The COVID-19 pandemic didn’t just change how people work outside of their traditional office spaces—it’s also changed how—or rather, where—people live. As a result, and by default, it’s changed how real estate investors develop their portfolios and choose where to invest. With newfound and ongoing opportunities for extended (if not permanent) remote work, short-term rentals have seen a significant rise in occupancy over the last year and are expected to continue well into 2022. As a result, there has been unprecedented growth for both the housing market and by extension, the cities, towns, and vacation destinations they exist in.
Of course, not all markets are created equal. Selecting a place that offers investors the greatest opportunity to get a return on their investment is always a top priority. A few key components to consider can be:
1. Rental demand: consider how often rentals are booked throughout the year by looking at listing growth rates and the trailing twelve months (TTM) occupancy.
2. Investability: consider the expected income of a property in relation to how much it’ll cost to buy.
3. Revenue growth: consider whether properties earned more this year by looking at the trailing twelve months (TTM)year-over-year change in revenue per available room for properties that were booked, ideally over the past two years.
Keeping these points in mind, these are some of the most promising short-term rental markets investors should consider for their next project.
With an incredibly high occupancy level of 73% and average revenue of just over $100k, Maui is an ideal market for investors to seek out properties that would appeal to those looking for a memorable vacation as well as those looking to change the scenery for remote work opportunities.
As the second-largest Hawaiian island with stunning scenery and endless opportunities for adventure, it’s no wonder that the average daily rate to stay at a vacation rental is $375.
Kenai Peninsula, AK
From one distant part of the country to another, Kenai Peninsula, AK boasts a 67% occupancy rate and an average revenue of $44k. The opposite experience of Maui, this corner of Alaska offers access to numerous national parks and endless vistas of untouched wilderness. With an increased demand for outdoor exploration since the pandemic began, the Kenai Peninsula’s revenue growth has reached a score of 94.
With a 70% occupancy level and average revenue of $47k, Chattanooga offers investors an opportunity to cater to outdoors people who want access to trails, hiking, and historic sites. The market is supported by increased regional travel and Zillow forecasts home values to increase by 17% this year. Areas such as Lookout Mountain and Dunlap provide numerous appealing vacation rental opportunities for investors to keep visitors coming.
Gulfport, Biloxi MS
Two close markets instead of one! Gulfport and Biloxi are located on the Gulf of Mexico, drawing vacationers from all over and offering investors an opportunity to further develop these tourists’ markets. This part of Mississippi boasts an average revenue of $44k and an occupancy rate of 70%. A relatively low average home value of $155k means Gulfport/Biloxi earns an overall investability score of 95.
Staying in the southern U.S., the Slidell market in Louisiana can offer the benefits of investing in New Orleans without the New Orleans price tags. Luckily close to the city, Slidell is touted as one of the easiest places to access Louisiana, meaning tourists can come and go from just about anywhere and get settled. Located only 40 minutes from New Orleans’ famous French Quarter, the market has an average revenue of $69k for investors and an occupancy rate of 62%. Easy access to beaches, history, and casinos makes it an easy market for investors to consider.
As with everything else, investors should do their research and understand what their long-term and short-term goals are with any project they seek to tackle next. Consider the pros and cons of investing in vacation rentals, and if all signs indicate ‘go,’ any of these five markets are ones worth considering.
If you are ready to discuss your plans for a short-term rental investment, contact Temple View Funding, LP (“Temple View”) today to learn more.