The Smartest Beach Towns To Invest in a Vacation Rental, Based on Your Budget
For many people, the reasons for buying a second home on the coast are twofold: The escape can serve as a spot for personal enjoyment and also as a means for generating extra cash flow when not in use. And while you might direct your real estate search based on a favorite getaway, it’s smart to take into consideration a home’s capitalization rate (or the annual return you can expect on your investment). Vacation rental manager Vacasa recently analyzed home sale prices, operating costs and average incomes of rental properties in high-density rental markets to create the ultimate guide for beach house hopefuls. If your destination is flexible, here are some of the top revenue-generating beach towns to buy in, based on your budget:
If you have $250,000…head to Myrtle Beach
The affordable neighbor to Hilton Head Island, Myrtle Beach offers many of the same benefits—including a boardwalk and 60 miles of beachfront—at a significantly lower price. (Median home price is $251,000, though you can snag a two-bedroom condo for $100k.) If affordability is paramount, Vacasa suggests looking in North Myrtle Beach, where you’ll find lower price tags attached to waterfront homes with easy access to golf courses and the ocean.
If you have $275,000…head to South Padre Island
With 34 miles of gorgeous Gulf shoreline, this warm-weather Texas getaway attracts vacationers year-round—making it a smart option for investors looking for a four-season income. It’s also ideal for those looking to go beachfront on a budget, with a median sales price of $264,100 and every home on the island boasting walkability to the sand. For dependable back-to-back bookings, opt for a property with pool access, says Vacasa.
If you have $300,000…head to Ocean City, Maryland
This East Coast resort town is a draw for families in the summertime, thanks to its big-city proximity (Washington, D.C. is just three hours away), gorgeous beaches, and three-mile-long boardwalk packed with beachy storefronts and activity. Being here is really all about the beach, so Vacasa suggests springing for an oceanfront condo if you want a rental that’s competitive, and in particular searching for ones that offer amenities such as pools, game rooms, and fitness rooms.
If you have $350k…head to Florida’s Forgotten Coast
Despite its nickname, this pristine white-sand paradise on Florida’s panhandle is rarely forgotten by those who vacation there—which makes it a smart spot for a rental property (the smartest on the list, in fact, with a capitalization rate of 9.6 percent). The 12-mile beachfront stretch from Port St. Joe to Cape San Blas is particularly friendly to families and the luxury set (more than a few country singers own second homes here), but if you’re looking for the most rental traffic, snatch up a condo in the somewhat busier Mexico Beach. While listings vary, the median home price is $336,900—but you can expect to earn a large chunk of that back in rental revenue, to the tune of some $40k annually.
If you have $400k…head to Florida’s Emerald Coast
Head west along the Gulf from Florida’s Forgotten Coast and you’ll hit this equally postcard-perfect yet much more trafficked coastline. Known for its sugar-white sand, this sliver of panhandle from Santa Rosa Beach to Panama City Beach is popular year-round with vacationers, from Floridians seeking breezy relief from the summer heat to northerners looking for a wintery escape. If budget is strict, avoid the more upscale towns along 30A and narrow your search to the fast-growing Panama City Beach, where you can find bargains on beachfront condos that can generate $25k-plus in annual rental revenue.
If you have $450k…head to Gulf Shores, Alabama
Come the first hint of spring, nearly every Southerner is planning a trip to their favorite Gulf Coast beach—and Alabama’s Gulf Shores is one of the best. Beautiful beaches, coupled with a close proximity to Florida and nationally renowned festivals, draw visitors from near and far. To maximize your ROI, Vacasa suggests searching for a beachfront condo with boat slips as well as family-friendly attractions such as pools with slides and lazy rivers.
If you have $550k…head to North Kona, Hawaii
Who doesn’t want to escape to the Aloha State? While this slice of island paradise isn’t known for its affordability, its status as a tourism mecca means there’s lots of potential for big rental revenue. This area on the west side of the Big Island is a great option for investment seekers, with its proximity to nature and growing popularity with adventurers (it’s home to the annual Ironman World Championship). Median home prices here come in at $543,900, but you can expect to rake in close to $200 per night for a two-bedroom condo with a dependable occupancy rate.
If money doesn’t matter…head to Key West
There’s no question the Conch Republic is a destination high on just about everyone’s list. Couple that with a limited supply of rental properties, and you’re guaranteed a great investment no matter where you buy. If you want to be the first to catch the eye of vacationers, however, Vacasa suggests going for properties with classic cottage charm and inviting outdoor spaces (bonus points for a pool), and finding one with a transient license in place if you want to rent short-term. Homes here go for a hefty median price of $804,400 but you can expect to earn back a median amount of $62,710 in annual rental revenue, making the home well worth the cost if you can swing it.