If you’re sitting on a big chunk of change -- perhaps from high pay at work or big success in financial markets -- you may be interested in purchasing a vacation home.
And perhaps you’ll want to look at one that you can rent out when you’re not there to ease the financial pain of your purchase, especially with interest rates on the rise.
Vacasa, which manages vacation homes, sees a strong environment for buying vacation rentals. “After several years of historically high demand -- coupled with historically low inventory -- the real estate market is stabilizing, and inventory is catching up,” Vacasa said in a report.
“That’s good news for buyers who have more opportunity to regain some leverage in what is still predominantly a seller’s market.”
As for purchaser demographics, “younger buyers are now the majority of vacation home purchasers,” Vacasa said.
“Millennials [born 1981-1996] and Generation Z [1997-2012] are willing to spend a bit more than the older generations -- with budgets often over $400,000.”
Vacasa has put together a list of the top 25 cities for buying vacation homes that can be rented.
Here are the top 10 cities on the list, including the city’s median home-sale price and the market’s capitalization rate. The cap rate is the amount of net income -- rent minus expenses -- a homeowner would receive per year divided by the home’s value. The higher the percentage, the better.
1. Lake Anna, Va. Cap rate: 12.2%, median home-sale price: $435,000.
2. Port Aransas, Texas. Cap rate: 10.7%, median home-sale price: $295,000.
3. Palm Coast, Fla. Cap rate: 10.3%, median home-sale price: $354,000.
4. Corolla, N.C. Cap rate: 10.2%, median home-sale price: $930,000.
5. Okaloosa Island, Fla. Cap rate: 9.0%, median home-sale price: $425,000.
6. Fort Lauderdale, Fla. Cap rate: 8.5%, median home-sale price: $490,250.
7. Phoenix. Cap rate: 7.8%, median home-sale price: $470,000.
8. Saugatuck, Mich. Cap rate: 7.8%, median home-sale price: $510,000.
9. Sylva, N.C. Cap rate: 7.7%, median home-sale price: 333,000.
10. Gulf Shores, Ala. Cap rate: 7.5%, median home-sale price: $437,250.
Vacasa’s Take on Lake Anna
It’s the second largest lake in Virginia, stretching 17 miles long. “Lake Anna is split into two sections: a public side with waterfront restaurants, marinas, and boat launches, and a private side where no commercial operations are allowed,” Vacasa says.
Vacasa’s Take on Port Aransas
It’s an island that’s known as the “fishing capital of Texas,” Vacasa says. “There is plenty of water recreation to entertain homeowners and guests, but it also has a thriving art community, fine dining, and is a prime spot for bird watching.”
Vacasa’s Take on Palm Coast
It has numerous oceanfront golf courses, including a few designed by golfing legend Jack Nicklaus, Vacasa says. And it has 125 miles of hiking and biking trails through state parks and nature preserves. “It also has a notable art scene,” Vacasa says.