Short days. Cold weather. Winter can be a downer. How much better might you feel if snow translated to money in your pocket? Investing in a winter vacation rental could do the trick. True, today’s market is challenging for buyers, many of whom have put their plans on hold until prices or interest rates (or both) recede. But if you can manage to buy a vacation rental, it can start making you money right away.
To give first-time investors a starting point, Vacasa, a property management company, examined 12 months’ worth of rental and sales data in 135 U.S. markets where the company or its subsidiaries manage at least 50 units — nearly 10,500 properties in all. After the numbers were crunched, the 10 best U.S. locations in which to buy a profitable winter rental emerged. We asked the company to share an expanded list of 15 destinations.
Locations were ranked by capitalization rate (or cap rate), a metric used to gauge the profitability of rental properties by comparing a home’s sale price to what is left of the annual rental revenue after expenses. So if a home sells for $200,000 and there is $2,000 in net revenue at the end of the year, the cap rate is 1 percent. (Be aware that the cap rate equation does not include mortgage costs, so they must be factored into monthly expenses.)
It’s no surprise that areas known for skiing and other winter activities offer hearty investment returns, though they’re often offset by higher purchase prices. For example, in Teton Village, Wyo., home to the famed Jackson Hole Mountain Resort, a homeowner could rake in more than $100,000 in annual gross rental revenue, but the median home sale price is over $2.1 million.
Other winter destinations have seen their rental returns sag as home prices have risen through the pandemic. Steamboat Springs, Colo., saw its median home price balloon from $549,400 in 2019 to over $1.1 million in the current analysis, dropping its ranking on this list from fifth down to 14th during that span.
For something closer to a bargain, try the Poconos region, in Pennsylvania. It may not have the highest peaks or the longest ski season, but its attractions are ample and its median vacation home price is less than $300,000 — one of only two places in the top 15 that can make that claim. In fact, lower-priced areas populate the top of Vacasa’s list — a ray of hope for investors.
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