US: Vacation rental management platform Vacasa has released the 2020 edition of its Top 25 Best Places to Buy a Vacation Home report.
The annual Top 25 Best Places to Buy a Vacation Home report was launched in 2018 and ranks the best US destinations to invest in a vacation rental property by average cap rate [or yearly rate of return].
Interest rates have plummeted as a result of Covid-19 and other economic drivers. Mortgage rates on primary residences and second homes have hit all-time lows, and are currently being offered between two per cent and 3.5 per cent, depending on the lender.
This, combined with employers encouraging their staff to work remotely as a result of the pandemic, has driven strong interest in vacation rentals, according to Vacasa.
Vacasa VP of sales and marketing, Shaun Greer, said: “We’ve seen a surge in demand for vacation homes across our portfolio, and real estate transactions are up as much as 35 per cent in some of our vacation rental markets across the country when compared to July 2019. Many buyers believe we will be impacted by Covid-19 for the next 12 to 18 months, and are seeking a place close to home where they can get away with their families, work remotely if needed, and generate income when the home is not in use.”
Several markets from the 2019 Top 25 Best Places to Buy a Vacation Home report have again ranked in the list, including Big Sky, Montana, Killington, Vermont, Kissimmee, Florida, and Dauphin Island, Alabama, among others. This year’s list reflects markets where single-family homes are the primary inventory type and there are opportunities for outdoor adventure.
Changing consumer preferences have introduced a number of new markets to the list, and on the other hand, eliminated some popular vacation rental destinations.
Vacasa’s Top 25 Best Places to Buy a Vacation Home report was designed to help buyers seeking to invest in a vacation home by providing useful data, including estimated cap rate, annual gross rental revenue and median home cost for the market.
Furthermore, Vacasa’s vacation rental real estate calculator aims to help buyers factor cap rate, cash on cash, annual net operating income into their decisions when it comes to determining the earning potential for each specific rental property.
To determine its ranking of top vacation rental markets, Vacasa and its licensed subsidiaries analysed home sales data from the last twelve months for vacation destinations throughout the country, and overlaid it with actual performance data for thousands of US vacation rental properties. It utilises data from the markets where it actively operates vacation rentals to ensure accuracy of performance.
To calculate average cap rate, Vacasa also considered the averages of the following in each market: property taxes, utilities, HOA fees, insurance, and property management fees.
Earlier this summer, Vacasa raised $108 million in a strategic investment round led by existing investor Silver Lake, with participation from other existing investors including Riverwood Capital and Level Equity. The private equity firm, which has also invested in Airbnb and Expedia this year, previously invested in Vacasa last October in a $319 million investment round.