property investors, home values have remained reasonable in Pinellas County. The median value of $395,165 makes local home prices comparable to the US average, while Airbnb daily rates and occupancy rates are significantly above the nationwide average.

4. Georgia Mountains, GA

The Georgia Mountains, also known as North Georgia Mountains or Northeast Georgia, are famous for the amazing natural scenery which they offer to visitors. The area is a series of gentle peaks and fast waters which causes many to call it a natural paradise.

With this type of natural attractions, it comes as no surprise that North Georgia Mountains have emerged as one of the top Airbnb locations in the US market, especially for cabins.

What attracts guests from near and far to the Georgia Mountains is the beautiful waterfalls, the wonderful hiking trails, the abundant wineries and craft breweries, the galleries, the shops, and the friendly local population.

Several million guests visit the area each year. The most popular Georgia Mountains vacation rental property type is luxury mountain cabins, but other short-term rental types also attract interest.

While there are many small towns throughout the North Georgia Mountains where Airbnb properties are prospering, the best locations for investing in Airbnb cabins for year-round occupancy are Blue Ridge, Ellijay, Blairsville, and Dahlonega.

Regarding Airbnb regulations Georgia short-term rental laws are not too prohibitive. Towns in the Georgia Mountains region have imposed some restrictions and requirements in order to operate a legal vacation rental business. If you’re a remote investor or don’t feel comfortable navigating laws, it might be a good idea to hire a local Airbnb property management company.

As investment destinations, all these towns benefit from property prices similar to the US median value, ranging from $305,426 in Dahlonega to $391,754 in Blue Ridge.

5. Kissimmee, FL

Kissimmee’s strategic position in the region's heart’s multitude of amusement parks has defined its status as the top location for Airbnb and other hospitality investment opportunities nearby this type of entertainment.

The City of Kissimmee’s proximity to Walt Disney World Resort, Universal Orlando Resort, SeaWorld Parks and Resorts, Legoland Florida, and Kissimmee Waterfront is more than enough to guarantee some of the highest Airbnb occupancy rates nationwide along with profitable nightly rates. That’s because many visitors to the theme and amusement parks choose to avoid the unaffordable hotel prices within the parks.

Naturally, most of the visitors are families with children, and these make for some of the best short-term rental guests. To cater to the needs of this type of renter, it’s a smart move to invest in a single family home with a private pool for your Kissimmee vacation rental property.

Kissimmee and the surrounding area welcome 9.5 million overnight visitors per year, which is the chief contributor to the strong Kissimmee Airbnb demand.

Because vacation rental regulations in the Florida market favor hosts, investors can expect a seamless process when starting an Airbnb business in Kissimmee.

Yet another positive indicator which makes Kissimmee such a great place for hospitality opportunities near Walt Disney World and Universal Studios is the residential real estate prices. The typical home price of $386,219 is about the same as within the rest of the US market, while Airbnb indicators significantly exceed the US averages.

Meanwhile, over the past twelve months Kissimmee property prices appreciated by 38.8%, so investors will make money not only in the short run but also in the long haul.

6. Gatlinburg, TN

It’s a well-known fact that nature is one of the major attractions in the most popular tourist destinations, and this holds more true than ever in the Gatlinburg Airbnb rental market. In recent years Gatlinburg has emerged as one of the most sought after short-term rental markets, and we expect this trend to continue in the future.

The main reason for the popularity of this Tennessee city is the Great Smoky Mountains National Park, which is the most visited national park in the entire US. Over 14 million visitors come to the Smoky Mountains each year, and most of them spend the night in one of the many Gatlinburg vacation rental properties.

All four seasons offer ample opportunities for outdoor sports like walking, hiking, swimming, and skiing, attracting a diverse group of visitors from far and near. From investors’ point of view, this translates into year-round demand for Gatlinburg, TN short-term rentals. Accompanied by excellent daily rates, this is the perfect combination for good Airbnb profit margins.

Visitors are always interested in Gatlinburg cabins as vacation rentals, but other property types also have the potential to generate good returns.

While the entire State of Tennessee has favorable short-term rental laws, Gatlinburg has one of the easiest procedures for starting and owning a vacation rental business not only in Tennessee but also nationwide.

One thing investors need to consider, though, is the above-average property prices. The median home value stands at $596,931. However, if investors have access to good options for investment property loans, it’s worth buying a short-term rental in Gatlinburg. Real estate prices are growing at an annual rate of 36.1%, so long-term profits will be excellent.

7. Orange Beach, AL

Although Orange Beach is a small city on the Alabama Gulf Coast with a population of over 6,000 residents, it offers enormous opportunities for short-term rental investments. Nationwide it’s famous as a water sports hub.

Some of the water sports opportunities are diving, kayaking, jet skiing, boating, and fishing. Visitors with various levels of passion for extremes can find the right water sport for their preference.

The most popular tourist attractions in Orange Beach include the Wharf, Orange Beach Waterfront Park, Alabama Point East, Orange Beach Sportsplex, and Gulf State Park Nature Center.

The local authorities and community plan exciting events for both individuals and families throughout the year.

Despite its small population, Orange Beach and the surroundings welcome over 6 million visitors per year. This guarantees strong demand for Orange Beach vacation rentals.

Investors considering buying an Orange Beach short-term rental property will be glad that Airbnbs are legal. Alabama short-term rental laws are favorable for hosts. While licenses are required, there aren’t many restrictions on vacation rental business operations.

Similar to other best places to buy vacation rental properties, Orange Beach has high property prices. The median home value reaches $696,782.

8. Galveston, TX

An island resort city off the coast of Southeast Texas, Galveston hosts some of the most popular tourist attractions in the Lone Star State. Because of its status as a top tourist destination, it’s also emerged as one of the best places to buy vacation rental property, not only in Texas but also nationwide. Galveston, TX Airbnb’s are good for investors looking for waterfront short-term rental properties.

The major tourist destinations include Moody Gardens, Galveston Island State Park, Schlitterbahn Waterpark, Galveston Island Historic Pleasure Pier, and the Kemah Boardwalk. Galveston offers multiple opportunities for fishing, kayaking, surfing, boating, swimming, biking, and golfing.

The City of Galveston hosts various arts, music, and cultural festivals throughout the year to celebrate the rich culture of the area.

Because of the tourist attractions and the temperate weather, Galveston short-term rentals welcome visitors year-round. Over 7 million visitors come to the island each year, which makes tourism a major economic sector, considering the relatively small population.

The relaxed Galveston Airbnb laws are another factor which has contributed to the growth of the vacation rental industry in this Texas city. While Galveston vacation rentals need to be registered, they are completely legal and face few limitations.

Yet another positive factor has been the moderate property values. The median home value is $381,078, which is comparable to the US average. Daily rates and occupancy rates are well above the national average, ensuring that Galveston waterfront vacation rental investments bring positive cash flow and good ROI.

Takeaway

The first step to making a profitable short-term rental property investment decision is finding a top location. Many investors make the mistake of focusing on major cities, while small US towns with unique nature and culture also have a lot to offer to both guests and Airbnb hosts. 

If you’d like to generate good Airbnb demand revenue without spending a fortune on your income property, check out our list of the 8 best places to buy vacation rental property for various strategies.