2023’s Best Cities to Own a Vacation Rental

What’s the outlook of the vacation rental industry for the next 1–3 years? What about the long term?

Destinations are becoming more aware that more accommodations, and thus more visitors, are not necessarily a good thing. Destinations such as Virginia Beach, Myrtle Beach, and Panama City Beach that didn’t figure this out until it was too late are regretting their development decisions.

So, My prediction is that destinations like Outer Banks, NC and Boulder, CO will steadily grow, but with limits set and moratoriums on new construction. The growth of new properties will be in new destinations, but also in VRBO and Airbnb to take advantage of existing opportunities without creating new accommodations.

In a market that’s saturated with vacation rentals, how can an owner make theirs stand out from the competition?

Destination marketing gets the eyeballs to a website for booking, but visitors are looking for both value and convenience to make their choice. P1p fills one of the convenience gaps.

Vacation renters don’t want to spend their afternoons stocking the fridge with fresh necessities from the crowded Walmart. They also want to be responsible and purchase local produce, which is farm fresh. Other such conveniences, coupled with the booking, could tip the balance.

What are your top three tips for people looking to invest in a vacation rental?

Location, location, location.

1. First, the investment needs to fit a personal lifestyle rather than cash flow. So, pick a location that is attractive for the investor (activities, landscape, close to family).
2. A location that isn’t saturated with VR. Values will appreciate, but where demand is high in saturated locations, older properties will be replaced with newer and higher-priced development. Eventually, investments will become replaced at a depreciated value.
3. Finally, the location should have the destination stewardship mentality, which is that a destination should be a wonderful place to live with a sustainable plan to manage the vacation economy. More than one-third of the economy is dependent upon tourism, and the residents become resentful.

Some cities and states impose strict regulations on short-term rentals. How can hosts ensure they’re following all applicable local and state regulations before advertising their space?

There are two obvious sources of this information. The first is the online marketing platform(s) they intend to use to advertise their property. In recent years, destinations have sued these online platforms for not collecting the required occupancy taxes, and the destinations have won.

These lawsuits have put the marketing and sales platforms on notice that they need to pay attention to local and state regulations. A homeowner can read the conditions for listing a short-term rental, which most likely will include regulations that must be followed.

Second, there is usually someone within the local government who handles the dissemination of local and state regulations and restrictions on short-term rentals. A homeowner who is considering a short-term rental offering should do their research, find this person or government division, and get to know the ins and outs of the regulations. Many of these regulations are in place to protect the homeowner.

What hidden costs, if any, should short-term rental owners watch out for?

There are many costs to a short-term rental that are not hidden but just left out of the cash flow equation. The cost of a rental turnover is a recurring expense that homeowners will incorporate into each rental.

However, an owner must also consider maintenance, repairs, and wear and tear on the property over a longer period. It is good to have a depreciation schedule for all these assets separately –– the property, appliances, furnishings, etc. –– so that the life of the assets can be included in a rental pricing structure. Each rental should be paying the fair share of the costs the property owner must bear.

What are the top three amenities that will attract the most guests?

Beyond providing a clean and safe accommodation experience, a homeowner should consider the following.

1. The top asset would be a surprisingly amazing view. These are difficult to come by and so are highly valued. A homeowner must be extremely aware, however, of the community and what effects the location of the great view has on the off-property views.

   In North Carolina, the Ridge Law restricts structures to be no higher than the tree line due to the Sugarloaf condominiums in Western NC. Great views can create unsightly intrusions from offsite locations.

2. The second would be unique and creative activities and experiences available within a reasonable radius of the property. After all, the destination location is a strong reason that motivates visitation. These “attractions” would not include go-cart tracks, hyped tourist gift shopping, etc.; instead, they would be local experiences that are unique to the destination.
3. Finally, a variety of local food experiences. Are there options to provide vacationers with local farm products? Can visitors schedule farm visits and experience pick-your-own options for produce needed for their stay? Are there award-winning chefs in the destination?

What’s the outlook of the vacation rental industry for the next 1–3 years? What about the long term?

The past year showcased an explosion in the vacation rental demand, with increased pricing to match. The short-term and long-term trajectory remains the same, where demand will exceed supply in hotspot areas during the high season.

With the average daily rate (ADR) for vacation rentals climbing, hotel chains and property management companies have stepped into the mix by expanding their portfolios to include private home vacation rentals.

In a market that’s saturated with vacation rentals, how can an owner make theirs stand out from the competition?

The saturation level varies geographically, seasonally, and psychologically. Motivated travelers will optimize their searches by working a year or more in advance of the travel dates.

The budget-conscious tourist may wait until the last minute to catch a deal but will need to be flexible. Vacation rental owners can stand out through staging, competitive pricing, and service, all of which should have the end goal of getting outstanding reviews of the property.

First, when creating a listing profile for potential guests, owners should stage the property as if they were going to sell it. The images should convey that the property is immaculate, homey, and move-in ready.

Modest investments in décor, such as modern comforters with pintuck pleats or jacquard stripes, will photograph beautifully and give an upscale appearance. Fresh paint in a soothing tone is a must, and one or two large pieces of art, such as wrapped canvases of photographed local sites, will offer focal points.

Ditch the knickknacks and strive for an open, fresh appearance. Importantly, do not mislead. A sure way to get a poor review is to showcase a beautifully appointed home that has, in actuality, suffered from overuse.

Second, price the rental competitively. When preparing to list, look at similar properties, compare the amenities, and list slightly under those with more reviews. Be transparent about what is and is not included in the rental cost.

If amenities such as linen service and parking are included, be certain to detail these benefits. If there are restrictions, such as a single parking pass included with the rental, make sure that any restrictions or extra fees are clearly stated. Renters do not want to be surprised by hidden charges and inconveniences at the last minute.

Third, ensure that you can provide excellent service. In almost all cases, it will make sense to outsource cleaning, linen service, maintenance, and pest management. Guests should have ready access to a number to call in case of emergency, whether small or large.

If they walk into the property, and the refrigerator is full of the previous renter’s food, the air conditioner is a wall unit that doesn’t function, there is no Wi-Fi, or ants are crawling all over the countertops, the tone of their stay will be negatively impacted from the onset, and it will be difficult to recover.

What are your top three tips for people looking to invest in a vacation rental?

1. First, select a destination you personally love and are committed to visiting on a regular basis. Even with a property management company on board, the owner’s personal touch is essential to ensure the upkeep of the property.
2. Second, choose a destination that has a four-season appeal; otherwise, the income potential will be minimized. With this in mind, factor recurring costs into the purchase decision and rental rate. If you opt to invest in a property with massive, vaulted ceilings, the HVAC costs associated with this aesthetic may devour your profits.
3. Third, select the best neighborhood you can afford. Safety and security are paramount to many renters, especially those with young children. Highlight safety features and the benefits of the selected neighborhood. Showcase both indoor and outdoor views of the property, as well as amenities located within a 10-mile radius.

Some cities and states impose strict regulations on short-term rentals. How can hosts ensure they’re following all applicable local and state regulations before advertising their space?

City and state governments have legitimate concerns regarding the negative impacts of neighborhoods being overrun with illegal short-term rentals.

The character, safety, and long-term appeal of a neighborhood will shift dramatically when confronted with a revolving door of visitors who are not invested in the community on a personal level.

Potential investors in rental properties must do their homework prior to purchase by reviewing dwelling laws, administrative codes, zoning resolutions, and legal consequences.

What hidden costs, if any, should short-term rental owners watch out for?

On the owners’ side, they must be aware of the income tax laws and liability insurance fees associated with renting out property. For renters, beware of the hidden costs of “resort fees,” a general misnomer that can apply to just about anything and is often tagged on at the last minute.

Be certain you are comparing apples to apples when conducting your search, as some companies estimate the total cost in their initial listing, and others wait until your booking process is almost finalized, when all of a sudden, the cost doubles.

What are the top three amenities that will attract the most guests?

Location, location, location.

With all things being equal, potential guests will compare properties within the same general vicinity. They will then move on to the layout of the property, with the number of bedrooms being a priority, as well as the presence or absence of key features, such as air conditioning.

Air conditioning has emerged as an important consideration as global warming has resulted in unbearably warm settings in destinations that are generally not reliant on this amenity, with owners who have not made the investment receiving critical online feedback.

What’s the outlook of the vacation rental industry for the next 1–3 years? What about the long term?

I am of the opinion that the vacation rental industry will face some significant challenges in the next 1-3 years, as the demand is exceeding the supply.

People that used to rent their houses are now selling them and moving into smaller homes that they don’t plan to rent. The problem is exacerbated by the supply chain issues and increased costs of housing, so there are fewer houses and rentals available.

I don’t have a crystal ball, but I expect that long term, the housing market and supply chain issues will correct themselves, thus enabling more houses on the market available to rent.

In a market that’s saturated with vacation rentals, how can an owner make theirs stand out from the competition?

Price and flexibility. Attention to detail. Owners can make their vacation rentals stand out by ensuring the rental is very clean and attractively furnished and providing several pictures to demonstrate that. In addition, aptly describing the property and all the amenities offered is key.

Vacationers want all of their needs taken care of and a home that is “well stocked.” Of course, waterfront property, a pool, or a hot tub would definitely make one’s property stand out amongst others that don’t offer that.

The rental home should be a reflection of its natural surroundings. If you are making a beach house, then the house should have the feel of a beach house. If it is located in a remote wooded setting, it should have rustic décor. If you are near a theme park, have at least one room that is devoted to that theme.

In general, your home should cater to the people that will rent it most frequently. Repeat business is the name of the game. You also want the home to feel comfortable; it is a good idea to create a house amenities checklist to make sure you’ve stocked up on everything a renter could need during their stay.

What are your top three tips for people looking to invest in a vacation rental?

1. Location, Location, Location – you can’t go wrong with ocean or lakefront views, and a short drive to restaurants, bars, and stores is a plus. People like to walk, and having a safe and scenic place to walk is becoming a necessity.
2. Property attraction inside and out, e.g., nicely landscaped, room for vacationers to play yard games, or proximity to open space, such as the beach, recreation trails, parks, etc., clean, well maintained, nicely painted, open floor concept, number of bathrooms commensurate with the number of bedrooms.
3. Low maintenance property – After all, it’s a vacation home for the owners too, so when you’re there, you don’t want to have to be “fixing the house.”

Some cities and states impose strict regulations on short-term rentals. How can hosts ensure they’re following all applicable local and state regulations before advertising their space?

Talk to the planning board, chat with a local property management firm (as a tentative customer), and consult your local town website for information on the rules that govern short-term rentals. Typically, closing documents will also stipulate the “dos and don’ts” of rental regulations.

What hidden costs, if any, should short-term rental owners watch out for?

They aren’t really “hidden” costs, but there are variable costs. Specifically, the cost of energy is increasing at record rates, so rental owners need to be aware that guests may not be as considerate or “energy conscious” while renting, so the utilities are absolutely something they should watch out for.

What are the top three amenities that will attract the most guests?

1. Water views
2. Walking distance to shops, restaurants, live music, etc.
3. Space, i.e., deck with nice outdoor furniture, a fireplace and/or hot tub