With the economy recovering and many pandemic restrictions being lifted, the outlook for short-term rentals looks promising in 2022, according to AirDNA.
The company tracks the performance of 10 million short-term and vacation rentals around the world and predicts that demand for short-term rentals (STRs) will grow by 15% in 2022 with average occupancy rates at 59.8%. Last year, the average annual revenue for STRs listed full time increased to $56,000, the highest level ever, and 35% higher since the start of the pandemic.
If you’ve been thinking about buying an STR, this year might be a good time to invest. In this article, we’ll discuss factors that make a good STR, then cover 30 of the best markets to consider.
Key takeaways
- Factors and metrics to consider when investing in an STR include location, seasonality, cap rate, cash-on-cash return, occupancy rate, and local rules and regulations.
- The best STR markets based on cap rate include Kissimmee, FL; Fresno County, CA; and Breckenridge, CO.
- Cash-on-cash return from STRs is highest in small towns like Pulaski, VA; Spring Grove, IL; and Osceola, WI.
- Three of the best vacation real estate markets to invest in with the largest year-over-year revenue growth are Joshua Tree, CA; Sea Isle City, NJ; and Sedona, AZ.
>>Explore Roofstock's Short-Term Rental Marketplace.
What makes a good STR?
While STRs can be found almost everywhere, there are criteria that may help to make some markets better than others. Factors to consider when choosing the best market include:
- Rules and regulations
- Location
- Seasonality
- Monthly short-term rental income
- Occupancy rate
- Median home prices
- Cap rate
- Cash-on-cash return
For example, rental income and operating expenses affect cash flow, and the price paid for an STR and future appreciation impact potential profits when the property is sold. Overall demand in a market for STR property has a significant impact on revenues and occupancy levels, along with percentage returns and cash flows.
30 of the best STR markets in 2022
While STRs may potentially be a profitable investment, not all rental markets offer the same opportunities.
Here are 30 estate markets to consider for investors thinking about buying an STR property in 2022, according to research conducted by Lodgify, Mashvisor, and Realtor.com.
Lodgify: Best vacation rental property markets for 2022
Lodgify looked at some of the markets offering the best cap rates for STRs. As a rule of thumb, Lodgify suggests looking for property with a cap rate of between 4% and 6%. While higher cap rates may offer a greater potential return, there may also be more risk involved.
| Market | Cap rate | Median home price | Occupancy rate |
| Gatlinburg, TN | 8.1% | $409,084 | 61% |
| Kissimmee, FL | 6.9% | $250,000 | 57% |
| Fresno County, CA | 6.58% | $326,544 | 75% |
| Fort Myers, FL | 6.75% | $278,542 | 58% |
| Breckenridge, CO | 5.9% | $1,320,000 | 60% |
| Lake Havasu, AZ | 5.9% | $474,900 | 66% |
| South Lake Tahoe, CA | 5.26% | $646,009 | 75% |
| Raleigh-Durham, NC | 4.6% | $360,891 | 74% |
| Baltimore, MD | 4.16% | $225,000 | 67% |
| Cincinnati, OH | 3.4% | $208,672 | 65% |
Mashvisor: 10 best places to buy an STR property
Mashvisor based its ranking on a number of different criteria, including location, cap rate or cash-on-cash return, monthly rental income, occupancy rate, median home prices, and local regulations on STR property.
When compiling the following list, Mashvisor only included cities and towns that allow non-owner-occupied short-term and vacation rentals for hosting guests for under 30 day. In some places, even if a municipality allows STRs, homeowner association rules may prohibit using a home as a vacation rental.
Here are the current top 10 places for an STR property, according to Mashvisor, ranked by Airbnb cash-on-cash return:
1. Pulaski, VAPulaski is home to about 9,000 residents and is close to Claytor Lake State Park and New River Trail State Park, which makes the town ideal for outdoor enthusiasts looking for an STR property:
- Median property price: $144,613
- Daily rental rate: $241
- Monthly rental income: $3,483
- Occupancy rate: 58%
- Cash-on-cash return: 9.88%
The Village of Spring Grove is located in the Fox Lake region of Chicagoland, about an hour and a half north of the city. It’s a popular weekend getaway destination for urban dwellers and offers year-round attractions and events:
- Median property price: $253,617
- Daily rental rate: $328
- Monthly rental income: $7,171
- Occupancy rate: 66%
- Cash-on-cash return: 9.80%
Osceola is located on the St. Croix National Scenic Riverway along the Minnesota border. Home to less than 3,000 residents, the town is about one hour north of the Twin Cities and is the perfect retreat for visitors looking for outdoor adventure and small-town charm:
- Median property price: $268,695
- Daily rental rate: $254
- Monthly rental income: $3,670
- Occupancy rate: 55%
- Cash-on-cash return: 9.24%
Franklin is situated in Northern New Hampshire where the Pemigewasset and Winnipesaukee rivers meet the Merrimack River. With about 9,000 residents, Franklin is the least populated city in the state and makes for an ideal STR market for outdoor and history enthusiasts:
- Median property price: $254,120
- Daily rental rate: $270
- Monthly rental income: $4,280
- Occupancy rate: 79%
- Cash-on-cash return: 9.23%
Located just south of Springfield, Battlefield is within an easy drive of Kansas City, St. Louis, and Oklahoma City. The town is near several parks and is the site of the second major battle of the Civil War:
- Median property price $257,850
- Daily rental rate $125
- Monthly rental income $3,365
- Occupancy rate 78%
- Cash-on-cash return 8.95%
While there is plenty of tourist activity in St. Robert, the city also attracts STR business from families and friends with service members stationed at the Fort Leonard Wood Army Center. St. Robert is located just north of Springfield, and an easy drive from Oklahoma City, St. Louis, and Kansas City:
- Median property price: $212,250
- Daily rental rate: $109
- Monthly rental income: $2,776
- Occupancy rate: 70%
- Cash-on-cash return: 8.90%
Edgerton is home to about 5,600 people and is an easy drive from Madison, Milwaukee, and Chicago. The town offers year-round attractions, including shopping, hiking, biking, and snowmobiling:
- Median property price: $422,900
- Daily rental rate: $258
- Monthly rental income: $4,936
- Occupancy rate: 64%
- Cash-on-cash return: 8.82%
Despite its name, Santa Claus is a great place to own an STR property for bookings throughout the year. The town is home to about 2,500 residents, and within a day’s drive of major cities such as St. Louis, Nashville, Louisville, Cincinnati, and Indianapolis:
- Median property price: $329,010
- Daily rental rate: $246
- Monthly rental income: $4,231
- Occupancy rate: 54%
- Cash-on-cash return: 8.70%
Home to about 7,000 people, Bryans Road is located less than an hour south of Washington, D.C., and less than 2 hours from Baltimore. The town is a sought-after destination for guests looking for an STR away from urban congestion with small-town amenities:
- Median property price: $427,311
- Daily rental rate: $180
- Monthly rental income: $6,678
- Occupancy rate: 76%
- Cash-on-cash return: 8.68%
Caledonia is located about 30 minutes from Grand Rapids, and is a day’s drive from Detroit and Chicago. The village has small-town charm, plenty of outdoor and tourist attractions, and is home to the 36-hole Saskatoon Golf Club:
- Median property price: $384,703
- Daily rental rate: $196
- Monthly rental income: $4,777
- Occupancy rate: 59%
- Cash-on-cash return: 8.61%
While these markets are small in size, they are all located within a day’s drive or less of larger metro areas and are perfect for guests looking for a weekend getaway.
Realtor.com: Best places to buy a vacation investment property
Realtor.com analyzed data from the 250 largest rental markets to locate the best places to own an STR and selected one city per state to ensure geographic diversity.
Researchers looked at key investment criteria including the median list price for a home, average daily rental rate, how many days a property would need to be rented each month to cover the mortgage (based on a 20% down payment and a 3% mortgage interest rate), and year-over-year revenue growth.
These are the 10 best places to buy a short-term vacation rental, according to Realtor.com’s list:
| Market | Median Price | Daily Rate | Days to break even | Rev. Growth |
| Joshua Tree, CA | $525,050 | $268 | 9 | 113% |
| Sea Isle City, NJ | $1,200,000 | $432 | 14 | 82% |
| Lincoln City, OR | $764,950 | $250 | 14 | 72% |
| Sedona, AZ | $895,050 | $264 | 15 | 65% |
| Blue Ridge, GA | $599,950 | $275 | 9 | 60% |
| Leavenworth, WA | $799,050 | $310 | 12 | 56% |
| St. George, UT | $635,050 | $169 | 16 | 56% |
| Incline Village, NV | $1,700,000 | $360 | 22 | 56% |
| Fredericksburg, TX | $898,550 | $283 | 17 | 52% |
| Hot Springs, AR | $299,500 | $212 | 6 | 52% |
Ready to find your next short-term rental property? Browse our marketplace here, where you'll find properties in several of the markets listed in this article.
