18 Best Cities To Invest in Vacation Rentals

According to a VRBO trend report, 82% of families are planning to travel this year.

After a long period of being stuck at home, who can blame them? In the past year, home rentals outperformed hotels globally with higher demand for private vacation spaces. For this reason, vacation rentals are an excellent opportunity for interested investors.

However, these short-term rentals are very different from long-term rentals like apartments or single-family homes. With vacation rentals, owners should use a rent affordability calculator to determine rates and perform improvements that provide an experience equal to or greater than a hotel. Whatever kind of investment a person chooses, they must always run the numbers. Not every property is a good deal. So, do your market analysis and spend responsibly.

Are you ready to buy a vacation home as a rental property? The odds are you're aren't alone. More people are buying second homes, but less than half of owners use them for more than four weeks of the year. According to data gathered by AirDNA, here are the 18 best cities to invest in vacation rentals to start your search.

1. CAstroville, CA

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Castroville is a small agricultural town located a few miles west of Monterey Bay in southern California. This small city provides many attractions, such as the scenic view along the Monterey Peninsula or watching workers unload the day’s catch at Old Fisherman’s Wharf. The annual revenue potential is $133,934.

2. Lakehead, CA

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Families interested in caverns and rock formations visit Lakehead, which is located in northern California. One of the main attractions is the Lake Shasta Caverns. Vacationers can also choose to do a boat ride or a bus tour.  The annual revenue potential is $66,359.

3. Manchester, CA

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Manchester is located on the coast of northern California. Tourists can do various outdoor activities, like visiting Coast Lighthouse, whale watching outlooks, and Fort Ross State Historic Park. The annual revenue potential is $62,403.

4. Apollo Beach, FL

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Apollo Beach is located along Tampa Bay in Florida. Tourists can spend their day on the beach or visit the Apollo Beach Nature Preserve, a  63-acre nature preserve for various aquatic species, and the Manatee Viewing Center. The annual revenue potential is $48,101.

5. Cherry Log, GA

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If you’re interested in investing in a mountain vacation area, Cherry Log may be an option for you. This city touts a local barbeque favorite, The Pink Pig, and a horseback ride with Adventure Trail Rides. The annual revenue potential is $41,399.

6. Cleveland, GA

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This Cleveland is different from the city in Ohio. This Georgia city offers various activities such as North Georgia Wildlife Park, Yonah Mountain Vineyards, and the Babyland General Hospital. The annual revenue potential is $36,701.

7. Slade, KY

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Slade is east of Lexington, KY, and offers multiple trails for hiking enthusiasts within the Red River Gorge. Also, the Nada Tunnel is an exciting way to enter the Red River Gorge. The annual revenue potential is $39,124.

8. Manistee, MI

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On the edge of Lake Michigan, you can find the small town of Manistee. This city has 25 miles of sandy Lake Michigan shoreline, the Manistee North Pierhead Lighthouse, and a historic theater. The annual revenue potential is $50,459.

9. Lutsen, MN

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Lutsen is located just off Lake Superior and is a popular skiing destination. Tourists can also visit the Cascade River State Park on the north tip of Lake Superior. The annual revenue potential is $62,635.

10. Nevis, MN

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Looking for the world’s largest Tiger Muskie, then Nevis is the place to be! With access to various lakes, fishing fans will find this location a great catch. The annual revenue potential is $30,297.

11. Two Harbors, MN

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Two Harbors is another city off of Lake Superior. Whether your out-of-state tourists or medical school students driving up from the Mayo Clinic of Medicine, Two Harbors provides attractions, such as Gooseberry Falls State Park and the Split Rock Lighthouse. The annual revenue potential is $32,355.

12. West Glacier, MT

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Vacationers seeking wilderness and solitude are a perfect match for the Glacier National Park in West Glacier. Visitors can also do a boat tour or rafting on the Flathead River. The annual revenue potential is $49,291.

13. Tuckasegee, NC

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Tuckasegee has the largest stair-step reservoir at Bear Creek Lake, a popular destination for anglers and boaters. There are also Class II rapids that are gentle enough for kayaking or canoeing. The annual revenue potential is $38,188.

14. Rockbridge, Oh

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Rockbridge is just south of Columbus, OH. High Rock Adventures and Hocking Hills Canopy Tours are some of the many tourist attractions in Rockbridge.  The annual revenue potential is $45,447.

15. Pocono Summit, Pa

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Pocono Summit is located on the east side of Pennsylvania and draws vacationers in all four seasons. From water parks to ski slopes and stunning state parks, there's a wide range of attractions.  The annual revenue potential is $55,023.

16. Whitwell, TN

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Whitwell is located 24 miles northwest of Chattanooga. Outdoor activities include the Canoe Kayak Chattanooga and the Sequatchie Valley Institute. Families wanting to enjoy more of mother nature will be interested in booking their next trip here. The annual revenue potential is $35,116.

17. Denison, TX

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Denison is located north of Dallas, home to several Eisenhower Veterans Monument and Eisenhower’s Birthplace State Historical Park. Families who enjoy adding history lessons as part of their outdoor adventures will enjoy this place. The annual revenue potential is $26,854.

18. Shenandoah, VA

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Shenandoah is located within driving distance of the Washington, D.C. metro area and features multiple tourist attractions, such as the Shenandoah National Park, Luray Caverns, waterparks, and wineries. The annual revenue potential is $44,426.

Final Words

With restrictions slowly loosening and the vaccine starting to become more available to the public, it isn’t a surprise that families are making plans to travel again.  To be successful in short-term rentals, especially for family vacations, you need to invest in an area that also provides activities for everyone.

Did any of these places interest you? Which city do you want to start investing your vacation rental in?

Jonathan Sanchez is a real estate investor and personal finance blogger for Parent Portfolio. He owns a small real estate business that operates a couple of investment properties in his local market. He aims to help others understand their money and generate passive income. He’s also been featured in Business Insider, USA Today, and FOX Business.