As the short-term rental landscape undergoes seismic shifts, a new survey by LawnStarter reveals the cities leading the pack in 2023 for owning a profitable vacation rental. This year, the spotlight is on college towns and smaller cities, as larger metropolises take a dip in the rankings.
LawnStarter undertook a comprehensive analysis of over 180 premier U.S. cities, considering a range of criteria that spanned legal restrictions, revenue potential, and operational expenses among 18 varied metrics.
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Key Insights
College towns are emerging as prime locales for operating a short-term rental (STR) business, thanks to a steady influx of families seeking convenient lodging options during visits to their collegiate family members. Noteworthy performers in this category include Durham, North Carolina, leading the pack, followed closely by urban centers such as Milwaukee, Wisconsin, and Mobile, Alabama. These cities have carved a niche with their high occupancy rates and significant revenue prospects, backed by a more lenient legal framework governing STR operations.
Remarkably, a large chunk of Californian cities – a total of 30 to be exact – find themselves in the lower echelons of the rankings. This decline can be attributed to a combination of prohibitive initial investments, soaring operating costs, and stringent regulatory landscapes. Key cities witnessing this dip include Los Angeles, San Francisco, and Huntington Beach, which holds the unfortunate position at the very bottom of the list. These stringent conditions stem from an effort to alleviate the housing crunch affecting many local residents, pushing the cities to foster a climate encouraging long-term leases and promoting homeownership within the community. Furthermore, there’s a growing discourse at the state government level about introducing taxation on STR operations, adding another layer of complexity for prospective investors in the region.
On a broader scale, analyzing the performance across all 182 prominent cities in the study, the STR sector displays an average occupancy rate of 42%. This performance has translated to a median annual revenue tallying at $18,691 over the preceding 12 months, painting a mixed picture of opportunities and challenges for potential investors in the STR market.
Here are America’s 10 best cities to own a vacation rental in 2023:
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10. Charlotte, North Carolina
Overall Score: 67.06
Charlotte stands as a beacon of modernity fused with Southern charm. Known as a major US financial hub, it offers vacationers a unique blend of high-energy urban life and picturesque natural escapes. Although the exact score is missing, Charlotte’s established status and potential growth in the short-term rental market cannot be ignored, offering potential investors promising opportunities.
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9. Mesa, Arizona
Overall Score: 67.07
Despite being at the bottom of our top 10, Mesa still holds potential with relatively good operating conditions and a notable rank in the legality category. Nestled in the Sonoran Desert, the city is renowned for its excellent golf courses, and cultural attractions like the Mesa Arts Center and the Arizona Museum of Natural History. While it’s on the outskirts of Phoenix, it presents a more tranquil alternative for vacationers. Its budding short-term rental market is characterized by relatively good operating conditions and a notable legality rank, making it a promising ground for vacation rental investments.
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8. Rochester, New York
Overall Score: 68.07
Located on the southern shore of Lake Ontario, Rochester is a city with a rich industrial history. Home to world-renowned institutions like the Eastman School of Music and the Strong National Museum of Play, it promises visitors not only safety but also a diverse range of entertainment options. The favorable legality environment and a relatively high safety rank mark it as an encouraging site for budding vacation rental proprietors
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7. Indianapolis, Indiana
Overall Score: 67.30
As the capital city of Indiana, Indianapolis serves as a hub of both historical significance and modern development. Known for hosting the Indianapolis 500, an annual automobile race, the city has a rich motor sporting heritage. The city also offers a plethora of entertainment options, including parks, museums, and an impressive dining scene, creating a ripe environment for the growth of vacation rentals, bolstered by its favorable initial investment requirements.
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6. Winston-Salem, North Carolina
Overall Score: 68.21
Nestled in the heart of North Carolina, Winston-Salem, often referred to as the “City of Arts and Innovation,” offers a rich cultural experience. Visitors can explore its historic old town, arts district, and numerous vineyards. The city presents a solid option for vacation rentals, with good scores in legality and guest safety, making it a potential hotspot for investors eyeing the short-term rental market.
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5. Anchorage, Alaska
Overall Score: 68.81
Anchorage, set against the stunning backdrop of mountains and forests, serves as a gateway to the majestic landscapes of Alaska. Its short-term rental market is promising due to the city’s exotic appeal which draws tourists year-round for nature expeditions and to witness phenomena like the Northern Lights. The high legality rank and considerable revenue potential make it a lucrative ground for vacation rental investments.
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4. Mobile, Alabama
Overall Score: 69.61
Mobile, a historic port city on Alabama’s Gulf Coast, offers visitors a rich cultural experience with its vibrant art scene and deep-rooted Mardi Gras traditions. The city promises an attractive option for short-term rentals due to its low initial investment and high legality rank, setting the stage for a prosperous vacation rental environment.
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3. Milwaukee, Wisconsin
Overall Score: 70.21
Milwaukee, situated on the western shore of Lake Michigan, is known for its brewing traditions and vibrant cultural scene. Visitors can enjoy a host of attractions including the Milwaukee Art Museum and the Harley-Davidson Museum. Its well-balanced environment, marked by high legality and entertainment options ranks, makes it an attractive option for those looking to invest in the vacation rental market.
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2. Birmingham, Alabama
Overall Score: 70.32
Birmingham, a city with deep historical roots, serves as a hub for civil rights history, coupled with a vibrant culinary and art scene. The city, witnessing a renaissance in terms of urban development and cultural offerings, stands as a strong contender in the vacation rental market, offering high potential revenue with reasonable operating expenses.
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1. Durham, North Carolina
Overall Score: 70.99
Durham, a pivotal part of North Carolina’s Research Triangle, is known for its technological research and healthcare sectors. The city is home to Duke University, drawing visitors for academic events and its lush Sarah P. Duke Gardens. Its booming tech industry and cultural vibrancy make it a prime location for vacation rentals. Topping the list, Durham offers promising prospects for owning a vacation rental in 2023, making it the top choice for investors seeking to capitalize on high revenue potential and favorable legality conditions.
This article was produced and syndicated by MediaFeed.
Image Credit: Sean Pavone / istockphoto.
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