Thinking about diving into the world of vacation rentals? You’re not alone. From beachside condos to mountain cabins, these properties can deliver both great getaways and solid returns if you know where to look. But finding the right investment isn’t just about scrolling through listings and picking the prettiest one. It’s about understanding markets, crunching the numbers, and spotting opportunities others might miss.
In this guide, we’ll walk through proven ways to track down vacation rental properties that can actually perform. Whether you’re brand new or looking to expand your portfolio, you’ll get practical tips, tools, and insider advice to make your search smarter and more profitable. Let’s dive in.
1. Begin with Clear Investment Goals
Before you start hunting for properties, get clear on what you actually want from your investment. Are you aiming for steady monthly cash flow, long-term appreciation, or a mix of both? Think about the return on investment you’d be happy with and set a budget that makes sense for your financial situation. This will help you avoid falling for a property that looks great but doesn’t meet your numbers.
You’ll also want to decide on your ownership model early. Will the property be a full-time rental that’s always available to guests, or do you want to block off time for your own use? Some investors even share ownership with family or friends to split costs and responsibilities. Knowing these details upfront keeps your search focused and your expectations realistic.
2. Identify Promising Destinations
Not all vacation spots are created equal when it comes to investment potential. You want a location that keeps visitors coming in every season, not just during a short summer or winter rush. Think coastal towns with both beach and festival seasons, mountain areas that attract hikers in summer and skiers in winter, or cities that host major events year-round.
Spend some time looking at local tourism reports to see how many visitors the area draws throughout the year. Check average occupancy rates for short-term rentals and what properties are charging per night. This will give you a realistic idea of how often you can book your place and what kind of revenue you might expect. A steady stream of visitors means steadier income and less stress during slow months.
3. Analyze Market Conditions
Before you fall in love with a property, it’s worth digging into the numbers that show how well a market is actually performing. This is where data tools like AirDNA, Mashvisor and Awning’s Airbnb Market Data tool can help. They let you see key metrics such as occupancy rates, average daily rates (ADR), and revenue per available room (RevPAR). If you notice high occupancy paired with strong ADR, that’s usually a sign the area can sustain profitable rentals.
Don’t stop at current performance. Look at where the market is headed. Are there new hotels, resorts, or attractions being built nearby? Is the city investing in better roads, airports, or public spaces that could boost tourism? Keep an eye on seasonal trends too. A market with strong year-round demand is less risky than one that relies only on peak seasons. The more you understand the local dynamics, the better your investment decisions will be.
4. Understand the regulatory environment
Before you fall in love with a property, figure out what the rules let you do. Short term rental laws vary by city, county, and state, and your HOA or condo board can add another layer on top. Here is how to cover your bases and avoid expensive surprises.
Start with definitions:
- Many cities define a short term rental as stays under 30 nights. Others use 28 or 90. The definition determines which rules apply.
- Some places allow only primary residences. Others cap the number of nights per year or require the owner to live on site.
Check zoning and use:
- Look up the parcel’s zoning on the city or county GIS map. Confirm that short term rentals are a permitted use or find out if you need a conditional use permit.
- Ask planning staff whether caps or spacing rules apply, like a minimum distance from another licensed rental.
- Verify “legal nonconforming” or grandfathered status in writing if the property has been operated in the past.
Licenses and permits:
- Many jurisdictions require a business license plus a separate short term rental permit. Expect proof of insurance, a local contact, and a site plan.
- Some require building or fire inspections. Common items include smoke and CO alarms in each bedroom, egress windows, fire extinguishers, handrails, address signage, and posted house rules.
- Pools and hot tubs often trigger health department rules and periodic inspections.
Taxes you may owe:
- Transient occupancy or hotel tax at the city or county level.
- State and local sales tax, and sometimes a tourism or lodging assessment.
- Platforms like Airbnb may collect some taxes but not all. You might still need to register with the state revenue department and file returns. Call the tax office to confirm what the platform collects in that location.
Neighborhood and HOA rules:
- Read the CC&Rs and bylaws, not just the realtor’s summary. Look for minimum rental terms, guest limits, parking rules, and noise restrictions.
- Some HOAs prohibit rentals under 30 nights or require board approval. Fines can be steep and can attach to the property.
Operational rules you must follow:
- Occupancy limits tied to bedrooms or square footage.
- Parking minimums and quiet hours.
- Solid waste requirements, bear boxes in mountain towns, sand dune protections on coasts, and similar local quirks.
- On-site contact within a set response time and 24/7 posting of the contact number.
Documentation to collect:
- Written confirmation from planning or code enforcement that your intended use is allowed.
- Copies of licenses, permits, inspection reports, and tax registrations.
- Prior rental history and license numbers if the seller claims grandfathered status.
- A compliance calendar with renewal dates and filing deadlines.
Red flags:
- “Everyone does it” without permits.
- A permit that is nontransferable or tied to the seller.
- Pending rule changes or moratoriums in council agendas.
- Properties inside special zones with extra hurdles, such as coastal or wildfire overlay districts.
Practical workflow:
- Call planning and zoning with the specific address. Ask about allowed use, caps, spacing, and permits.
- Call the business licensing division about license types, fees, inspections, and renewal cycles.
- Call the tax office to confirm which taxes you must collect and how filings work.
- Review HOA documents and email the property manager for a written statement on short term rentals.
- Price the compliance cost into your pro forma, including inspections, permit fees, taxes, insurance riders, and a noise monitoring device if required.
Pro tip: Create a one page compliance sheet for each target market. Include contact info for city staff, links to applications, fee schedules, occupancy rules, and renewal dates. This keeps you legal and protects your cash flow as the discussion of the topic continues.
5. Run Financial Modeling
Before you fall in love with a property, you need to see if the numbers make sense. Start by estimating how much income the rental could bring in over the course of a year. Look at similar properties in the area and check their average nightly rates and occupancy levels. Multiply those numbers to get a ballpark figure for your gross rental revenue.
Next, start subtracting the costs that come with running a vacation rental. Include cleaning services, property management fees, routine maintenance, and any repairs you might need to handle. Remember to set aside a vacancy buffer to cover those slower months when bookings dip.
You should also factor in insurance premiums, utility bills, and platform fees if you plan to list on sites like Airbnb or Vrbo. Once you have those numbers, explore your financing options and run scenarios to see how different loan terms affect your monthly payments. Finally, compare the cap rate to what you might get from a long-term rental in the same area. This will help you decide if the potential return is worth the investment.
6. Explore Property Types & Channels
Not all vacation rentals are created equal, and the type of property you choose can have a big impact on your returns. Condos are often low-maintenance since the HOA covers exterior upkeep, making them appealing for out-of-town owners.
Single-family homes give you more control, more space, and the potential to attract families or groups, but they also come with higher upkeep costs. Cabins can be a strong choice in mountain or lake destinations where guests are looking for cozy, rustic stays.
Multi-unit properties, like duplexes or triplexes, allow you to diversify your income stream within a single location. And then there are niche options—tiny homes, beach bungalows, or themed properties—that stand out in crowded markets and often command higher nightly rates.
Once you’ve narrowed down the property type, think about your booking channels. Some owners swear by direct bookings through their own websites, which can save on platform fees and help build repeat business. Others prefer the built-in exposure of online travel agencies like Airbnb or Vrbo, which can reach millions of potential guests quickly.
Many successful hosts use a combination of both, capturing visibility on big platforms while gradually building a loyal customer base through direct channels. The right mix will depend on your marketing skills, budget, and how hands-on you want to be with guest communication.
7. Source Suitable Listings Strategically
When you’re ready to start hunting for properties, think beyond a basic Zillow search. Many real estate portals now have filters designed for investors, letting you sort by ROI potential, rental history, or even price per square foot. This can save you hours of scrolling through listings that don’t fit your goals.
It’s also worth building relationships with local agents who understand the short-term rental market. They often hear about opportunities before they hit the market. Join real estate investment groups online or in your target area to get insider tips and referrals. And don’t overlook auctions, off-market deals, or MLS listings tailored to investors. The more angles you use to source properties, the better your chances of finding a hidden gem that fits your criteria.
8. Conduct Thorough Due Diligence
Before you commit to a property, take the time to really dig into the details. Start by looking at neighborhood comparables to see how similar rentals are performing. This gives you a realistic idea of what you can expect in terms of nightly rates and occupancy.
Walk through the property and check its overall condition, noting any repairs or upgrades it might need. Factor in things like the state of the roof, appliances, and major systems. If the property is part of an HOA, review their rules and financial health so there are no surprises later. Pay attention to noise levels and accessibility for guests.
Finally, try to verify any rental history you can find. Talk to the current owner, nearby hosts, or use data tools to confirm demand and income potential. A little homework now can save a lot of headaches later.
9. Plan for Property Management
Next, you’ve got to choose how hands‑on you want to be. Managing your vacation rental yourself gives you total control but also eats up time that you might want to spend elsewhere. On the other hand, hiring a local manager or a full‑service team can make things feel effortless—you hand over the tasks, they handle guest communications, cleanings, pricing, and even emergencies. Just keep in mind that management fees generally run between twenty and thirty percent of your income.
If you’re aiming for a truly hands‑off setup, check out Awning’s full‑service vacation rental management. They operate nationwide, cover everything from listing and guest support to dynamic pricing and maintenance, and start at around fifteen percent of your revenue. It’s a solid choice if you’d rather focus on returns than operations.
10. Assess Exit Strategies
Before you commit to a vacation rental, it’s smart to think about how you might eventually move on from it. Markets change, personal goals shift, and having a plan makes those transitions smoother. Ask yourself how strong the resale demand is in the area and whether the property would attract buyers if you decided to sell.
You might also consider switching to a long-term rental if the short-term market slows down or regulations change. Some owners even pivot to using the property as a personal holiday home before selling. It’s worth looking at the potential for appreciation over time, but balance that against possible tax implications and how quickly you could liquidate your investment if needed. Thinking through these options early can save you from scrambling later.
11. Mitigate Key Risks
Even the best-looking investment can turn sour if you don’t think ahead. Start by running a few “what if” scenarios. What happens if bookings drop during the off-season or if the economy slows down? Can the property still cover its expenses?
It’s also smart to check if the area is prone to hurricanes, floods, or wildfires, since that can mean higher insurance costs and potential downtime. Keep an eye on local legislation, too. Short-term rental rules can change quickly and sometimes limit how often you can rent.
Finally, look at the competition in the area. If the market is oversaturated with similar listings, you might have to work harder or lower prices to stay competitive. Thinking about these risks upfront can save you a lot of headaches later.
Round Up with Insider Tips
Once you’ve found the right property, small moves can make a big difference. Focus on upgrades that cost little but wow your guests, like fresh bedding, better lighting, or a cozy outdoor seating area. Add thoughtful touches that turn a good stay into a great one, such as a stocked coffee bar or local guidebook. Try out dynamic pricing tools to keep your nightly rates competitive year-round and make the most of high-demand periods. And don’t underestimate the power of connections. Build a network of local contacts, from cleaners and handymen to other hosts who can share advice and referrals.
If you’d rather spend less time on the details and more time growing your portfolio, RedAwning’s property management services can handle everything from pricing strategy to guest experience. Let the experts maximize your rental’s performance while you focus on finding your next investment.
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