5 Best States for Generating Passive Income Through Vacation Rentals
Written by
Vance Cariaga
Edited by
T. Woods
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One of the best ways to build wealth is to buy a rental property and keeping it rented out on a consistent basis. Rental properties provide a steady source of passive income while also giving you an asset that appreciates in value. Vacation rentals can provide an even bigger income boost — provided you find the right market.
Among the biggest benefits of short-term vacation rentals is that you can charge a lot more than you can with long-term rentals. You might get $1,000 to $1,500 a month renting a property out to a full-time tenant. But with a vacation rental, you might get $1,500 or more a week. Even if you only rent it out for half the year, you’ll earn more than you would with a compete year of full-time rental income.
Before making the leap into a vacation rental investment, however, you need to figure out where to buy one. Obviously, the most important element of a vacation rental is that it is located where people actually take vacations. Getting a great deal on a rental home in the middle of nowhere won’t do you much good if you can’t find anyone to rent it.
Opinions vary on the best states to buy a vacation rental, but there are some common threads. The most important is that it offers tourist attractions such as beaches, mountains, sunshine, entertainment, history and culture. Other important factors include average home prices and the potential for properties to appreciate in value.
“It’s essential to focus on areas that offer both a high quality of life and potential for real estate appreciation or strong rental income,” Mike Wall, realtor with EXP Realty and partner at EZ Sell Homebuyers, told GOBankingRates in a recent interview. “Consider factors such as location desirability, potential rental income, property management costs, and the overall investment strategy — e.g., long-term appreciation versus short-term rental income.”
Here’s a look at the five best states to generate passive income with a vacation rental, according to various real estate and management sites.
California
The main downside of buying a vacation rental in California is that it’s expensive. But the Golden State still lands at or near the top of most rental investment lists because it is a magnet for millions of travelers every year. As a blog on the Management Library website noted, California offers an “abundance of amazing beaches and incredible city life,” pulls tourists in year-round, and has property taxes that “aren’t as bad” as you might think.
Florida
The Sunshine State placed six cities on a list of 25 best places in the U.S. to invest in vacation rentals that was recently compiled by AirDNA, a short-term rental data company. In addition to its famous beaches and luxury resorts, Florida boasts an “extra month of sunshine compared to the national average” every year, according to Management Library. That extra sunshine helps guarantee year-round vacation income.
Nevada
Las Vegas gets most of the attention, but there’s a lot more to Nevada than Sin City. Other tourist attractions include the Grand Canyon, Hoover Dam, Lake Tahoe, Zion National Park and Red Rock Canyon. One especially good place to invest in a vacation rental is North Las Vegas, which has average home values below $400,000 and high rates of revenue per room.
North Carolina
Vacationers flock to North Carolina to enjoy its beaches, Blue Ridge Mountains and urban centers such as Charlotte and Raleigh. Homes are affordable compared with other vacation hotspots, and property taxes are about average.
South Carolina
Like its neighbor to the north, South Carolina offers beaches and mountains, along with plenty of history and culture in cities like Charleston and Greenville. The Palmetto State also has some of the lowest property taxes in the country and plenty of affordable homes.
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