The Art of Tourist Trapping: Investing in Vacation Rental Properties

Most states define vacation rentals as short-term rental properties, meaning that tenants can rent the property for no more than six consecutive months, although many states and even cities have stricter requirements.

Travelers are familiar with how vacation rentals work, as many vacation-goers choose to stay in vacation homes as opposed to hotels. These types of properties are also good investments for those looking to earn an extra income, especially if you know the best places to invest in vacation rentals. Here are the top three states to invest in vacation rentals, plus the best cities in each state.

1. California

California is the most populous state in the United States, with nearly 40 million people living in the Golden State. Even though it’s only the third-largest state by land area, there are several destination spots that span the entire state making it one of the best places to visit, and one of the best places to invest in vacation rentals. There’s the California Wine Country and San Francisco (featuring the majestic Golden Gate Bridge) in the northern part of the state and all of the goodness of Los Angeles in the southern part of the state.

If you can’t decide which part of the state to visit, consider taking an extended vacation to travel up and down the coast. Although the cost of living in California is pretty high (median property values range from $350,000 to $500,000, depending on the exact location), this means that you’re allowed to charge more to your tenants— within reason.

Some of the most popular destinations in California are:

● Los Angeles
● Palm Springs
● Palm Desert
● San Diego
● San Francisco

2. Florida

While Florida isn’t one of the biggest states in the U.S., it is definitely one of the most populated states. Known as a “retirement state”, Florida is the third most populous state with close to 22 million people calling the Sunshine State home. Florida is probably best known for its many beaches, amusement parks, and warm weather year-round.

These factors make it one of the best vacation destinations, as well as a smart place to invest in vacation rental property. Many Florida homes have a median price of $250,000, which is very affordable and close to the national median price, although you will find some that exceed $500,000.
Some of the most popular destinations in Florida are:

● Kissimmee
● Davenport
● Destin
● Panama City Beach
● Orlando
● The Florida Keys

3. Texas

Texas is the second-largest state by both land area and population, with almost 30 million people calling the Lone Star State home. It’s one of the most diverse states in the U.S., along with California, and it can be considered a “hidden gem” when it comes to vacation destinations.

Although many people may not think of Texas when thinking about where to go on their next vacation, Texas does see a lot of new residents from both within the U.S. and internationally. Texas is full of history and culture, and there are so many different things to experience within this single, yet large state.
Some of the best places to look for vacation rentals in Texas include:

● Austin
● Galveston
● Houston
● San Antonio
● Dallas

When investing in vacation rentals, the best locations are typically those that see a lot of tourists year-round because that’s how you make money from these types of properties. Keep in mind that not all popular destinations in the U.S. allow short-term rentals, or they may have very strict rules regarding them.

Make this a part of your research when looking for the best areas for a vacation rental investment. Because these three states also have many people moving to them each year, they’re also ideal locations for investing in regular residential properties.

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